-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ANcBQJi3Vj473ZBHYl6S+y2M9G6hpKNDqMR8qxDYrJaU1Rjk23KHYYEjmYMDaPnp w0M5dWIQLByDsuqEr4np/Q== 0001061778-98-000076.txt : 19981211 0001061778-98-000076.hdr.sgml : 19981211 ACCESSION NUMBER: 0001061778-98-000076 CONFORMED SUBMISSION TYPE: SB-1 PUBLIC DOCUMENT COUNT: 47 FILED AS OF DATE: 19981210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IQ POWER TECHNOLOGY INC CENTRAL INDEX KEY: 0001072667 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-1 SEC ACT: SEC FILE NUMBER: 333-68649 FILM NUMBER: 98766692 BUSINESS ADDRESS: STREET 1: SUITE 708-A STREET 2: 11 WEST HASTINGS STREET, V6E 2J3 CITY: VANCOUVER, BC BUSINESS PHONE: 6046693132 MAIL ADDRESS: STREET 1: SUITE 708-A, 111 WEST HASTINGS STREET STREET 2: VANCOUVER, BC V6E 2J3 SB-1 1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on December 10, 1998. File No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM SB-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- iQ POWER TECHNOLOGY INC. (Name of small business issuer in its charter) 3690 Canada (Primary Standard Not Applicable (State or jurisdiction of Industrial Classification (I.R.S. Employer incorporation or organization) Code Number) Identification No.) Suite 708-A, 1111 West Hastings Street Vancouver, British Columbia V6E 2J3 (604) 669-3132 (Address and telephone number of principal executive offices) Erlenhof Park Inselkammer Strasse 4 D-82008 Unterhaching, Germany (Address of principal place of business or intended principal place of business) Bogle and Co. Suite 4700 601 Union Street Seattle, Washington 98101-2346 (206) 682-5151 (Name, address and telephone number of agent for service) --------------------- Copies to: Greg A. Sasges, Esq. Randal R. Jones, Esq. Kjeld Werbes, Esq. Matthew D. Latimer, Esq. Werbes Sasges & Company Bogle & Gates P.L.L.C. 1111 West Hastings Street Two Union Square Suite 708 601 Union Street Vancouver, British Columbia Seattle, Washington 98101-2346 Canada V6E 2J3 Approximate date of proposed sale to the public: As soon as practicable after Registration Statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [X] ----------- CALCULATION OF REGISTRATION FEE ==================================================================================================================== Proposed Proposed Amount of Title of each class of securities Amount to be maximum offering maximum aggregate registration to be registered registered price per share (1) offering price (1) fee - -------------------------------------------------------------------------------------------------------------------- Common shares, without par value 5,000,000 shares US$1.00 US$5,000,000 US$1,390 ==================================================================================================================
(1) Pursuant to Rule 457(a), the proposed maximum offering price per share and the proposed maximum aggregate offering price are estimated solely for the purpose of calculating the registration fee. ----------- 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, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ----------- Disclosure alternative used (check one): Alternative 1[ ] Alternative 2 [X] PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED DECEMBER 9, 1998 iQ POWER TECHNOLOGY INC. (the "Company" or "iQ Canada") 5,000,000 Common Shares (Total Maximum) 3,000,000 Common Shares (Total Minimum) We are offering and selling all of the Common Shares listed above. IPO Capital Corp. ("IPO") is acting as our selling agent outside the United States, and sales agents selected by IPO may act as our sales agents in the United States. IPO and the other sales agents are selling the Common Shares on a "best efforts" basis. The offering price will be US$1.00 per Common Share. The minimum subscription per investor is 25,000 Common Shares for US$25,000. Prior to this offering, the Common Shares have not been traded publicly. ----------------------- The Common Shares we are offering involve a high degree of risk. See "Risk Factors" at page 4. ----------------------- We have the right to reject orders to purchase Common Shares in whole or in part. If we reject your order, we will return your money to you without interest or deduction on the next business day after our rejection. IPO will hold the subscription funds and will release the subscription funds to us after (i) we have received subscriptions for the minimum number of Common Shares and (ii) our registration statement on Form 8-A under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), has been declared effective by the Securities and Exchange Commission (the "SEC"). This Prospectus is not complete and may be amended. We have filed a registration statement for the Common Shares with the SEC. We cannot sell or accept any offers to buy the Common Shares before the registration statement becomes effective. We have not given any person authority to give any information or make any representation that is not in this Prospectus. You should not assume that the information in this Prospectus is accurate as of any date other than the date on the front of this Prospectus. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ The information in this 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 prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Price to Discounts Public and Commissions(1) Proceeds to Issuer(2) -------- ------------------ --------------------- Per Common Share.............. US$1.00 US$0.10 US$0.90 Total Minimum................. US$3,000,000 US$300,000 US$2,700,000 Total Maximum................. US$5,000,000 US$500,000 US$4,500,000
(1) In addition to the commissions listed above, we have also agreed to grant to IPO warrants to purchase an amount of Common Shares equal to 10% of the Common Shares sold in the Offering and to pay to IPO a corporate finance fee of US$50,000. See "Plan of Distribution." (2) Before deducting offering expenses we will pay of approximately US$260,000. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------------------- The date of this Prospectus is ,1998 ----------------------- IPO CAPITAL CORP. TABLE OF CONTENTS FORWARD LOOKING STATEMENTS......................................................................................iii NARRATIVE INFORMATION REQUIRED IN PROSPECTUS.....................................................................iv Item 2. Significant Parties................................................................................iv Item 3. Relationship with Issuer of Experts Named in Prospectus............................................vi Item 4. Legal Proceedings..................................................................................vi Item 5. Changes in and Disagreements with Accountants......................................................vi Item 6. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................vi SUMMARY...........................................................................................................1 THE OFFERING......................................................................................................3 RISK FACTORS......................................................................................................4 Limited Operating History....................................................................................4 Expectation of Continuing Losses; Negative Cash Flow; Need for Additional Financing..........................4 Competition..................................................................................................5 Reliance on Unproven Applications of Technology; Dependence on Single Product................................5 New Products and Technological Change........................................................................6 Uncertainty of Market Acceptance; Customer Concentration.....................................................6 Reliance on Strategic Relationships..........................................................................6 No Marketing, Manufacturing or Distribution Experience.......................................................7 Cyclical Industry; Seasonality and Weather...................................................................7 Dependence on Key Personnel..................................................................................7 Proprietary Technology.......................................................................................8 International Operations; Currency Risk......................................................................8 Lack of Public Market........................................................................................8 THE COMPANY.......................................................................................................9 EXCHANGE RATES...................................................................................................10 CAPITALIZATION...................................................................................................11 DILUTION.........................................................................................................12 PLAN OF DISTRIBUTION.............................................................................................14 USE OF PROCEEDS..................................................................................................15 BUSINESS.........................................................................................................16 Overview....................................................................................................16 Industry Background.........................................................................................16 The iQ Technology...........................................................................................18 Performance Specifications and Test Results.................................................................20 The Company Strategy........................................................................................21 Industry Relationships......................................................................................22 Research and Development....................................................................................23 Competition.................................................................................................23 Intellectual Property Rights................................................................................24 Employees...................................................................................................24 Facilities..................................................................................................25 Legal Proceedings...........................................................................................25 SELECTED FINANCIAL DATA..........................................................................................26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................27 Overview....................................................................................................27 Acquisition of iQ Germany...................................................................................27 Results of Operations of the Company........................................................................28 Results of Operations of iQ Germany.........................................................................28 Liquidity and Capital Resources.............................................................................29 Year 2000 Issue.............................................................................................29 Foreign Currency Translation Risk...........................................................................30 Recent Accounting Pronouncements............................................................................30 DIRECTORS AND EXECUTIVE OFFICERS.................................................................................31 Directors and Executive Officers............................................................................31 REMUNERATION OF DIRECTORS AND OFFICERS...........................................................................33 Director Compensation.......................................................................................33 Options to Purchase Securities..............................................................................33 Employment Agreements.......................................................................................33 1998 Stock Option Plan......................................................................................34 Indebtedness Of Directors And Senior Officers...............................................................34 PRINCIPAL SHAREHOLDERS...........................................................................................35 INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.......................................................36 DESCRIPTION OF CAPITAL STOCK.....................................................................................38 Common Shares...............................................................................................38 Special Warrants............................................................................................38 Certain Rights of Shareholders..............................................................................38 Exchange Controls and Other Limitations Affecting Holders of Common Shares..................................38 Pooling and Escrow Agreements...............................................................................39 Transfer Agent and Registrar................................................................................39 DIVIDEND POLICY..................................................................................................40 CERTAIN TAX CONSIDERATIONS.......................................................................................40 United States Federal Income Tax Considerations.............................................................40 Personal Holding Companies..................................................................................41 Foreign Personal Holding Companies..........................................................................42 Passive Foreign Investment Companies........................................................................42 Controlled Foreign Corporation..............................................................................44 Certain Canadian Federal Income Tax Considerations..........................................................45 SECURITIES ELIGIBLE FOR FUTURE SALE..............................................................................46 AVAILABLE INFORMATION............................................................................................47 LEGAL MATTERS....................................................................................................48 INTRODUCTION TO FINANCIAL STATEMENTS.............................................................................48
FORWARD LOOKING STATEMENTS We have made forward-looking statements in this Prospectus. These statements involve risks and uncertainties. Such statements include statements of the Company's plans, objectives, expectations and intentions. You should read the cautionary statements made in this Prospectus as if they were applicable to all forward-looking statements in this Prospectus. Our Company's actual results could differ materially from those anticipated in these forward-looking statements because of certain factors, including those factors listed under "Risk Factors" and other places in this Prospectus. -iii- NARRATIVE INFORMATION REQUIRED IN PROSPECTUS Item 2. Significant Parties (1) The full names and business and residential addresses, as applicable, of iQ Canada's directors are as follows: Name: Russell French Business Address: Suite 708-A, 1111 West Hastings Street, Vancouver, British Columbia, Canada Home Address: 3677 Regent Avenue, North Vancouver, British Columbia, Canada V7N 2C3 Name: Peter E. Braun Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Reineke Strasse 56, 81545 Munich, Germany Name: Gunther C. Bauer Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Oderweg 7, 85521 Ottobrunn, Bavaria, Germany (2) The full names and business and residential addresses, as applicable, of iQ Canada's officers are as follows: Name: Peter E. Braun Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Reineke Strasse 56, 81545 Munich, Germany Name: Gerhard Trenz, Vice-President, Finance Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Heimstettener Strasse 56, 85551 Kirchheim, Germany Name: Gunther C. Bauer Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Oderweg 7, 85521 Ottobrunn, Bavaria, Germany (3) iQ Canada is organized as a corporation and has no general partners. (4) As of December 1, 1998, the names and business and residential addresses of record owners of the five percent (5%) or more of any class of iQ Canada's equity securities are as follows: Name: Peter E. Braun Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Reineke Strasse 56, 81545 Munich, Germany -iv- Name: Gunther C. Bauer Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Oderweg 7, 85521 Ottobrunn, Bavaria, Germany Name: Horst Dieter Braun Business Address: Not applicable Home Address: Schrenckweg 1, 85658 Egmating, Germany Name: Karin Wittkewitz Business Address: Not applicable Home Address: Schrenckweg 1, 85658 Egmating, Germany Name: Rainer Welke Business Address: Ascheberger Strasse 2, 48308 Senden, Germany Home Address: Kreuzbauerschaft 79, 48308 Senden, Germany Name: Helmut Krack Business Address: Not applicable Home Address: Weinerstrasse 7, 48145 Muster, Germany (5) The names and business and residential addresses of beneficial owners of five percent (5%) or more of any class of iQ Canada's equity securities include those persons set forth in response to Item 2(4) as well as: None. (6) The name and business and residential address of the promoter of iQ Canada is. Name: Russell French Business Address: Suite 708-A, 1111 West Hastings Street, Vancouver, British Columbia, Canada Home Address: 3677 Regent Avenue, North Vancouver, British Columbia, Canada V7N 2C3 (7) The names and business and residential addresses of affiliates of iQ Canada are set forth in response to Items 2(1), (2) and (4) as well as: Name: iQ Battery Research & Development GmbH Business Address: Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany Home Address: Not applicable (8) Werbes Sasges & Company, 1111 West Hastings Street, Suite 708, Vancouver, Canada V6E 2J3 is counsel to the Company. Bogle & Gates P.L.L.C., Two Union Square, 601 Union Street, Seattle, Washington 98101-2346 is special U.S. counsel to iQ Canada in connection with the proposed offering. (9) None. (10) Not applicable. -v- (11) Not applicable. (12) Not applicable. (13) Not applicable. Item 3. Relationship with Issuer of Experts Named in Prospectus We have not engaged any expert named in the Prospectus as having prepared or certified any part of it on a contingent basis. No expert had or has a material interest in iQ Canada or is connected with iQ Canada as a promoter, underwriter, voting trustee, director, officer or employee. Item 4. Legal Proceedings As of the date of this Prospectus, there is no material litigation pending against the Company. Item 5. Changes in and Disagreements with Accountants Not applicable. Item 6. Disclosure of Commission Position on Indemnification for Securities Act Liabilities To the extent indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of our Company pursuant to our Company's Articles of Incorporation, contractual agreements or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. -iv- SUMMARY This is a summary of information about the Offering. This is a summary only, and you should read the more detailed information contained in this Prospectus, including the information under the heading "Risk Factors." We urge you to read this entire Prospectus. THE COMPANY THE COMPANY: Our Company, iQ Power Technology Inc., was founded in December 1994 and is a corporation organized under the Canadian Business Corporations Act. In August 1998, we acquired all the issued and outstanding shares of iQ Battery Research and Development GmbH ("iQ Germany") by exchanging shares of our Company for shares of iQ Germany held by iQ Germany's shareholders. The Share Exchange Agreement between our Company and the former shareholders of iQ Germany provides that the former shareholders of iQ Germany, as a group, have a limited right to require us to repurchase all, but not less than all, of our Common Shares received by such shareholders (the "Put Option"). The shareholders may exercise the Put Option at and after the four month anniversary of the initial filing of this Prospectus if (i) we have failed to complete an equity offering with gross proceeds of at least US$3 million; and (ii) such shareholders have repaid to us the full amount of all funds we have advanced or invested in iQ Germany. The Put Option will terminate at the close of this Offering. PRINCIPAL BUSINESS: We, through our wholly-owned subsidiary, iQ Germany, develop and market technology related to starting, lighting and ignition batteries (the "iQ Technology"). TERMS OF THE OFFERING: We are offering a maximum of 5,000,000 Common Shares and a minimum of 3,000,000 Common Shares. We will offer the Common Shares for US$1.00 per share. The minimum subscription is 25,000 Common Shares or US$25,000 per investor, but we may, at our option, accept a lesser amount. IPO will release the offering proceeds to us and we will issue the shares to you when (i) we have received subscriptions for the minimum number of Common Shares and (ii) our registration statement on Form 8-A under the Exchange Act has been declared effective by the SEC. USE OF PROCEEDS: After commissions and offering expenses of US$260,000 are deducted, we will receive approximately US$4,240,000 in net proceeds from the Offering if we sell 5,000,000 Common Shares and approximately US$2,440,000 in net proceeds from the Offering if we sell 3,000,000 Common Shares. We expect to use the proceeds from the Offering for research and development of our battery technologies, expansion of our marketing and sales organization and for general working capital. We may also use some of the proceeds to acquire or invest in businesses, products or technologies that enhance our existing business. Until we use the funds, we will invest the net proceeds from this Offering in government securities or short-term, interest- or dividend-bearing investment-grade securities. See "Use of Proceeds." -1- CAPITALIZATION: We may issue an unlimited number of Common Shares. Currently, there are 18,479,425 Common Shares (including 2,300,000 Common Shares issuable upon the exercise of special warrants) issued and outstanding as of the date of this Prospectus. See "Description of Capital Stock." MANAGEMENT: The President and Chief Executive Officer of the Company is Peter E. Braun. RISK FACTORS: Our Company is a development stage company with new and untested technology. We cannot guarantee that our Company will produce revenues. Your investment in the Common Shares involves a high degree of risk. See "Risk Factors." FORWARD-LOOKING STATEMENTS: We have made forward-looking statements in this Prospectus about our Company's plans, intentions, strategies, expectations, predictions, financial projections and beliefs concerning our future activities, results of operations and other future events or conditions. Actual results, events or conditions could differ materially from those projected by us due to a variety of factors, some of which are beyond our control. See "Forward-Looking Statements" and "Risk Factors." -2- THE OFFERING Number of Common Shares offered hereby..........5,000,000 shares (maximum); 3,000,000 shares (minimum) Common Shares outstanding after the Offering................23,479,425 shares(1) Use of proceeds...........Working capital, general corporate purposes, including research and development, sales and marketing activities and potential acquisitions. Risk Factors..............The Common Shares offered involve a high degree of risk. See "Risk Factors." Summary Financial Data Fiscal Period Years Ended 6 Months Ended Ended December 31, June 30, --------------------------- --------------------------------------- Statement of Operations Data: December 31, 1996 1997 1998 (seven Pro Forma Pro Forma months) 1997 (unaudited)(2)(3) 1997 1998 (unaudited)(2)(4) ------- ---- ----------------- ---- ---- ----------------- Revenue................................. $ -- $ - - $ 27,000 $ -- $ $ -- Operating Expenses...................... 10,504 135,236 760,000 42,471 101,211 457,000 Operating income (loss)................. (10,504) (135,236) (779,000) (42,471) (101,211 (457,000) Net income (loss) for the period........ (10,504) (135,236) (779,000) (42,471) (101,211) (463,000) Net income (loss) per share............. N/A (0.14) (0.06) (0.08) (0.04) (0.03) Weighted average shares outstanding..... -- 950,294 13,750,294 547,271 2,286,461 15,086,461
As at June 30, 1998 ---------------------------------------------------------------------------- As Adjusted(5) Proforma Actual (unaudited) (unaudited)(2)(6) ----------------------- --------------------------------------------------- Balance Sheet Data: Cash and cash equivalents.......... $ 78,731 $ 4,318,000 $ 4,335,000 Working capital.................... 388,855 4,629,000 3,826,000 Total assets....................... 553,588 4,793,000 4,797,000 Non-current liabilities............ -- -- 307,000 Shareholders' equity (deficiency).. 388,855 4,629,000 3,725,000 - ------------------------------
(1) Based upon shares outstanding as of December 1, 1998, and assumes the sale of 5,000,000 Common Shares pursuant to the offering. This number includes 2,300,000 Common Shares issuable upon the exercise of outstanding Special Warrants, but does not include 2,875,000 outstanding options to purchase Common Shares issued by the Company under its Stock Option Plan at an exercise price of US$1.00 per share. (2) For your convenience, we have converted Deutschmark income statement amounts into U.S. dollars using the average noon buying rate in New York City for cable transfers payable in Deutschmarks as certified for customs purposes by the Federal Reserve Bank of New York for the relevant period. We have also converted Deutschmark balance sheet amounts using the relevant period-end noon buying rate, as set forth in "Exchange Rate Information." These translations do not necessarily represent the amounts that would have been reported if iQ Germany had historically reported its financial statements in U.S. dollars. In addition, the exchange rates used are not necessarily indicative of the rates in effect at any other time. (3) Gives effect to the business combination with iQ Germany as if it had occurred on January 1, 1997. (4) Gives effect to the business combination with iQ Germany as if it had occurred on January 1, 1998. (5) Adjusted to give effect to the net proceeds from our sale of the maximum (5,000,000) Common Shares offered in the Offering (at an assumed offering price of US$1.00 per Common Share and after deducting the estimated agents' fees and commissions and estimated offering expenses payable by the Company). (6) Gives effect to the business combination with iQ Germany as if it had occurred on June 30, 1998. -3- RISK FACTORS In addition to the other information in this Prospectus, you should consider the following factors carefully as you evaluate whether or not to invest in the Common Shares. Limited Operating History Our Company was incorporated in December 1994. iQ Germany was established in 1991 to develop technology to improve the performance of conventional lead-acid batteries. Both iQ Germany and our Company have limited operating histories and have not licensed any technologies or sold any products based on the iQ Technology. Our Company and iQ Germany, like most new business enterprises, are subject to a number of risks, including having a limited amount of cash and other financial resources and the fact that other more established businesses with more resources are our competitors. Neither our Company nor iQ Germany have received any material revenues from operations, and we cannot assure you that we will ever receive any revenues from operations, or that we will ever be commercially profitable. Neither we nor iQ Germany have ever been profitable. Expectation of Continuing Losses; Negative Cash Flow; Need for Additional Financing We were organized to acquire iQ Germany and the iQ Technology. iQ Germany is a development stage company which means that it is still developing the iQ Technology for commercial use. The iQ Technology is in the early stages of development and iQ Germany has not produced any commercial products based on it. To date, iQ Germany has concentrated on strategic planning, developing the iQ Technology, developing and testing product prototypes, developing strategic relationships with automakers and third party manufacturers of batteries and conducting market research. We have focused mainly on raising financing for the acquisition of iQ Germany. We have not generated any revenues from our operations and have incurred losses of approximately US$135,236 during the fiscal year ended December 31, 1997 and US$101,211 during the six month period ended June 30, 1998. At December 31, 1997 and June 30, 1998, the Company had an accumulated deficit of US$145,740 and US$246,951, respectively. iQ Germany incurred losses of approximately DM1,034,000 (US$570,000) in the fiscal year ended December 31, 1997 and DM773,000 (US$426,000) in the fiscal period ended June 30, 1998. At December 31, 1997 and June 30, 1998, iQ Germany had an accumulated deficit of DM1,397,000 (US$776,000) and DM1,790,000 (US$993,000), respectively. We do not anticipate having any material revenues from operations until at least the year 2000. Our ability to generate revenues and to make a profit in the future will depend upon a number of factors, including our ability to develop the iQ Technology for commercial use in a timely manner, our ability to license the iQ Technology successfully and, if we decide to sell batteries directly, our ability to enter into contracts with third party manufacturers to manufacture batteries based on the iQ Technology, to develop a marketing and distribution network to sell our products and our customers' acceptance of our products. We cannot guarantee that we will be able to successfully license the iQ Technology to other companies or that we will be successful in marketing and distributing products based on the iQ Technology. We may never have enough revenues from licensing the iQ Technology or selling products to make a profit. We anticipate that the net proceeds we receive from this Offering will be sufficient to satisfy our cash needs for about twelve months after this Offering. Thereafter, the Company's capital requirements will depend on several factors, including the success and progress of our product development programs, the resources we devote to developing our products, the extent to which our products achieve market acceptance and other factors. We expect to devote substantial capital resources for research and development. Consequently, in order to fund such research and development, we may be required to raise additional funds by issuing debt or equity securities, or both. We may also require additional money if we experience delays, cost overruns, additional funding needs for joint ventures or other unanticipated developments. We cannot give you any assurance that we will be able to obtain more financing on favorable terms, if at all, or that we will be able to obtain financing on a timely basis. If we fail to get the necessary financing on a timely basis it might delay and increase the costs of development and commercialization of the iQ Technology, cause us to default on some of our financial commitments, prevent us from being able to commercialize the iQ Technology and force us to discontinue our operations or to look for a -4- purchaser for the iQ Technology or our business. If we issue additional equity securities, it could cause substantial reduction in the value of stock held by existing shareholders. Competition The lead-acid battery industry is highly competitive and includes many firms with greater financial, technological, manufacturing, marketing and other resources than either us or iQ Germany, and that have longer operating histories than our Company or iQ Germany. Many of our competitors have devoted substantial resources to research and development, manufacturing, marketing and commercializing products. We expect competition in the battery industry to intensify because many battery companies are consolidating or vertically integrating which, because they own all stages of production, allows them to make batteries at lower cost. Our competitors range from development stage companies to major domestic and international companies. Many of our competitors' products and technologies are widely accepted by retail consumers and other buyers of batteries and have long histories of reliable and effective use. Our competitors also have established reputations and long-standing relationships with original equipment manufacturers that may give them a substantial competitive advantage over us and could pose a significant barrier to our entry to the marketplace. In recent years, buyers of lead-acid batteries have also consolidated, reducing the number of customers for lead-acid batteries and increasing price competition. We cannot assure you that the iQ Technology or products using the iQ Technology will be accepted in the market. Additionally, even if the iQ Technology is widely accepted, our competitors may develop alternative or competing technologies that are more efficient than ours. Advances in battery technology may render our products or technology obsolete or noncompetitive. In addition, consumers may not see any advantage in purchasing products based on the iQ Technology over the products of our competitors. The development of alternative or competitive technologies or the lack of market acceptance of the iQ Technology could have a material adverse effect on our business, financial condition and the results of our operations. See "Business--Competition." North America. The United States and Canadian market for starting, lighting, and ignition ("SLI") and specialty batteries is mature and highly competitive. Battery manufacturers compete primarily on the basis of price, quality, service, warranty period and timeliness of delivery. Generally, manufacturers make sales without long-term contracts. Because the industry has had excess capacity, competition and increased pressure for cost reduction has resulted in declining prices in the last several years. Our primary domestic competitors in North America are Johnson Controls, Inc., Delco Remy (a division of General Motors Corporation), Exide Corporation and GNB Incorporated. Although the U.S. market is currently dominated by domestic manufacturers, foreign competition could increase depending on changes in relative prices, duties, tariffs, freight costs, currency exchange rates or changes in technology. Europe. The SLI battery market in Europe is also highly competitive. Competition in this market has intensified because of reduced demand. European manufacturers compete primarily on the same bases as manufacturers in the United States. The excess production capacity in the industry, competition and increased pressure for cost reduction from large customers has caused prices to decline. Currency fluctuations among the European countries can also have considerable effects on the amount of revenues generated in the market. Among our competitors in Europe are VB Autobatterie GmbH, Hawker Batteries, Fiamm, Delco Remy, Exide Corporation, Autosil, Hoppecke, Yuasa and Matsushita. Reliance on Unproven Applications of Technology; Dependence on Single Product The iQ Technology uses an insulated double-walled case, an internal microprocessor and a battery acid anti-stratification device to increase the charging, storage and power delivery capabilities of a conventional lead acid battery. This design requires us to integrate the iQ Technology with existing lead acid battery technology. Neither we nor iQ Germany have manufactured prototypes in commercial quantities or used a commercial manufacturing process. We cannot guarantee that the iQ Technology can be successfully integrated into lead acid batteries on a commercial basis. In addition, we may not be successful in developing a manufacturing process that will permit us to commercialize our battery products. Although we believe that the iQ Technology can be integrated into lead acid -5- batteries on a commercial basis, and that a commercially feasible manufacturing process can be developed, we cannot guarantee success. We anticipate that all of our revenues will initially come from fees derived from licensing the iQ Technology or, possibly, from the sale of batteries that incorporate the iQ Technology. See "Business -- The iQ Technology." We cannot guarantee that we will receive any revenues from the licensing of the iQ Technology or from the sale of batteries incorporating the iQ Technology or that we can generate a profit. If we receive any revenues, the revenues may decrease after an initial period of market introduction due to factors such as competition, changes in consumer preferences, changes in customer specifications, market saturation, changes in demand from original equipment manufacturers ("OEM"), changes in demand for automobiles, changes in economic conditions, or other factors, many of which are beyond our control. Any decline in the demand for batteries could have a material adverse effect on our business, results of operations and financial condition. See "New Products and Technological Change," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business--Industry Background" and "Competition." New Products and Technological Change We believe our growth will depend upon our ability to develop and commercialize the iQ Technology and to introduce new products and technologies that are attractive to consumers, OEMs, automobile manufacturers, automobile service providers and retailers of automotive batteries. The process of creating, developing, researching and commercializing battery and power technologies is risky. We may experience delays in the process, and we cannot assure you that we will successfully complete the development or introduction of any new technologies or products, or that such technologies or products will achieve market acceptance. If we fail to anticipate or respond adequately to changes in technology and consumer preferences, our development and introduction of new technologies or products may be delayed and such delays could have a material adverse effect on our business, results of operations and financial condition. See "Business--The iQ Technology" and "Reliance on Strategic Relationships." Uncertainty of Market Acceptance; Customer Concentration There are currently no lead-acid batteries that use technology that is similar to the iQ Technology. As a result, the potential demand for products that use the iQ Technology and the degree to which the iQ Technology can meet market demand is difficult to estimate. We cannot guarantee that there will be enough demand for the iQ Technology or products that incorporate the iQ Technology to generate enough revenues or cash flows so that we will achieve commercial profitability. Our success in gaining market acceptance for the iQ Technology will be affected by a number of factors that are beyond our control, such as, the license fees for the iQ Technology, the willingness of consumers to pay a premium price for batteries incorporating the iQ Technology, specifications of automobile manufacturers, the marketing and pricing strategies of competitors, the development of alternative technologies and general economic conditions. We anticipate that a significant portion of our revenues and accounts receivable will be from license fees from a limited number of key customers that may include automobile manufacturers, aftermarket resellers and OEMs. We have not yet entered into any licensing agreements for the iQ Technology. To the extent we depend upon these key customers for a large percentage of our revenues, the loss of one or more of them or a significant reduction in licensing fees from them could have a material adverse affect on our business and the results of our operations. Reliance on Strategic Relationships Our future success is dependent on the development and maintenance of strategic relationships. We may rely upon strategic partners to assist us in the research and development of the iQ Technology and future technologies, to participate in the later stage development and testing of commercial prototypes, to manufacture products based on the iQ Technology and to market and distribute such products. We intend to license the iQ Technology to strategic partners for up-front licensing fees, royalties or previously agreed upon transfer prices on the sale of battery products that use our technology. Alternatively, we may enter into a strategic relationship with a third party manufacturer to manufacture a line of batteries under our brand name and to distribute and market such batteries to -6- the automotive manufacturing industry and the aftermarket automotive industry. If such strategic partners or third parties fail to perform effectively, we may fail to generate any revenues or a profit. There is no guarantee that any relationship will continue or result in any successful developments or profits to us. See "Business -- Industry Relationships." No Marketing, Manufacturing or Distribution Experience We have no experience in marketing of battery technology or products. We cannot be certain that the iQ Technology will be successfully integrated into a commercially manufactured product at costs or in quantities necessary to make them commercially viable. If we elect to develop and market our own product line, we will likely contract with a third-party manufacturer to manufacture, assemble, test and package our products to our specifications. We cannot guarantee that we will be able to enter into contracts with third-party manufacturers to manufacture a product line to our specifications on terms that are acceptable to us. In addition, third-party manufacturers are required to meet governmental and regulatory requirements including environmental and consumer safety requirements. If the third-party manufacturer we select should fail to comply with the regulatory requirements or be unable to meet our quantity and quality requirements, we will be required to select another manufacturer, which may result in delays in delivering products to distributors or other purchasers. We cannot guarantee that we or any third-party manufacturer can obtain, on acceptable terms, enough of the required components and substances necessary to manufacture our products. If they should encounter delays or difficulties in their relationships with suppliers and third-party vendors, their development and testing efforts will likely be delayed. If these delays occur, the market introduction and subsequent sales of our products may be delayed. Any delay will have a material adverse effect on our business, financial condition and the results of our operations. Neither we nor iQ Germany has sales, marketing or distribution experience. We may have to rely on experienced employees, strategic partners, distributors and third-party manufacturer's representatives to market our products. We cannot guarantee that such efforts will lead to a successful and effective sales force and distribution system. To the extent that we depend on our strategic partners or third parties for marketing and distribution, any revenues received by us will depend upon their efforts. If we are unable to maintain or establish third-party distribution relationships, we may have to develop our own marketing and sales force with technical expertise and supporting distribution capabilities. Cyclical Industry; Seasonality and Weather The automotive aftermarket is seasonal as retail sales of replacement batteries are generally higher in the fall and winter. Accordingly, demand for automotive batteries is generally highest in the fall and early winter because retailers are building inventories in anticipation of the winter season. European sales are usually concentrated in the fourth calendar quarter because of the practice of many industrial battery customers (particularly governmental and quasi governmental entities) of deferring purchasing decisions until the end of the calendar year. Demand for automotive batteries is significantly affected by weather conditions. Unusually cold winters or hot summers accelerate battery failure and increase demand for automotive replacement batteries. We anticipate that, if we decide to market products based on the iQ Technology, such products will be subject to factors over which we have no control that affect pricing and net sales, such as general economic and industry conditions. In particular, the battery markets in which such products are likely to compete are cyclical in nature and are sensitive to the rate of economic growth in the U.S. and other world economies. Future economic downturns could adversely affect our results of operations and financial condition. Dependence on Key Personnel Our performance and future operating results substantially depend on the continued service and performance of our Company's senior management and key technical personnel. We intend to hire a significant number of additional technical and sales personnel in the next year. Competition for qualified personnel is intense, and we cannot be sure we will retain our key technical, sales and managerial employees, or that we will be able to attract or retain highly-qualified technical and managerial personnel in the future. If we lose the services of any of our senior management -7- or other key employees, or if we are unable to attract and retain necessary sales, technical and managerial personnel, it could have a material adverse effect on our business, operating results and financial condition. See "Business -- Employees" and "Directors and Executive Officers." Proprietary Technology Our success is dependent upon iQ Germany's ability to protect its intellectual property rights. iQ Germany relies principally upon a combination of copyright, trademark, trade secret and patent laws, non-disclosure agreements and other contractual provisions to establish and maintain its rights. iQ Germany's policy is to enter into nondisclosure and confidentiality agreements with each of its consultants, distributors, customers and corporate partners to limit access to and distribution of the iQ Technology, documentation and other proprietary information. We cannot guarantee that iQ Germany's efforts to protect its intellectual property rights will be successful. Although we believe that the iQ Technology and products do not infringe upon the intellectual property rights of third parties, we cannot be sure that third parties will not bring infringement claims (or claims for indemnification resulting from infringement claims) against us or iQ Germany with respect to copyrights, trademarks, patents and other proprietary rights. Any such claims, whether with or without merit, could be time consuming, result in costly litigation and diversion of resources, cause product shipment delays or require us or iQ Germany to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on acceptable terms, if at all. A claim of product infringement against us or iQ Germany and our or iQ Germany's failure or inability to license the infringed or similar technology, could have a material impact on our business, operating results and financial condition. International Operations; Currency Risk iQ Germany's operations in Germany are subject to the risks usually associated with foreign operations, including the disruption of markets, changes in export or import laws, restrictions on currency exchanges, and the modification or introduction of other governmental policies with potential adverse effects. Because of the nature of these operations, we anticipate that a substantial portion of our future revenues and expenses may be denominated in currencies other than U.S. dollars and changes in exchange rates will therefore have a greater effect on our results of operations. We currently do not hedge foreign exchange risks, but may do so in the future. We cannot be sure that this can be accomplished on satisfactory terms. To the extent we do not take steps to effectively reduce the changes in the relative value of the U.S. dollar and these foreign currencies, our results of operations and financial condition could be adversely affected. In addition, we may expand into other countries through joint ventures involving local partners who may have economic, business or legal interests or goals which are inconsistent with those of the joint venture or us or who may be unable to meet their financial or other obligations to the joint venture. We cannot guarantee that we will be able to effectively protect our economic, business or legal interest with such joint venture partners. Lack of Public Market The Common Shares have no established trading market. Although we intend to take steps to permit the development of a market in the Common Shares on the Nasdaq OTC Bulletin Board, we cannot guarantee that an active trading market for the Common Shares will ever develop. -8- THE COMPANY iQ Germany was formed in 1991 to research and evaluate methods of maximizing lead-acid battery performance. On August 25, 1998, the Company acquired all the issued and outstanding capital stock of iQ Germany. The Company was formed to acquire iQ Germany and to license the iQ Technology or to market products based on the iQ Technology. The Share Exchange. In August of 1998, the Company acquired all the issued and outstanding stock of iQ Germany in exchange for 10,000,000 common shares of the Company at a deemed price of US$0.25 per common share for a total purchase price of US$2,500,000. Pursuant to the terms of the Share Exchange Agreement, the former shareholders of iQ Germany, as a group, have a limited right to require iQ Canada to repurchase all, but not less than all, of the iQ Canada Common Shares received by such shareholders (the "Put Option"). The Put Option is exercisable at and after the four month anniversary of the initial filing of this Prospectus if (i) iQ Canada has failed to complete an equity offering with gross proceeds of at least US$3 million; and (ii) such shareholders have repaid to iQ Canada the full amount of all funds iQ Canada has advanced or invested in iQ Germany. The Put Option will terminate at the close of this Offering. Pursuant to the terms of Atypical Share Exchange Agreements, the Company has also issued into escrow an additional 2,800,000 Common Shares against the deposit into escrow of "atypical shares" of iQ Germany held by all of iQ Germany's atypical shareholders (the "Atypical Shareholders"). The Common Shares and the "atypical shares" will be released from escrow to the Atypical Shareholders and the Company, respectively, at the close of this Offering. In the event the Put Option is exercised, the Common Shares and the "atypical shares" will be released from escrow and returned to the Company and the Atypical Shareholders, respectively. In connection with the Share Exchange, the former shareholders and Atypical shareholders of iQ Germany and certain shareholders of iQ Canada have entered into a pooling agreement pursuant to which they have agreed to escrow their shares in iQ Canada. See "Description of Capital Stock -- Pooling and Escrow Agreements." We have been advised that the former Shareholders of iQ Germany have also entered into a Shareholders Agreement pursuant to which they have agreed to act jointly with respect to the voting of their shares in iQ Canada. In addition, certain former shareholders of iQ Germany have entered into employment, confidentiality and non-competition agreements with the Company. See "Remuneration of Directors and Officers -- Employment Agreements" and "Interests of Management and Others in Certain Transactions." The business combination with iQ Germany will be accounted for by the Company under the purchase method of accounting with iQ Germany being identified as the acquiror. Until all of the conditions have been satisfied with respect to the closing of the acquisition, the financial results of the Company and iQ Germany cannot be reported on a consolidated basis. Accordingly, unless otherwise stated herein, the financial information presented is that of the Company only. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Acquisition of iQ Germany" and the Unaudited Pro Forma Consolidated Financial Statements and Notes thereto included elsewhere in this Prospectus. The Company was incorporated on December 20, 1994 under the Canada Business Corporations Act as 3099458 Canada Inc. The Company changed its name to iQ Power Technology Inc. on May 9, 1997. Unless the context requires otherwise, references to "iQ Canada" and the "Company" refer only to iQ Power Technology Inc. The Company's principal executive offices are located at Suite 708-A, 1111 West Hastings Street, Vancouver, British Columbia, Canada V6E 2J3, and its telephone number at that location is (604) 669-3132. -9- EXCHANGE RATES The historical financial statements of iQ Germany are in Deutschmarks (DM). Accordingly, set forth below, for each period presented, are the exchange rates at the end of the period, the average exchange rates on the last day of each month during the period and the high and low exchange rates for one Deutschmark, expressed in U.S. dollars, based on the noon buying rate in New York City for cable transfers payable in Deutschmarks as certified for customs purposes by the Federal Reserve Bank of New York. U.S. Dollars Per Deutschmark Six Months Ended Year Ended December 31, June 30, --------------------------------------------------------------------- 1993 1994 1995 1996 1997 1998 ------------- ------------- ------------- ------------- ------------- -------------- Period End.................... US$0.6020 US$0.6454 US$0.6971 US$0.6499 US$0.5558 US$0.5545 Average....................... 0.5749 0.6204 0.7012 0.6636 0.5749 0.5516 High.......................... 0.6380 0.6702 0.7372 0.6967 0.6488 0.5685 Low........................... 0.5745 0.5673 0.6405 0.6388 0.5316 0.5393
On November 30, 1998, the noon buying rate was DM1.00 = US$0.5900. The DM is convertible into U.S. dollars at freely floating rates, and there are currently no restrictions on the flow of German currency between Germany and the United States. -10- CAPITALIZATION The following table sets forth, at June 30, 1998, the capitalization of the Company (after giving effect to the issuance of 14,036,300 Common Shares issued after June 30, 1998 and the issuance of 2,300,000 Special Warrants) and the capitalization as adjusted to give effect to the issuance and sale by the Company of the maximum amount (5,000,000) of Common Shares offered hereby, at an assumed public offering price of US$1.00 per share and after deducting the underwriting discounts and commissions and estimated offering expenses. This table should be read in conjunction with the Consolidated Financial Statements and the Notes thereto appearing elsewhere in this Prospectus. June 30, 1998 ------------------------- As Actual Adjusted -------- ------------- (in thousands) Long Term Bank Debt............................................ 136 136 Non-Current due to Shareholders................................ 303 303 --- --- 439 439 Shareholders' equity Common Shares, without par value, unlimited number of shares authorized; 16,179,425 shares issued, actual; 21,179,425 shares issued, as adjusted ...................................... $1,808 $6,808 Special Warrants, 2,300,000 issued and outstanding(1)....... 575 575 Cumulative Foreign Exchange Adjustment...................... 153 153 Retained earnings (deficit)................................. (2,263) (3,028) ----- ----- Total shareholders' equity................................ 273 4,508 --- ----- Total capitalization........................................... $712 $4,947 ==== ======
- -------------------------------- (1) Each Special Warrant is exchangeable, without payment of additional consideration, into one Common Share. -11- DILUTION As of June 30, 1998, the pro forma net tangible book value of the Company's Common Shares was US$124,905, or US$0.01 per share. Pro forma net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the number of Common Shares outstanding after giving effect to the issuance of an additional 13,636,200 Common Shares issued after June 30, 1998 and the conversion of 2,300,000 Special Warrants outstanding as of December 1, 1998. After giving effect to the sale by the Company of the maximum number of Common Shares offered hereby (5,000,000) at an assumed offering price of US$1.00 per share and after deducting the commissions and estimated offering expenses payable by the Company, the pro forma net tangible book value of the Company as of June 30, 1998 would have been US$4,364,905, or US$0.20 per share. This represents an immediate increase in net tangible book value of US$0.19 per share to existing shareholders and an immediate dilution of US$0.80 per Common Share to new investors purchasing the Common Shares in this offering. Dilution is determined by subtracting pro forma net tangible book value per share after the offering from the amount of cash paid by a new investor for a Common Share. The following table illustrates this per share dilution: Assumed offering price per share ........................ US$1.00 Pro forma net tangible book value (deficiency) per share as of June 30, 1998........................... US$0.01 Increase per share attributable to the offering.......... US$0.19 -------- Pro forma net tangible book value per share after this offering........................................... US$0.20 Dilution per share to new investors....................... US$0.80 ======= The following table summarizes, on a pro forma basis as of December 1, 1998, the number of Common Shares purchased from the Company, the total consideration paid to the Company and the average price per share paid by existing shareholders and by new investors purchasing the maximum amount of Common Shares offered hereby based on an assumed offering price of US$1.00 per share (before deducting discounts and commissions and estimated offering expenses payable by the Company): Average Shares Purchased Total Consideration Price --------------------------------------------------------------------- Number Percent Amount Percent Per Share --------------------------------------------------------------------- Existing shareholders, pro forma basis..... 18,479,425 78.7% US$4,619,856 48.0% US$0.25 New investors.............................. 5,000,000 21.3% US$5,000,000 52.0% US$1.00 --------- ---- ---------- --- Total .................................... 23,479,425 100% US$9,619,856 100% ========== === ========== ===
After giving effect to the sale by the Company of the minimum Common Shares offered hereby (3,000,000) at an assumed offering price of US$1.00 per share and after deducting the commissions and estimated offering expenses payable by the Company, the pro forma net tangible book value of the Company as of June 30, 1998 would have been US$2,564,905, or US$0.12 per share. This represents an immediate increase in net tangible book value of US$0.11 per share to existing shareholders and an immediate dilution of US$0.88 per Common Share to new investors purchasing the Common Shares in this offering. -12- The following table illustrates this per share dilution: Assumed offering price per share ........................ US$1.00 Pro forma net tangible book value (deficiency) per share as of June 30, 1998........................... US$0.01 Increase per share attributable to the offering.......... US$0.11 -------- Pro forma net tangible book value per share after this offering........................................... US$0.12 Dilution per share to new investors....................... US$0.88 ======= The following table summarizes, on a pro forma basis as of December 1, 1998, the number of Common Shares purchased from the Company, the total consideration paid to the Company and the average price per share paid by existing shareholders and by new investors purchasing the minimum amount of Common Shares offered hereby based on an assumed offering price of US$1.00 per share (before deducting discounts and commissions and estimated offering expenses payable by the Company): Average Shares Purchased Total Consideration Price --------------------------------------------------------------------- Number Percent Amount Percent Per Share --------------------------------------------------------------------- Existing shareholders, pro forma basis..... 18,479,425 86.0% US$4,619,856 60.6% US$0.25 New investors.............................. 3,000,000 14.0% US$3,000,000 39.4% US$1.00 --------- ---- ---------- --- Total .................................... 21,479,425 100% US$7,619,856 100% ========== === ========== ===
The foregoing computations include 2,300,000 Common Shares issuable upon the exercise of outstanding Special Warrants and exclude, as of December 1, 1998, the possible issuance of 2,875,000 Common Shares at an average exercise price of $1.00 per share pursuant to outstanding stock options. In addition, the foregoing computations exclude an aggregate of 325,000 Common Shares reserved for issuance upon exercise of options to be granted under the Company's 1998 Stock Option Plan. To the extent such stock options are exercised, or such Common Shares are granted, there will be further dilution to new investors in the offering. See "Principal Shareholders" and "Remuneration of Directors and Executive Officers - Stock Option Plan." -13- PLAN OF DISTRIBUTION Under the terms and subject to the conditions contained in the Agency Agreement, IPO has agreed to sell the Common Shares on a "best efforts" basis. IPO will offer the Common Shares at the offering price set forth on the cover page of this Prospectus and the Company will allow IPO a commission equal to 10% of the offering price. IPO may engage other broker-dealers registered with the NASD and in applicable jurisdictions and selected securities dealers in Canada to participate in this Offering and IPO may pay a commission to these dealers. IPO will not effect any sales to discretionary accounts. The Company has agreed to indemnify IPO against certain liabilities including liabilities under the Securities Act, or to contribute to payments IPO may be required to make in respect thereof. The Offering will begin on the date of this Prospectus and will continue until the later of (i) the date that is four months after the date of this Prospectus or (ii) such later date as may be agreed upon by the Company and IPO (the "Expiration Date"). When collected, subscription funds will be held by IPO in an interest-bearing escrow account. The Company reserves the right to reject orders for the purchase of Common Shares in whole or in part, and if a subscription is rejected, the subscriber's funds will be returned without interest the next business day after rejection. The Offering will be terminated, no Common Shares will be sold, and no subscription proceeds will be released from escrow to the Company unless on or before the Expiration Date (i) the Company has accepted subscriptions and payment in full for the minimum number of Common Shares and (ii) the Company's registration statement on Form 8-A under the Exchange Act has been declared effective by the SEC. If the foregoing conditions have not been satisfied by the Expiration Date, or the Offering is otherwise earlier terminated, accepted subscriptions will be of no future force or effect. In such event, IPO will promptly return to all subscribers all subscription funds, without any interest thereon. If the minimum number of Common Shares are sold and the Company's registration statement on Form 8-A has been declared effective under the Exchange Act, the subscription amounts held in escrow, including any interest thereon, shall be released to the Company for its immediate use. Any subscriptions accepted after the sale of the minimum number of Common Shares but before the termination of the Offering will be held by IPO pending acceptance or rejection of subscriptions. Upon acceptance, such proceeds will be available for immediate use by the Company. In connection with the Offering, the Company has agreed to issue to IPO warrants to purchase Common Shares in an amount equal to 10% of the Common Shares sold in the Offering. The warrants are exercisable for a period of two years from the date of IPO having received a letter from the Company indicating that Company's registration statement on Form 8-A has been declared effective by the SEC. The exercise price for the first year is US$1.00 per Common Share and for the second year is US$1.50 per Common Share. The Company has also agreed to pay IPO a corporate finance fee of US$50,000. Before this Offering, there has been no market for the Company's Common Shares. The offering price of the Common Shares was determined by negotiation between the Company and IPO and does not necessarily bear any relationship to the Company's assets, book value, revenues or other established criteria of value, and should not be considered indicative of the actual value of the Common Shares. Factors considered in determining such offering price, in addition to prevailing market conditions, include the history of, and prospects for, the industry in which the Company competes, and assessment of the Company's management, its past and present operations, the prospects of the Company, its capital structure and such other factors as were deemed relevant. -14- USE OF PROCEEDS The net proceeds to the Company from the sale of the Common Shares being offered hereby, based on an offering of 3,000,000 to 5,000,000 Common Shares at an assumed initial public offering price of US$1.00 per share and after deducting commissions and estimated offering expenses payable by the Company, estimated to be approximately US$260,000, are estimated to be between US$2,440,000 and US$4,240,000. The Company expects to use the proceeds from the Offering for research and development of new products and technologies, expansion of the Company's marketing and sales organization and activities and general working capital. The Company may also use a portion of the proceeds to acquire or invest in businesses, products or technologies that expand, complement or are otherwise related to the Company's existing business. The Company has no present plans, agreements or commitments, and is not currently engaged in any negotiations, with respect to any such transactions. Pending their application, the Company will invest the net proceeds from this Offering in government securities or short-term, interest- or dividend-bearing investment-grade securities. -15- BUSINESS Overview The Company is engaged in the development and commercialization of electrical power system components for the automotive industry. The Company's primary technology relates to a "smart" automotive starter battery (the "iQ Battery") which combines several proprietary features. These features include an insulated case to minimize temperature fluctuation, an internal microprocessor to monitor and control the changing and discharging process and a battery acid anti-stratification device, to create a battery with more efficient charging, storage and power delivery than conventional automotive batteries. Compared to conventional OEM batteries, the iQ Battery is lighter, has increased cold-weather starting performance and increased life expectancy. The starting, lighting and ignition ("SLI") battery industry is a mature and stable industry that is composed of a limited number of aftermarket resellers and OEMs. Over the last ten years, new competition and changes in the automotive industry have increased pressure on SLI battery manufacturers to reduce costs and to improve the power and efficiency of the batteries they produce. In response to these conditions and to the increased market demand for smaller and lighter SLI batteries that produce adequate amounts of electrical power, the Company has developed the iQ Technology, a battery technology that lowers the weight and increases the electrical output of SLI batteries. The Company has produced prototype batteries based on the iQ Technology for testing by several major automotive manufacturers, including Daimler-Benz, BMW and Audi. As a result of these tests and extensive testing by the Company, the Company believes that when compared to a conventional 12 volt automotive battery, a comparable iQ Battery will: o weigh 40% less; o have six times the recharging capacity in cold conditions; o require 40% less lead; o have increased service life; and o have increased low-temperature starting capacity. The Company intends to market the iQ Battery to automakers in order to stimulate demand for the iQ Technology. The Company anticipates that it will eventually license the iQ Technology to automobile suppliers and battery manufacturers or enter into one or more strategic relationships with established battery manufacturers to produce and distribute the iQ Battery. Industry Background The SLI battery industry is a stable, mature industry that is composed of a limited number of aftermarket resellers and OEM's. In 1997, worldwide unit sales in the SLI battery market have been estimated at approximately 235 million units with a value of US$7.5 billion. The SLI battery industry is highly-concentrated and is dominated by eight SLI battery manufacturers who, in 1997, accounted for approximately 66% of the worldwide market share. The following graph sets forth the approximate world SLI battery market share of the principal battery manufacturers in 1997. -16- [Pie chart setting forth the approximate world SLI battery market share of principal battery manufacturers in 1997. The information contained in the chart is as follows: Manufacturer Market Share Exide 20% Yuasa (Japan) 10% GNB (Australia) 8% Hawker (England) 7% Johnson Controls (U.S.) 6% Varta (Germany 5% JSB (Japan) 5% Delco Remy (U.S. 5% Others 34%] The SLI battery industry, over the past 30 years, has had a relatively low level of product innovation and has been slow to respond to changes in automotive technology and performance requirements. However, new competition within the SLI battery industry and changes in the automotive manufacturing industry have placed increased pressure on SLI battery manufacturers to reduce costs and to increase the power and efficiency of the batteries they produce. In recent years, many automotive manufacturers have begun divesting their component manufacturing divisions in an effort to streamline production processes. This divestment has resulted in increased competition and lower overall prices for SLI batteries. At the same time, many automobile manufacturers, in an effort to reduce costs, have begun to apply strict conditions to their relationships with OEM's, such as requiring "just-in-time" delivery and "in house" assembly of components. Many automobile manufacturers have also adopted a policy of having at least two alternative sources of supply, thus requiring any developer of new battery technologies to persuade other OEM's to adopt similar technologies. Recent advances in automobile technology and design have placed increasing demands on the electrical output generated by an automobile battery. Despite these changes, conventional lead acid batteries have remained relatively unchanged since they were first introduced as an electrical power source for the auto industry. Conventional lead acid batteries are extremely sensitive to changes in temperature and continuously lose output capacity due to temperature fluctuations, vibration damage and corrosion and sulfatation inside the battery. As a result, in order to compensate for the tendency of conventional lead acid batteries to lose much of their output capacity over time, conventional battery manufacturers are required to manufacture larger and heavier batteries with increased initial output capacity. Such batteries not only add additional weight to the vehicle, but are also often more difficult to integrate into modern engine configurations. At the same time, fuel efficiency requirements and engine designs require that battery size and weight be reduced to ensure maximum fuel efficiency. The Company believes that increased competition in the SLI battery manufacturing industry along with increased demands for high-powered, lightweight, efficient SLI batteries that can be used in both traditional and alternative vehicle applications, will facilitate the adoption of the Company's "smart battery" technology by aftermarket resellers and OEM's. -17- [Picture of iQ Battery] The iQ Technology Over time, lead-acid batteries lose output capacity due to, among other things, temperature fluctuations and corrosion of the internal lead plates. The iQ Battery utilizes an insulated case, an internal microprocessor and a battery acid anti-stratification device to minimize the loss of output capacity. As a result, the iQ Battery requires fewer lead plates than a conventional lead acid battery to deliver the required output capacity for a specific application. Double-Walled Casing Conventional lead-acid batteries are vulnerable to damage caused by temperatures above 50 degrees Centigrade (122 degrees Fahrenheit) and to loss of starting performance when temperatures fall below freezing (0 degrees Celsius or 32 degrees Fahrenheit). Some auto manufacturers have attempted to protect batteries from the high temperatures found in the car's engine compartment by installing the batteries in the rear of the vehicle. Although this placement protects batteries from heat, it requires the use of long, thick cables to connect the battery to the engine. The cables not only increase the weight of the car, they also produce electrical losses in cold starting conditions. To offset these losses, manufacturers must use batteries with larger amounts of lead and acid, thus further increasing the total weight of the automobile. In order to minimize the loss of performance caused by temperature extremes, the Company engaged BASF, Germany's largest chemical company, to develop a double-walled battery case made from a polypropylene foam material called Neopolen(R), a thermoplastic particle foam. When a battery is placed inside the Neopolen case, it is protected against the extreme temperature fluctuations by the thermal insulation properties of the material. In addition, Neopolen has mechanical properties which lends itself to integrating with battery technology. The cells of this ductile material remain intact under mechanical pressure and, after protracted compression, the material returns to its original shape. The Company believes that the structural stability of the Neopolen case will provide additional protection to the internal battery components. -18- Energy Control System Although the insulated case of the iQ Battery provides protection against extreme high temperatures, the insulated case cannot protect the battery from extended low temperatures. Temperatures below freezing dramatically reduce the ability of a battery to start an automobile engine and to be recharged by a running car's generator. To prevent the loss of performance caused by low temperatures, the iQ Battery incorporates an energy control system to maintain or reestablish optimal internal battery temperatures. The energy control system consists of a sensor and control system and an internal heating component. The sensor and control unit is designed to measure and record a variety of internal and external factors, including: o outside temperature o changes in outside temperature o inside temperatures o changes in inside temperature o the revolutions per minute ("RPMs") at which the engine was cranked o the time of travel and the RPMs during travel o voltage o changes in voltage Using this information, the energy control system determines when the heating component must be activated and the amount of power that may be used to maintain optimum internal battery temperature without draining the battery to the point that damage occurs. The Company anticipates that, in the future, automobiles will have real time electronic information displays linked to the vehicle's on-board computer system to provide the driver information relating to battery charge levels, electrical outputs, temperature and other information. The Company has initiated programs to complete the production design of the integrated circuits necessary for the internal sensor and control unit. As part of this process, the Company has received bids, from several manufacturers, each of which has established, at its own cost, design teams to compete for anticipated production orders. At the present time, each manufacturer has developed and presented functional prototypes meeting the Company's specifications. If the Company elects to produce the iQ Battery, rather than license the iQ Technology, the Company anticipates that it will select one of these manufacturers for the production of the energy control system components. The Anti-Stratification Component Acid stratification is a less well-known, but significant, problem associated with lead-acid batteries. Lead-acid batteries utilize a mixture of sulfuric acid and distilled water. Because the specific gravity of water is less than that of sulfuric acid, over time gravity causes the acid and the water to separate. When this separation occurs, the battery is not able to produce or store electric power in the upper parts of the internal lead plates that are surrounded by water. In addition, if pure sulfuric acid becomes concentrated in the lower parts of the battery, the highly corrosive effects of the acid tend to override the electrochemical process in the lower parts of the internal lead plates. The problems caused by acid stratification can be alleviated by continuously mixing the acid and water. In the past, manufacturers have sought to address this problem with acid pumps and other methods, but such efforts have not been successfully adapted for commercial application in the automotive starter battery market. Instead of using moving parts or pumps, the iQ Technology uses hydrodynamic principles to facilitate continuous mixing of the sulfuric acid and the distilled water inside the battery. A simple plastic baffle is integrated into each cell of the battery. When the vehicle is moving, e.g., accelerating or braking, the inertial energy acts with the baffle to produce internal fluid pressure that causes the sulfuric acid at the bottom of the battery to travel through a corridor to the top of the battery. Specially designed "gating" mechanisms inhibit the reversal of the fluid flow. In -19- addition, when the vehicle is not moving, the internal baffle system acts as a hydrodynamic pump that moves fluid to the top of the battery in response to the battery's internal heating element. Performance Specifications and Test Results The outer dimensions of the iQ Battery are identical to a standard conventional 12 volt lead acid battery in order to facilitate ease of replacement in existing vehicles. In addition, the dimensions and shape of the iQ Battery's terminals are identical to those of conventional batteries. The iQ Battery, however, loses charging capacity at a much lower rate than conventional batteries. As a result, the iQ Battery requires less amp output to deliver the same performance over time, and therefore, weighs approximately 40% less than conventional batteries. The Company's prototype batteries have been tested extensively both in-house and by third-party organizations. The following tables detail the results of tests performed by a major auto manufacturer. All tests compared the prototype iQ Battery with a premium class, 12 volt, 100 amp battery that is normally used as OEM equipment in German luxury cars. Car Power System Test [Bar graph showing electrical output for the iQ Battery and a standard battery under two different temperature conditions: -20 degrees Celcius and 20 degrees Celcius. The results reflected in the graph are as follows: -20 degrees Celsius Relative Amp Value ------------------- ------------------ Standard Battery 0.3 iQ Battery 1.22 20 degrees Celsius Relative Amp Value ------------------- ------------------ Standard Battery 5.66 iQ Battery 6.98] In the car power system test, the tested batteries were inserted into the power system of a standard automobile. A winter night drive was then simulated by placing the power system under load by adding additional power consumers, such as a heater, headlights, a stereo, power windows, etc. The electrical current output of the batteries was then measured under two different temperature conditions, 20 degrees Celsius and -20 degrees Celsius. The results indicate that at 20 degrees Celsius, the electrical current output of the iQ Battery was 125% of a conventional battery. At -20 degrees Celsius, the electrical current output of the iQ Battery was 420% of a conventional battery. Battery Test [Bar graph showing total cycle time (in hours) for the iQ Battery and a standard battery under 3 different temperature conditions: -20 degrees Celcius, 0 degrees Celcius and 20 degrees Celcius. The results reflected in the graph are as follows: -20 degrees Celsius Cycle Time (Hours) ------------------- ----------------- Standard Battery 62 iQ Battery 20 0 degrees Celsius Cycle Time (Hours) ------------------ ----------------- Standard Battery 19 iQ Battery 20 20 degrees Celsius Cycle Time (Hours) ------------------- ----------------- Standard Battery 19 iQ Battery 19] In the battery test, the tested batteries were charged and discharged multiple times at different temperature levels. The amount of time necessary to complete a full charging cycle (e.g., fully charge after being fully discharged) was -20- measured. The tests showed that the iQ Battery's recharging times were substantially equivalent to conventional batteries in moderate to warm temperatures and over 40 hours less than the recharge time of a conventional battery in extreme cold conditions. Climate Room Test [Bar graph showing total revolutions per minute attributable to electrical output from the iQ Battery and a standard battery. The results reflected in the graph are as follows: Revolutions Per Minute ---------------------- iQ Battery 83 Standard Battery 71] In the climate room test, the batteries were mounted in automobiles and placed in cold conditions (-25 degrees Celsius). The car's engine was then cranked and the number of revolutions per minute was recorded. The higher the revolutions, the more starting power can be attributed to the tested battery. Based on the results of the climate room test, the iQ Battery performed better than the conventional battery in cold starting conditions. Life Cycle Test [Bar graph showing total percentage reduction in battery capacity in the iQ Battery and in a standard battery. The results reflected in the graph are as follows: Percentage Reduction in Capacity -------------------------------- iQ Battery 14% Standard Battery 22%] In the life cycle test, the batteries were run through a series of industry standard tests that simulated the normal life cycle of a automobile SLI battery. At the end of the test, the lead battery plates were examined and the charging capacity of the batteries was measured to determine the percentage of battery capacity that was lost over time. The iQ Battery lost approximately 14% of its capacity compared with the loss of approximately 22% of capacity for the conventional battery. The Company Strategy The Company's objective is to license the iQ Technology to leading manufacturers of automotive batteries and to position itself as a leading provider of electrical power system components and technology to the automotive industry. The Company's strategy encompasses the following elements: o Marketing to Automakers. The Company and iQ Germany have begun marketing production-ready prototypes of the iQ Battery to major automakers in order to stimulate demand for the iQ Technology. The Company -21- anticipates that its initial marketing efforts with automakers will be concentrated on a relatively small group of companies and will be directed by a small and highly-skilled sales force of sales and application engineers. o License the iQ Technology and Develop Manufacturing Relationships. Once automaker and manufacturer demand has been developed, the Company intends to license the iQ Technology to major automakers and established third-party manufacturers of SLI batteries. The Company may also establish strategic relationships with manufacturers and suppliers of SLI batteries in order to produce commercial quantities of SLI batteries utilizing the iQ Technology. o Competitive Pricing. The Company anticipates that the retail price of the iQ Battery will be comparable to the retail prices of other premium priced SLI batteries. Industry Relationships The Company and iQ Germany have established relationships with a number of companies engaged in the automotive and electronics industries which are described below: Suppliers and Manufacturers BASF iQ Germany has entered into a Cooperation Agreement with BASF, a leading international chemical and textile manufacturer, pursuant to which BASF has agreed to participate with the iQ Germany in developing and marketing of the Neopolen battery case. Under the agreement, iQ Germany has agreed to exclusively use the Neopolen material produced by BASF in its battery designs in return for a payment by BASF to iQ Germany on every kilogram of Neopolen sold by BASF to battery manufacturers. Akkumulatorenfabrik Moll iQ Germany has established a relationship with Moll, a leading battery manufacturer, pursuant to which Moll has manufactured prototypes of a battery based on the iQ Technology. Currently, iQ Germany and Moll are negotiating a cooperation agreement relating to the joint development, production and marketing of batteries incorporating the iQ Technology. Automakers Daimler-Benz iQ Germany has provided prototypes of the iQ Battery to Daimler-Benz, which is currently performing in-the-car and out-of-the-car tests. See "Business -- Performance Specifications and Test Results." BMW iQ Germany has provided prototypes of the iQ Battery to BMW, which is currently testing such prototypes. iQ Germany has also purchased and installed BMW battery test and electronic lab equipment in iQ Germany's laboratories in Chemnitz, Germany, for the purposes of conducting tests on the iQ Battery prototypes. Other Relationships In addition to the above relationships, the Company, via iQ Germany, has also had discussions, and in some cases, delivered prototypes of the iQ Battery to Audi, Volkswagen and Porsche for testing. In addition to these German automakers, the Company is also pursuing contacts with other major automakers worldwide. -22- The Company has previously engaged in discussions with established battery manufacturers regarding the possibility of a joint venture in which small quantities of batteries using the iQ Technology can be produced in order to stimulate market interest or to satisfy niche market demands. In the event the Company is unsuccessful in its primary marketing strategy of licensing the iQ Technology to major automakers and established battery manufacturers, the Company anticipates that this type of arrangement may provide an alternative means of market entry for the Company. There can be no assurance that the Company will be able to successfully establish a joint venture arrangement with a battery manufacturer on terms favorable to the Company, if at all. Research and Development The Company and iQ Germany are focusing their research and development efforts on improving the iQ Technology and the development of process technology required to manufacture the iQ Battery. A key element of the Company's strategy is to complete development of a battery that has undergone all relevant testing programs by German auto manufacturers and can be produced in commercial quantities. Over the most recent three fiscal years, iQ Germany has spent a total of DM 2,198,000 (US$1,403,000) on research and development. The Company believes that its highly-qualified engineering and scientific personnel provide it with a significant competitive advantage. iQ Germany currently employs 12 engineers and scientists in its Chemnitz plant on a full- and part-time basis, whose primary focus is research and development. The Company's and iQ Germany's personnel have considerable experience with the development of SLI battery systems and applications. The Company believes that this combination of expertise has allowed iQ Germany, and will continue to allow the Company to design and develop battery technologies that can be implemented in a timely and cost-effective manner. Competition Competition in the battery industry is, and is expected to remain, intense. The competitors range from development stage companies to major domestic and international companies. Many of these companies have financial, technical, marketing, sales, manufacturing, distribution, and other resources significantly greater than those of the Company. In addition, many of these companies have name recognition, established positions in the market, and long-standing relationships with OEMs and other customers. There is significant development work being done by these competitors on various battery systems (including electrochemistries such as NiCd, NiMH and lithium), with significant effort focused on achieving higher energy densities, lower maintenance, lighter weight, longer energy retention and lower cost batteries. There can be no assurance that one or more new, higher power battery technologies will not be introduced which could be directly competitive with or superior to the iQ Technology. The Company believes that its primary competitors are existing suppliers of automotive and lead-acid batteries. The primary suppliers of automotive batteries are Johnson Controls, Inc., Exide Corporation, GNB Inc. and Delphi. Among the Company's competitors in Europe are VB Autobatterie GmbH), Hawker Batteries, Fiamm, Delco Remy, Exide Corporation, Autosil, Hoppecke, Yuasa and Matsushita. All of these companies are very large and have substantial resources and market presence. Many are vertically integrated and produce the core components for their batteries from raw or recycled materials, reducing the unit cost of manufacturing. These companies have pursued and implemented aggressive production and manufacturing strategies which have led to substantial competitive advantages in the areas of production efficiencies and integrated distribution and inventory management systems. The Company expects that it will compete in certain targeted market segments on the basis of performance, reliability, ease of recycling and increased battery life. There can be no assurance that the Company will be able to compete successfully against these companies in any of the targeted market segments. The Company may also develop products to compete in market segments including standby power, small batteries for engine starting and medical and electronics applications. The Company expects that its primary competition in the market for small lead acid batteries used in non-automotive applications are Yuasa, Exide Corporation, Matsushita, Hawker, CSB Battery of America Corp., and GS Battery. These companies are large and have -23- substantial resources and market presence. There can be no assurance that the Company will be able to compete successfully against traditional lead acid batteries in any of the targeted applications. The market for batteries, and the evolution of battery technology, is very dynamic. Other companies are devoting significant resources to improving existing battery technologies and developing new battery technologies. There can be no assurance that the Company's products will be able to compete effectively in any of its targeted market segments. Intellectual Property Rights The Company's success is dependent on its ability to protect its intellectual property rights. iQ Germany relies principally on a combination of copyright, trademarks, trade secret and patent laws, non-disclosure agreements and other contractual provisions to establish and maintain its proprietary rights. iQ Germany holds two United States patents related to its technology and has also applied for patents related to iQ Technology in other countries. iQ Germany issued patents cover the battery temperature sensor and heating element design and configuration. In addition, iQ Germany has several German patents pending and one international patent pending. As part of its confidentiality procedures, iQ Germany generally enters into nondisclosure and confidentiality agreements with each of its key employees, consultants, distributors and corporate partners and limits access to and distribution of its technology, documentation and other proprietary information. There can be no assurance that iQ Germany's efforts to protect its intellectual property rights will be successful. Despite iQ Germany's efforts to protect its intellectual property rights, unauthorized third parties, including competitors, may from time to time copy or reverse engineer certain portions of the iQ Technology and use such information to create competitive products. Policing the unauthorized use of the iQ Technology is difficult, and, while the Company is unable to determine the extent to which piracy of its technology exists, such piracy can be expected to be a persistent problem. In addition, the laws of certain countries in which the iQ Technology is or may be licensed do not protect its products and intellectual property rights to the same extent as do the laws of the United States. As a result, sales of products based on the iQ Technology in such countries may increase the likelihood that iQ Technology might be infringed upon by unauthorized third parties. It is possible that the scope, validity and/or enforceability of intellectual property rights of the Company could be challenged by competitors or other parties. The Company is currently in the process of recording its interests in the iQ Technology with relevant authorities in applicable jurisdictions. The results of such challenges before administrative bodies or courts depend on many factors which cannot be accurately assessed at this time. Unfavorable decisions by such administrative bodies or courts could have a negative impact on the intellectual property rights of the Company. Any such challenges, whether with or without merit, could be time consuming, result in costly litigation and diversion of resources, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to the Company or at all. In the event of a claim of product infringement against the Company and failure or inability of the Company to license the infringed or similar technology, the Company's business, operating results and financial condition could be materially adversely affected. iQ Germany has registered the trademark "iQ" in Germany. iQ Germany has not registered any trademarks in the United States. Employees As of December 1, 1998, iQ Germany had 12 employees engaged in product research and development on a part- and full-time basis and 8 employees engaged in general and administrative and marketing functions on a part- and full-time basis. The Company's and iQ Germany's success will depend in large part on their ability to attract and retain skilled and experienced employees. None of the Company's or iQ Germany's employees are covered by a collective bargaining agreement, and the Company believes iQ Germany's relations with its employees are good. -24- Facilities iQ Germany occupies approximately 228 square meters of leased office space at its headquarters in Unterhaching, Germany for its product development, marketing, support and administration operations. iQ Germany also occupies approximately 165 square meters of leased office space in Floha, Germany. The Unterhaching lease terminates on February 28, 2001 and the Floha lease can be terminated on the giving of three months' notice. The Company maintains a license for its executive offices in Vancouver, British Columbia, Canada on a month-to-month basis. Legal Proceedings As of the date hereof, there is no material litigation pending against the Company or iQ Germany. On January 3, 1994, a civil lawsuit was filed by Hans Engelhorn against Peter E. Braun and Horst Dieter Braun (the "Brauns") in the District Court of Berlin (Case No. 3 O 40/94). Mr. Engelhorn seeks to compel transfer of certain intellectual property rights or, alternatively, money damages of approximately DM 500,000 (US$310,000). Certain of the intellectual property rights at issue are now held by the Company. Mr. Engelhorn alleges that the Brauns had a contractual obligation to transfer the intellectual property to a partnership which has since been dissolved. The Company has been advised by the Brauns that the prosecution of this lawsuit has not been pursued. The Company believes that the lawsuit is without merit and will not materially affect the Company's rights in the intellectual property at issue. From time to time, the Company and/or iQ Germany may be a party to litigation and claims incident to the ordinary course of business. While the results of litigation and claims cannot be predicted with certainty, the Company believes that the final outcome of such matters will not have a material adverse effect on the Company's business, financial condition and operating results. -25- SELECTED FINANCIAL DATA The following selected consolidated financial data of the Company are qualified in their entirety by reference to and should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Prospectus and the audited consolidated financial statements and notes thereto included in this Prospectus. The consolidated statements of operations data for the six month period ended June, 1998, the years ended December 31, 1997 and1996 and the consolidated balance sheet data at June 30, 1998 and at December 31, 1997 and 1996, are derived from and are qualified by reference to the Company's audited consolidated financial statements which appear in this Prospectus These financial statements were prepared in accordance with Canadian GAAP. The pro forma financial data are provided for comparative purposes only and are not necessarily indicative of results that would have been achieved if the transactions reflected therein had been effected at the beginning of the period for which pro forma information is presented or of the results expected for any subsequent period. Fiscal Years ended Period Ended Six-Months Ended June 30, December December 31, 31, --------------------------------------------- -------------------------- -------------- 1998 1997 Pro Forma 1998 1997 Pro Forma 1997 1996 (unaudited) (unaudited) (seven months) --------------- -------------- -------------- ------------- ------------ ------------- Statement of Operations Data: Revenue..................... $ -- $ -- $ -- $ 27,000 $ -- $ -- Operating Expenses.......... 457,000 101,211 42,471 760,000 135,236 10,504 Net income (loss) for the period...................... (463,000) (101,211) (42,471) (779,000) (135,236) (10,504) Earnings (loss) per Common Share............... (0.03) (0.04) (0.08) (0.06) (0.14) N/A Weighted average shares outstanding(1)............. 15,086,461 2,286,461 547,271 13,750,291 950,294 --
As at June 30, As At December 31, ------------------------------------------------------------------------------------------ 1998 Pro Forma (unaudited) 1998 1997 1996 ---------------------- -------------------- ----------------------- --------------------- Balance Sheet Data: Cash and cash equivalents. $ 4,335,000 $ 78,731 $ 43,525 $ -- Working capital 3,826,000 388,855 346,695 (10,503) (deficiency).............. Total assets.............. 4,797,000 553,588 419,261 147,977 Non-current liabilities... 307,000 -- -- -- Stockholders' equity...... $ 3,725,000 $ 388,855 $ 346,695 $ (10,503)
-26- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains "forward-looking statements." In particular, certain statements in "Overview" and "Acquisition of iQ Germany" and the sections entitled "Results of Operations of the Company," "Results of Operations of iQ Germany" and "Liquidity and Capital Resources" contain forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of the Company's ability to achieve the objectives of its business strategy, accelerate or defer operating expenses, achieve revenue, hire new personnel and other factors set forth under "Risk Factors" in this Prospectus. In particular, the reader should note the Risk Factors entitled "Limited Operating History," "Competition," "Expectations of Continuing Losses; Negative Cash Flow; Need for Additional Financing," "Reliance on Unproven Applications of Technology; Dependence on Single Product," "Uncertainty of Market Acceptance" and "No Marketing, Manufacturing or Distribution Experience." The following discussion is qualified by the more complete financial information contained in the audited financial statements of the Company and the related notes and the financial statements of iQ Germany and the related notes included in this Prospectus. The financial statements of the Company included herein have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). Management believes that there is no material difference between Canadian GAAP and United States generally accepted accounting principles ("US GAAP") as applied to the financial results of the Company. The financial statements of iQ Germany included herein have been prepared in accordance with US GAAP. The following discussion of the results of operations of the Company should be read in conjunction with the Company's audited financial statements and the notes thereto, the discussion of Results of Operations of iQ Germany discussed below and the audited financial statements of iQ Germany and the notes thereto included in this Prospectus. The results of operations of iQ Germany are not included in the Company's financial statements included herein. Overview The Company was organized in December 1994 and commenced operations in June 1996. The Company is engaged in the development and commercialization of electrical power system components for the automotive industry. The Company's primary product is a "smart" automotive starter battery which combines several proprietary features designed to optimize automotive starter battery efficiency. The Company is in the development stage and its principal activity to date has been the acquisition of all the issued and outstanding shares of iQ Germany. Neither the Company nor iQ Germany have derived revenues from operations, and the Company does not anticipate having material revenues from operations until 2000, if at all. The Company and iQ Germany have incurred substantial losses to date, and there can be no assurance that the Company will attain any particular level of revenues or that the Company will achieve profitability. The Company believes that the historic spending levels of the Company and iQ Germany are not indicative of future spending levels because the Company is entering a period in which it will increase spending on product research and development, marketing, staffing and other general operating expenses. For these reasons, the Company believes its expenses, losses, and deficit accumulated during the development state will increase significantly before it generates material revenues. Acquisition of iQ Germany On August 25, 1998, the Company acquired all the issued and outstanding stock of iQ Germany in exchange for 10,000,000 common shares of the Company at a deemed price of US$0.25 per common share for a total purchase price of US$2,500,000. As a result of the business combination, the shareholders of iQ Germany have control of iQ Canada. Due to this acquisition, iQ Germany will be identified as the acquiror (reverse acquisition), and the business combination will be accounted for under the purchase method. Pursuant to the terms of the Share -27- Exchange Agreement, the former shareholders of iQ Germany, as a group, have a limited right to require iQ Canada to repurchase all, but not less than all, of the iQ Canada Common Shares received by such shareholders (the "Put Option"). The Put Option is exercisable at and after the four month anniversary of the initial filing of this Prospectus if (i) iQ Canada has failed to complete an equity offering with gross proceeds of at least US$3 million and (ii) such shareholders have repaid to iQ Canada the full amount of all funds iQ Canada has advanced or invested in iQ Germany. The Put Option will terminate at the close of this Offering. Pursuant to the terms of Atypical Share Exchange Agreements, the Company has also issued into escrow an additional 2,800,000 Common Shares against the deposit into escrow of "atypical shares" of iQ Germany held by all Atypical Shareholders. The Common Shares and the "atypical shares" will be released from escrow to the Atypical Shareholders and the Company, respectively, at the close of this Offering. In the event the Put Option is exercised, the Common Shares and the "atypical shares" will be released from escrow and returned to the Company and the Atypical Shareholders, respectively. Results of Operations of the Company The Company was organized in December 1994 and commenced operations in June 1996. The Company's principal activity to-date has been the acquisition of all the issued and outstanding shares of iQ Germany. No revenues were recorded in either the seven month period ended December 31, 1996, the year-ended December 31, 1997 or the six month period ended June 30, 1998. As of June 30, 1998, the Company had an accumulated deficit of US$246,951. The Company incurred a net loss of US$101,211 for the six-month period ended June 30, 1998, compared to a net loss of US$42,471 for the comparable period of the prior year and a net loss of US$10,504 for the seven-month period ended December 31, 1996, and US$135,236 for the year ended December 31, 1997. The Company anticipates that the level of spending will increase significantly in future periods as the Company undertakes research and development activities related to the commercialization of the iQ Technology. In addition, the Company anticipates that its general and administrative expenses will also significantly increase as a result of the growth in the Company's research, development, testing and business development programs. The actual levels of research and development, administrative and general corporate expenditures are dependent on the cash resources available to the Company. Results of Operations of iQ Germany iQ Germany was organized in 1991 to engage in the development and commercialization of electrical power system components for the automotive industry. Since that date iQ Germany has been engaged primarily in organizational, research and product development efforts. As of June 30, 1998, iQ Germany had an accumulated deficit of DM 1,790,000 (US$993,000). iQ Germany incurred a net loss of DM 793,000 (US$437,000) for the six month period ending June 30, 1998, DM1,073,000 (US$644,000) for the year ending December 31, 1997 and DM831,000 (US$551,000) for the year ending December 31, 1996. iQ Germany had no revenues for the six month period ending June 30, 1998, revenues of DM45,000 (US$27,000) for the year ending December 31, 1997, and no revenues for the year ending December 31, 1996. All of iQ Germany's revenues were derived primarily from licensing fees. For the six month period ended June 30, 1998, iQ Germany incurred research and development expenses of DM643,000 (US$355,000), DM881,000 (US$506,000) for the year ending December 31, 1997 and DM695,000 (US$461,000) for the year ending December 31, 1996. The increase in research and development expenses in each period reflects the cost of supporting a higher level of activity, principally research, product development, building prototypes and product testing. -28- iQ Germany incurred general and administrative expenses of DM110,000 (US$61,000) for the six month period ended June 30, 1998, DM162,000 (US$93,000) for the year ending December 31, 1997 and DM127,000 (US$84,000) for the year ending December 31, 1996. The increases in administrative and general corporate expenses from period to period were due primarily to the increase in expenses related to the growth of iQ Germany's operations, the leasing of a new office facility in 1997, and other administrative and corporate expenses related to the share exchange with the Company. Following completion of the offering, iQ Germany's expenditures are expected to materially increase as the Company pursues its research, development, testing and commercialization programs and expands its finance and administrative staff and financial and management system. Liquidity and Capital Resources Since inception, the Company has financed its operations primarily through sales of its equity securities. As of June 30, 1998, the Company had cash and cash equivalents of approximately $78,731. As of June 30, 1998, the Company had raised approximately $635,806 (net of issuance costs) from the sale of such securities. Subsequent to June 30, 1998, the Company received gross proceeds of $75,000 by issuing 300,000 Common Shares at a price of US$0.25 per share in July 1988. In December 1998, the Company received gross proceeds of $709,050 by issuing 536,200 Common Shares and Special Warrants to purchase 2,300,000 Common Shares at a price of US$0.25 per share and US$0.25 per Special Warrant. iQ Germany is obligated to pay to Horst Dieter Braun and Peter Braun, the Company's Vice President, Research and Development and President, respectively, DM400,000 in connection with the Company's acquisition of the iQ Technology and certain other intellectual property rights. The amount is payable only out of and only to the extent of the gross profits of iQ Germany. The Company plans to finance its capital needs principally from the net proceeds of this Offering and interest thereon and, to the extent available, lines of credit. The Company currently has no commitment for any credit facilities such as revolving credit agreements or lines of credit that could provide additional working capital. The Company believes that the net proceeds from this Offering, together with interest thereon and the Company's existing capital resources, will be sufficient to fund its operations through 1999. The Company's capital requirements depend on several factors, including the success and progress of its product development programs, the resources it devotes to developing its products, the extent to which its products achieve market acceptance, and other factors. The Company expects to devote substantial capital resources for research and development. The amount and timing of the Company's future capital requirements cannot be accurately predicted. The Company will consider collaborative research and development arrangements with strategic partners and additional public or private financing (including the issuance of additional equity securities) to fund all or a part of a particular program in the future. There can be no assurance that additional funding will be available or, if available, that it will be available on acceptable terms. If adequate funds are not available, the Company may have to reduce substantially or eliminate expenditures for research and development, testing, production and marketing of its proposed products, or obtain funds through arrangements with strategic partners that require the Company to relinquish rights to certain of its technologies or products. There can be no assurance that the Company will be able to raise additional capital if its capital resources are exhausted. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. Year 2000 Issue The Company has conducted a review of its computer systems to identify the systems that could be incompatible with dates beyond December 31, 1999, and is developing an implementation plan to resolve issues that may arise. The Company has also requested all its strategic partners, consultants, contractors and significant suppliers to conduct similar assessments of their respective computer programs, systems, procedures and operations to determine the extent to which the Company is exposed to possible computer system failure. The Company places minimal reliance on data sensitive software and believes that the expected cost and availability of resources, to -29- recover information not properly processed after December 31, 1999, would not result in a material effect on the Company's results of operations. The Year 2000 issue arises with the change in century and the potential inability of information systems to correctly "rollover" dates to the new century. To save on computer storage space, many systems were programmed with a two-digit century (i.e. December 31, 1999 would appears as 12/31/99) assuming that all years would be part of the 20th century. On January 1, 2000, systems with this programming will default to 01/01/1900 instead of 01/01/2000, and calculations using or reporting the date will not be correct and errors will arise. To prevent this from occurring, information systems need to be updated to ensure they recognize the Year 2000. The Company and iQ Germany began their respective Year 2000 strategies by compiling a list of all computerized equipment and making a determination of how, if at all, the software will be affected by Year 2000. Although the effect is so far unquantified, all of the Company's and iQ Germany's software is recent, and therefore the Company and iQ Germany anticipate that they will have sufficient time to test any new systems that need to be installed. All of the Company's and iQ Germany's financial and business records will be backed up to ensure that no loss of information can occur. Management does not anticipate incurring significant costs in this regard. Foreign Currency Translation Risk To date, exposure to foreign currency fluctuations has not had a material effect on the Company's operations. The Company believes its risk of foreign currency translation is limited, as its operations are based in Germany with resulting transactions primarily denominated in United States dollars. The Company does not currently engage in hedging or other activities to control the risk of foreign currency translation, but may do so in the future, if conditions warrant. Recent Accounting Pronouncements Accounting for Derivative Instruments and Hedging Activities. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 is effective for fiscal years beginning after June 15, 1999 and must be applied to instruments issued, acquired, or substantively modified after December 31, 1997. The Company does not expect the adoption of the accounting pronouncement to have a material effect on its financial position or results of operations. -30- DIRECTORS AND EXECUTIVE OFFICERS The directors, executive officers and key employees of iQ Canada are as follows: Name Age Position ---- --- -------- Peter E. Braun 35 President and Chief Executive Officer, Director Dr. Gunther C. Bauer 48 Vice President, Research and Development, Director Gerhard K. Trenz 57 Vice President, Finance and Chief Financial Officer Russell French 51 Director Eckehard Endler 55 Development Engineer Rolf Kohler 53 Development Engineer Freidrich-Wilhelm Schutz 57 Director, Material Management, Electronic Production and Quality Control Steffen Tschirsch 37 Director of Research and Development Gregory A. Sasges 38 Secretary - ----------------------------- Directors and Executive Officers Peter E. Braun has served as a director and as the Company's President and Chief Executive Officer since September 1998. From 1994 to the present, Mr. Braun has also served as Managing Director of iQ Germany. From 1992 to 1994, Mr. Braun worked for Daimler Benz as an in-house consultant to Deutsche Aerospace. Mr. Braun received a Masters of Science degree in Aeronautic Engineering and Space Technology from the Technical University of Berlin in 1992. Dr. Gunther C. Bauer has served as a director and as Vice President, Research and Development of the Company since September 1998. From 1994 to the present, Dr. Bauer has also served as Vice President, Engineering of iQ Germany. From 1993 to 1994, Dr. Bauer was responsible for creating a Profit Center within the Daimler Benz Group, an German automobile manufacturer, and from 1992 to 1993, he was responsible for business strategy with the TEMIC Group, a wholly-owned subsidiary of Daimler-Benz Aerospace A.G. From 1987 to 1992, Dr. Bauer served in positions with German Aerospace, including Head of Staff of Innovations Field Logic and Director of Corporate Development for Business Aeronautics. Since 1980, Dr. Bauer has been a Lecturer at the University of the Bundeswehr German Forces in Munich, Germany. Dr. Bauer received his Master of Science in Electronics from the Technical University of Munich and his doctorate in Mechanical Engineering from the University of Dortmund in Dortmund, Germany. Gerhard K. Trenz has served as Vice President, Finance and Chief Financial Officer of the Company since September 1998. From 1996 to the present, Mr. Trenz has also served as Vice President, Finance at iQ Germany. From 1988 to 1996, Mr. Trenz headed Semicustom, a business unit of the Siemens Group, as Vice President, Finance and Business Administration of Siemens Semiconductor Division. From 1970 to 1988, Mr. Trenz held various positions in the Siemens Group including Controller of Technology Development for ICs, in-house consultant for the Corporate Strategic Planning Group of Siemens and Vice President, Finance and Business Administration of Lormont / Bordeaux, a production site of Siemens in France. Mr. Trenz received his Master of Science degree in Telecommunications and Business Administration at the Technical University of Munich. Russell French has served as a director of the Company since 1994. From December 1994 to August 1998, Mr. French served as the President of the Company. From 1993 to the present, Mr. French has been a principal of Mayon Management Corp., a company organized to manage, organize and find new business ventures. Mr. French currently serves as a director and President of AlPaka Resources Corp., a publicly-traded company. Mr. French is a -31- past director and President of Pacific Falkon Resources Corp. and a past director of International Precious Metals Corporation. Gregory A. Sasges has served as Secretary of the Company since December 1, 1998. Mr. Sasges is a partner in a Vancouver law firm through his personal corporation and has practiced law continually for the past 12 years with a preferred area of practice in corporate and securities law. Mr. Sasges also currently serves as the corporate secretary and is a former director of High Desert Mineral Resources, Inc., a mineral resource company. Mr. Sasges is a past director of Alpaka Resources Corp. and a past corporate secretary of GHK Resources Ltd., both of which were mineral resource companies. Mr. Sasges received his Bachelor of Commerce and Bachelor of Law degrees from the University of British Colombia, Canada, in 1984 and 1985 respectively. KEY EMPLOYEES: The Key Employees of iQ Canada are: Eckehard Endler has served as Development Engineer of the Company since 1998. From 1994 to the present, Mr. Endler has also served as manager, Measurement and Laboratories of iQ Germany. From 1978 to 1994, Mr. Endler worked as a Development Engineer for a textile company. He received a degree in Electrical Engineering from The Senior Technical College in Dresden, Germany in 1973. Rolf Kohler has served as Development Engineer of the Company since 1998. From 1973 to 1997, he served as a Development and Test Engineer at Foron, a white goods producer, in Chemnitz, Germany. Mr. Koehler received a degree in Electronic Device Construction from The Senior Technical College in Midweida / Chemnitz in 1973. Friedrich-Wilhelm Schutz has served as the Director, Material Management, Electronic Production and Quality Control of the Company since 1998. In 1997, Mr. Schutz held the same position in iQ Germany. From 1967 to 1996, Mr. Schutz worked in the field of production and project development at Deutsche Aerospace, Bosch and Rhode & Schwarz. Mr. Schutz received his Master of Science degree in Telecommunications from the Senior Technical College in Cologne, Germany and in Microelectronics from the Technical University in Aachen, Germany in 1967. Steffen Tschirch has served as the Director of Research and Development of the Company since 1998. From 1994 to the present, Mr. Tschirch held the same position at iQ Germany. From 1989 to 1993, Mr. Tschirch worked as a Scientific Assistant at the Technical University of Chemnitz, Germany. Prior to that period, Mr. Tschirch studied at the Technical University of Chemnitz with a focus on Physics and Electronic Components and received his Master of Science degree in 1989. -32- REMUNERATION OF DIRECTORS AND OFFICERS The following table sets forth the compensation paid to directors and officers of the Company during the fiscal year ended December 31, 1997. Summary Compensation Table (in Canadian Dollars) Annual Compensation Long Term Compensation ---------------------------------------------- ----------------------------------------- Awards Payouts ------------------------------- ------- Securities Restricted Fiscal Other Annual under Shares or Name and Principal Year Compensation Options/SARs Restricted LTIP All Other Position Ended Salary ($) Bonus ($) ($) Granted (#) Share Units($) Payouts ($) Compensation - ------------------- ------ ---------- --------- ----------- ------------- -------------- ----------- ------------ Gunther C. Bauer 1997 45,600(1)(2) - - - - - - Peter E. Braun 1997 45,600(1)(2) - - - - - - Russell French 1997 60,000(3) - - - - - - Gerhard K. Trenz 1997 28,745(1)(2) - - - - - -
- ------------------------------ (1) Reflects salary paid to the officer or director by iQ Germany during the fiscal year ended December 31, 1997. (2) For your convenience, we have converted Deutschmark salary amounts into U.S. dollars using the average noon buying rate in New York City for cable transfers payable in Deutschmarks as certified for customs purposes by the Federal Reserve Bank of New York for the relevant period, as set forth in "Exchange Rate Information." (3) Represents consulting fees paid to Mayon Management Corp., a corporation controlled by Russell French. The Company does not have a long-term incentive plan pursuant to which cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Company's securities) was paid or distributed to the Named Executive Officers during the most recently completed financial year. During the most recently completed financial year ended December 31, 1997, the Company did not have a pension plan for its Directors, officers or employees. Director Compensation Other than compensation paid to Peter Braun, Gunther Bauer and Russell French, as disclosed above under the sub-heading "Remuneration of Directors and Officers," none of the Directors of the Company have received any cash compensation, directly or indirectly, for their services rendered during the most recently completed financial year of the Company. The Company does not have any non-cash compensation plans for its Directors and it does not propose to pay or distribute any non-cash compensation during the current financial year, other than pursuant to the granting of stock options. Options to Purchase Securities During the Company's most recently completed financial year ended December 31, 1997, the Company has not granted Directors and Officers any stock options, and no Directors or Officers of the Company have exercised any stock options. In addition, during the Company's most recently completed financial year ended December 31, 1997, there were no SAR or stock option repricings. Since the completion of its fiscal year ended December 31, 1997, the Company granted the stock options described below under "Principal Shareholders." Employment Agreements Effective September 1, 1998, Peter E. Braun, Dr. Gunther C. Bauer and Gerhard Trenz have entered into employment agreements with the Company, providing for annual salaries of US$102,000, US$96,000 and -33- US$84,000, respectively. Mr. Braun's and Dr. Bauer's employment agreements are for a term of five (5) years. Mr. Trenz's employment agreement is for a term of three (3) years. The employment agreements are governed by the laws of Germany. 1998 Stock Option Plan In November 1998, the Board of Directors of the Company adopted the 1998 Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan will terminate on the earlier of June 30, 2008 or such other date as the Board of Directors may determine. The Stock Option Plan is administered by the Board of Directors (or a committee thereof) and provides that options may be granted to the Company's officers, directors, employees and other persons, including consultants, based on the eligibility criteria set out in the Stock Option Plan. The options issued pursuant to the Stock Option Plan are exercisable at a price fixed by the Plan Administrator, in its sole discretion; provided that options granted in substitution for outstanding options of another corporation in connection with a merger, consolidation, acquisition of property or stock or other reorganization involving such corporation and the Company or any subsidiary of the Company may be granted with an exercise price equal to the exercise price for the substituted option of the other corporation, subject to adjustment. Subject to certain exceptions in the Stock Option Plan relating to death, divorce and certain estate planning techniques, options granted under the Stock Option Plan are non-assignable and non-transferable. The maximum number of the Common Shares reserved for issuance under the Stock Option Plan including options currently outstanding is 3,000,000 Common Shares. As of December 1, 1998 a total of 2,875,000 options are issued and unexercised. Indebtedness Of Directors And Senior Officers None of the Directors or Senior Officers of the Company or any associates or affiliates of the Company, are or have been indebted to the Company at any time since the beginning of the last completed financial year of the Company. -34- PRINCIPAL SHAREHOLDERS The following table sets forth as of December 1, 1998 information concerning the beneficial ownership of the Company's Common Shares, and as adjusted to reflect the issuance of the maximum Common Shares issuable pursuant to this Offering (5,000,000) by persons who are known by the Company to own beneficially more than 10% of Common Shares, by each of the persons named in the table under the caption "Remuneration of Directors and Officers" and by all directors and executive officers of the Company as a group. As Adjusted ------------------------------------- Name and Address Number of Percentage of Number of Common Percentage of of Beneficial Owner(1)(9) Common Shares Class(2) Shares Class(3) --------------------------------------- -------------- -------------- ----------------- ----------------- Gunther Bauer(4)....................... 2,954,000 15.6% 2,954,000 12.4% Horst Dieter Braun..................... 2,500,000 13.5% 2,500,000 10.6% Peter E. Braun(5)...................... 2,500,000 13.2% 2,500,000 10.5% Karin Wittkewitz....................... 1,900,000 10.3% 1,900,000 8.1% Schrenckweg 1, 85658 Egmating, Germany Gerhard Trenz(6)....................... 96,297 1.0% 96,297 * Russell French(7)...................... 636,214 3.4% 636,214 2.7% Suite 708-A 1111 West Hastings Street Vancouver, B.C. V6E 2J3 All Directors and Officers as a Group(8)............................... 10,661,511 54.0% 10,661,511 43.0%
* Represents less than 1% of outstanding shares. (1) Unless otherwise noted all addresses are Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany. (2) Based on an aggregate of 18,479,425 Common Shares outstanding as of December 1, 1998 and includes 2,300,000 common shares issuable upon the exercise of outstanding special warrants. (3) Based on an assumed offering of an aggregate of 5,000,000 common shares. (4) Includes options to purchase 400,000 Common Shares within 60 days of December 1, 1998 and 54,000 Common Shares held by Mr. Bauer's spouse, Christiane Bauer. (5) Includes options to purchase 400,000 Common Shares within 60 days of December 1, 1998. (6) Includes options to purchase 66,667 Common Shares within 60 days of December 1, 1998. (7) Includes 236,213 Common Shares held by Mayon Management Corp., a corporation controlled by Mr. French, also includes options to purchase 400,000 Common Shares within 60 days of December 1, 1998. (8) Includes options to purchase 1,266,667 Common Shares within 60 days of December 1, 1998. (9) The Company has been advised that Gunther Bauer, Horst Dieter Braun, Peter E. Braun, Karin Wittkewitz and Gerhard Trenz and all other former shareholders of iQ Germany have entered into a Shareholders Agreement pursuant to which they have agreed to act jointly with respect to the voting of their shares in iQ Canada. As of December 1, 1998, the following options to purchase shares of the Company are outstanding. Optionee Number of Shares Exercise Price Expiration Date -------- ---------------- -------------- --------------- Alain Marchand 50,000 US$1.00 12/01/08 Gregory A. Sasges 50,000 1.00 12/01/08 Joachim Schweizer 50,000 1.00 12/01/08 Steffen Tschirch 50,000 1.00 12/01/08 Joanne Gaska 25,000 1.00 12/01/08 Eckehard Endler 20,000 1.00 12/01/08 Friedrich-Wilhelm Schutz 20,000 1.00 12/01/08 Rolf Kohler 10,000 1.00 12/01/08 Russell French 800,000 1.00 12/01/08 Peter E. Braun 800,000 1.00 12/01/08 Gunther Bauer 800,000 1.00 12/01/08 Gerhard K. Trenz 200,000 1.00 12/01/98 ------- TOTAL: 2,875,000
-35- INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS In March 1995, iQ Germany entered into an Industrial Property Rights and Know-How Agreement with Horst Dieter Braun and Peter Braun (the "Industrial Property Rights Agreement"). Under the Industrial Property Rights Agreement, Horst Dieter Braun, a principal shareholder of the Company, and Peter Braun, a principal shareholder, director and officer of the Company, transferred to iQ Germany all their right, title and interest to certain patents and other intellectual property rights related to starter batteries technologies, and the German registered national trademark "iQ" (the "Braun IP Rights") in consideration for payment of a one time payment of DM400,000 and royalties equal to 40% of revenues from license fees and 20% of the gross revenues of the Company (excluding license fees) until the Year 2000. In August 1996, iQ Germany entered into a supplemental contract with Messrs. Braun, which supplements the obligations of Messrs. Braun under the Industrial Property Rights Agreement, requires them to undertake all necessary actions to convey the Braun IP Rights and acknowledges a civil dispute in District Court Berlin (Case No. 3 0 40/94) regarding a partnership in which Messrs. Braun were involved. In September 1996, iQ Germany entered into an extension of the Industrial Property Rights Agreement with Messrs. Braun. Under the extension, the one time payment of DM400,000 is allocated DM300,000 to Horst Dieter Braun and DM100,000 to Peter Braun, and iQ Germany's obligations to Messrs. Braun are offset by payments on certain bank loans made by iQ Germany on behalf of Horst Dieter Braun in the cumulative amount of DM275,000 and on behalf of Peter Braun in the cumulative amount of DM120,000, respectively. In December 1996, the Industrial Property Rights Agreement was amended to provide that, under certain circumstances, the one time payment of DM400,000 due under the Industrial Property Rights Agreement, may be delayed. In October 1998, Messrs. Braun waived their right under the Industrial Property Rights Agreement to receive royalties equal to 40% of the revenues from license fees and 20% of the gross revenues of the Company (excluding license fees) until the Year 2000. In December 1998, iQ Germany, Horst Dieter Braun and Peter Braun entered into an Agreement Re Rights and Interests amending and supplementing the payment terms of the Industrial Property Rights Agreement previously entered into among the parties to provide that the one time payment of DM400,000 due under the Industrial Property Rights Agreement is payable only out of and only to the extent of the gross profits of iQ Germany. In December 1998, iQ Germany, Horst Dieter Braun and Peter Braun entered into a Trademark Assignment Agreement amending and supplementing the Industrial Property Rights Agreement to restate the assignment of all rights and interest in German Trademark No. 2,061,981 for the "iQ" trademark and design. In December 1998, iQ Germany, Horst Dieter Braun and Peter Braun entered into a Patent Assignment Agreement amending and supplementing the Industrial Property Rights Agreement to restate the assignment of all rights and interest in German Patent No. 41 42 628 and other patents and patent applications related to the iQ Technology. In October 1996, iQ Germany entered into a consulting contract with Dr. Gunther Bauer, a director and officer of the Company. The consulting contract is terminable by either party with three month's notice and provides for a base fee of DM6,100 per month plus statutory sales tax and related expenses. This contract has been superseded by an employment agreement and a confidentiality agreement discussed below. In December 1996, iQ Germany entered into a loan contract with Karin Wittkewitz. Pursuant to the terms of the loan contract, Ms. Wittkewitz agreed to loan iQ Germany DM60,000 at an annual interest rate of 3% above the bank rate of the German Bundesbank. The loan contract is terminable within six months after the end of any calendar quarter in which written notice is given, but in any event, not earlier than December 31, 1998. In December 1996, iQ Germany entered into an agreement with Dr. Bauer pursuant to which Dr. Bauer agreed, under certain circumstances, not to enforce his claim to the payment of DM95,000 owed to Dr. Bauer under an agreement dated July 15, 1994 with the Company unless iQ Germany has the ability to redeem the obligation or unless a surplus exists after any liquidation of iQ Germany. The Company has entered into employment and confidentiality agreements, effective September 1998, with Peter Braun, Dr. Bauer, and Gerhard Trenz, the Company's Vice-President, Finance and Chief Financial Officer. See "Remuneration of Directors and Officers -- Employment Agreements." The Company has also entered into a confidentiality agreement with Russell French, a director of the Company. The confidentiality agreements restrict competition with the Company for a period of five years, and require that the Company's confidential information be kept confidential and that all work product, copyrights, inventions and patents produced during the employment relationship will be the property of the Company. In August 1998, the Company entered into a consulting agreement with Mayon Management Corp. ("Mayon"), a corporation controlled by Mr. French. The agreement is for an initial term of three (3) years and provides for a base annual fee of US$72,000 and for the reimbursement of reasonable expenses. The agreement superseded a management agreement between the Company and Mayon dated January 1997. -36- In August 1998, the Company entered into a Share Exchange Agreement with iQ Germany and the shareholders of iQ Germany including Dr. Bauer and Peter E. Braun and Horst Dieter Braun and Ms. Wittkewitz pursuant to which the Company acquired all the issued and outstanding shares in iQ Germany in exchange for the issuance of 10,000,000 Common Shares at a deemed price of US$0.25 per Common Share. Pursuant to the terms of the Share Exchange Agreement, the former shareholders of iQ Germany, as a group, have been granted a limited right to require iQ Canada to repurchase all, but not less than all, of the iQ Canada Common Shares received by such shareholders (the "Put Option"). The Put Option is exercisable at and after the four month anniversary of the initial filing of this Prospectus if (i) iQ Canada has failed to complete an equity offering with gross proceeds of at least US$3 million; and (ii) such shareholders have repaid to iQ Canada the full amount of all funds iQ Canada has advanced or invested in iQ Germany. The Put Option will terminate at the close of this Offering. In August and September of 1998, the Company entered into Atypical Share Exchange Agreements with each of the Atypical Shareholders of iQ Germany, including Mr. Trenz, pursuant to which the Company, on December 1, 1998, issued into escrow an additional 2,800,000 Common Shares against the deposit into escrow of "atypical shares" of iQ Germany held by the Atypical Shareholders. The Common Shares and the "atypical shares" will be released from escrow to the Atypical Shareholders and the Company, respectively, at the close of this Offering. In the event the Put Option is exercised, the Common Shares and the "atypical shares" will be released from escrow and returned to the Company and the Atypical Shareholders, respectively. In connection with the Share Exchange transaction, certain shareholders of iQ Canada and the former shareholders and Atypical Shareholders of iQ Germany, including Mr. French, Peter Braun, Dr. Bauer, Horst Dieter Braun, Mr. Trenz and Ms. Wittkewitz, entered into a pooling agreement pursuant to which such persons' shares of iQ Canada are held in escrow subject to certain conditions governing their release. See "Description of Capital Stock -- Pooling and Escrow Agreements." -37- DESCRIPTION OF CAPITAL STOCK Common Shares As of December 1, 1998, 18,479,425 Common Shares of the Company are issued and outstanding (assuming the exercise of the Special Warrants). All Common Shares of the Company rank equally as to dividends, voting powers and participation in assets and as to all other benefits which might accrue to holders of the Common Shares. No shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights, and no provision for redemption, purchase for cancellation, surrender or sinking funds attached to any of the Company's Common Shares. Provisions as to the modification, amendment or variation of such rights or provisions are contained in the Canadian Business Corporations Act (the "CBCA"). Each Common Share carries one vote at shareholder meetings of the Company. Special Warrants As of December 1, 1998, the Company had 2,300,000 Special Warrants outstanding. All of the 2,300,000 Special Warrants were issued to persons resident outside the United States and none of the Special Warrants have been exercised to date. Each Special Warrant entitles the holder, upon surrender, without payment of further consideration, to one Common Share of the Company. The Special Warrant holders have the right to require the Company to repurchase all Special Warrants not yet exchanged into Common Shares of the Company for the initial subscription price at any time prior to December 31, 1998. Certain Rights of Shareholders In accordance with the provisions of the CBCA, the amendment of certain rights of holders of a class of shares, including Common Shares, requires the approval of not less than two-thirds of the votes cast by the holders of such shares voting at a special meeting of such holders. Pursuant to the Company's Bylaws, a quorum for a special meeting of the holders of Common Shares occurs when at least two persons entitled to vote at such a meeting are present. In circumstances where the rights of Common Shares may be amended, however, holders of Common Shares have the right under the CBCA to dissent from such amendment and require that the Company pay them the then fair value of the Common Shares. Exchange Controls and Other Limitations Affecting Holders of Common Shares Canada has no system of exchange controls. There is no law, government decree or regulation in Canada restricting the export or import of capital or affecting the remittance of dividends, interest or other payments to a non-resident holder of Common Shares, other than withholding tax requirements. See "Certain Tax Considerations - Certain Canadian Federal Income Tax Considerations." There are no limitations on the right of holders of common shares not resident in Canada to hold or vote the Common Shares imposed by any governmental laws, decrees or regulations in Canada or by the charter or other constituent document of the Company other than (i) the CBCA which generally requires a majority of the board of directors of a company incorporated under such Act to be resident Canadians in order for that board of directors to conduct business and accordingly has the effect of limiting the rights of all holders of Common Shares with respect to the election of directors and (ii) as provided by the Investment Canada Act (the "Investment Act"). Under the Investment Act, an investment by an individual, a government or an agency thereof or an entity that is not a "Canadian" (as defined in the Investment Act and herein referred to as a "non-Canadian") may be subject to certain notification requirements or review by the Minister (the "Minister") responsible for the administration of the Investment Act. Except as set forth below, an investment in Common Shares by a non-Canadian would be reviewable under the Investment Act if (i) such investment constitutes an acquisition of direct control of iQ Canada where the value of the assets of iQ Canada is at least $5 million, or an acquisition of indirect control of iQ Canada where the value of the assets of iQ Canada is at least $50 million, or (ii) the investment is related to Canada's -38- cultural heritage or national identity. All investments subject to review may not be implemented unless the Minister is satisfied that the investment is likely to be of net benefit to Canada. Generally, however, an investment made by a "WTO Investor" (as defined in the Investment Act and which includes American or American controlled entities) in Common Shares is reviewable under the Investment Act only if such investment constitutes an acquisition of direct control of the Company and the value of the assets of the Company is at least $179 million (in 1998). An indirect acquisition of control by a WTO Investor (including an American) is generally no longer subject to review. The lower thresholds of $5 million for direct acquisitions and $50 million for indirect acquisitions are still applicable for WTO Investors investing in uranium production, financial services, cultural services and transportation services. The Investment Act states that a non-Canadian shall acquire control or shall be deemed to acquire control if such person or entity acquires a majority of the voting shares. An acquisition of less than a majority but more than one-third of the voting shares will be presumed to be an acquisition of control unless it can be established that, upon acquisition, iQ Canada is not controlled in fact by the acquirer through the ownership of voting shares. The notification requirements which would be applicable in the event of a proposed acquisition of control not otherwise subject to review require the potential investor to supply certain information concerning the proposed investment prior to, or within thirty days following, the consummation thereof. However, the Federal Cabinet retains the right to review any such proposed investment that is related to cultural heritage or national identity if, within a specific period, the Federal Cabinet considers it in the public interest on the recommendations of the Minister to issue an order for the review of the investment. In certain limited circumstances, transactions in relation to voting shares would be exempt from the Investment Act, including: (i) an acquisition of voting shares if the acquisition were made in connection with the person's business as a trader or dealer in securities; (ii) an acquisition of control of iQ Canada in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Act; and (iii) an acquisition of control of iQ Canada by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of iQ Canada, through the ownership of voting interests, remains unchanged. Pooling and Escrow Agreements An aggregate of 13,514,844 Common Shares of iQ Canada are held in escrow pursuant to the terms of a pooling agreement dated August 25, 1998 between iQ Canada, Montreal Trust Company of Canada ("Montreal Trust") and certain shareholders of iQ Canada (the "Pooling Agreement"). Under the terms of the Pooling Agreement, 3,378,711 Common Shares will be released from escrow on April 1, 2000 and an additional 25% of the Common Shares will be released from escrow every three months thereafter until all Common Shares are released. Any shareholder who holds less than or equal to 50,000 shares at a release date shall have all such shares released at such release date. In addition, 2,800,000 shares subject to the Pooling Agreement have been issued into escrow against the deposit into escrow of all the outstanding "atypical shares" of iQ Germany held by iQ Germany's Atypical Shareholders. The Common Shares and the "atypical shares" will be released from escrow to the Atypical Shareholders and iQ Canada, respectively, at the close of this Offering. Upon release from escrow the Common -39- Shares issued to the Atypical Shareholders will be subject to the Pooling Agreement pursuant to the terms of an amendment to the Pooling Agreement dated August 25, 1998. Transfer Agent and Registrar Montreal Trust Company of Canada, Vancouver, British Columbia, acts as registrar and transfer agent for the Company's Common Shares. DIVIDEND POLICY To date, the Company has not paid any dividends to holders of its Common Shares. The payment of dividends, if any, to holders of the Common Shares is within the discretion of the Board of Directors and will depend upon the Company's earnings, capital requirements, financial condition and other relevant factors. The Company does not intend to declare any cash dividends to the holders of the Common Shares in the foreseeable future, but instead intends to retain all future earnings, if any, for further research and development, business expansion and working capital. CERTAIN TAX CONSIDERATIONS The following discussion summarizes certain tax considerations relevant to a purchase of Common Shares pursuant to this Offering by individuals and corporations who, for the purposes of the Income Tax Act (Canada), as amended (the "Tax Act") and the United States Internal Revenue Code of 1986, as amended (the "Code"), as modified by the Canada-United States Income Tax Convention, 1980, as amended (the "Convention"), are resident in the United States and not in Canada, hold Common Shares as capital assets for purposes of the Code and capital property for purposes of the Tax Act, deal at arm's length with the Company, do not use or hold the Common Shares in carrying on a business through a permanent establishment or in connection with a fixed base in Canada and, in the case of individual holders, are also U.S. citizens (collectively, "Unconnected U.S. Shareholders"). The tax consequences of a purchase of Common Shares by holders who are not Unconnected U.S. Shareholders may be expected to differ substantially from the tax consequences discussed herein. The Tax Act contains recently enacted rules (the "mark-to-market rules") relating to securities held by certain financial institutions. This discussion does not take into account these mark-to-market rules and holders that are "financial institutions" for purposes of these rules should consult their own tax advisors. The discussion is based upon the current provisions of the Tax Act and regulations thereunder, the Code, the Convention, counsel's understanding of the current administrative policies and practices published by Revenue Canada and all specific proposals to amend the Tax Act and the regulations thereunder that have been publicly announced by the Minister of Finance (Canada) prior to the date hereof, the administrative policies published by the U.S. Internal Revenue Service, and judicial decisions, all of which are subject to change. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation in the United States, which, if enacted, could be applied, possibly on a retroactive basis, at any time. The discussion does not take into account the tax laws of the various provinces or territories of Canada or the tax laws of the various state and local jurisdictions of the United States or foreign jurisdictions. This discussion is intended to be a general description of the U.S. federal and Canadian federal income tax considerations material to a purchase of Common Shares and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective holder and no opinion or representation with respect to the income tax consequences to any such prospective holder is made. This discussion does not take into account the individual circumstances of any particular holder and does not address consequences peculiar to any holder subject to special provisions of U.S. or Canadian income tax law. Therefore, a prospective holder should consult their own tax advisors with respect to the tax consequences of a purchase of Common Shares pursuant to this Offering. -40- Dividends paid or credited or deemed to have been paid or credited on the Common Shares to Unconnected U.S. Shareholders will be subject to a Canadian withholding tax at a rate of 25% under the Tax Act. Under the Convention, the rate of withholding tax generally applicable to Unconnected U.S. Shareholders who beneficially own the dividends is reduced to 15%. In the case of Unconnected U.S. Shareholders who are companies which beneficially own at least 10% of the voting stock of the Company, the rate of withholding tax is reduced to 5% for dividends. United States Federal Income Tax Considerations Unconnected U.S. Shareholders generally will treat the gross amount of dividends paid by the Company equal to the U.S. dollar value of such dividends on the date of receipt (based on the exchange rate on such date), without reduction for the Canadian withholding tax, as dividend income for United States federal income tax purposes to the extent of the Company's current or accumulated earnings and profits. However, the amount of Canadian tax withheld (and, with respect to the foreign tax credit, in the case of certain U.S. shareholders that are corporations owning 10% or more of the Common Shares, a portion of the Canadian income tax paid by the Company) generally will give rise to a foreign tax credit, or deduction for U.S. federal income tax purposes. Investors should be aware that dividends paid by the Company generally will constitute "passive income" for purposes of the foreign tax credit, which could reduce the amount of foreign tax credit available to a U.S. shareholder. The Code applies various limitations on the amount of foreign tax credit that may be available to a U.S. taxpayer. Because of the complexity of those limitations, investors should consult their own tax advisors with respect to the potential consequences of those limitations. Dividends paid on the Common Shares will not generally be eligible for the "dividends received" deductions. An investor which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the U.S. source portion of dividends received from the Company if such investor owns shares representing at least 10% of the voting power and value of the Company. To the extent distributions exceed current or accumulated earnings and profits of the Company, they will be treated first, as a return of capital up to the investors' adjusted tax basis in the Common Shares, and thereafter as a gain from the sale or exchange of the Common Shares. In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, an Unconnected U.S. Shareholder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including an exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income. The sale of Common Shares generally will result in the recognition of gain or loss to the holder in an amount equal to the difference between the amount realized and the holder's adjusted basis in the Common Shares. Gain or loss upon the sale of the Common Shares held as capital assets will be long-term or short-term capital gain or loss, depending on whether the shares have been held for more than one year. Under current temporary U.S. Regulations, dividends paid on the Common Shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends paid, and the proceeds of a sale of Common Shares, in the United States through a U.S. or U.S.-related paying agent (including, a broker) will be subject to U.S. information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the Unconnected U.S. Shareholder's U.S. federal income tax liability, provided the required information is furnished to the Internal Revenue Service. Personal Holding Companies A non-U.S. corporation may be classified as a personal holding company (a "PHC") for U.S. federal income tax purposes if both of the following tests are satisfied: (i) if at any time during the last half of the Company's taxable year, five or fewer individuals (without regard to their citizenship or residency) own or are deemed to own (under -41- certain attribution rules) more than 50% of the stock of the corporation by value (the "PHC Ownership Test") and (ii) such non-U.S. corporation receives 60% or more of its U.S. related gross income, as specifically adjusted, from certain passive sources such as royalty payments (the "PHC Income Test"). Such a corporation is taxed (currently at a rate of 39.6%) on certain of its undistributed U.S. source income (including certain types of foreign source income which are effectively connected with the conduct of a U.S. trade or business) to an extent at least equal to which such income is not distributed to shareholders. The Company can give no assurance that it will not qualify as a PHC in the future. Foreign Personal Holding Companies A non-U.S. corporation will be classified as a foreign personal holding company (an "FPHC") for U.S. federal income tax purposes if both of the following tests are satisfied: (i) at any time during the Company's taxable year, five or fewer individuals who are United States citizens or residents own or are deemed to own (under certain attribution rules) more than 50% of all classes of the corporation's stock measured by voting power or value (the "FPHC Ownership Test") and (ii) the corporation receives at least 60% (50% in later years) of its gross income (regardless of source), as specifically adjusted, from certain passive sources (the "FPHC Income Test"). The Company does not believe that it satisfies either the FPHC Ownership Test or the FPHC Income Test. If the Company is classified as an FPHC, a portion of its "undistributed foreign personal holding company income" (as defined for U.S. federal income tax purposes) would be imputed to all of its shareholders who are U.S. holders of Common Shares on the last taxable day of the Company's taxable year, or, if earlier, the last day on which it is classified as an FPHC. Such income would be taxable as a dividend, even if no cash dividend is actually paid. U.S. holders who dispose of their Common Shares prior to such date would not be subject to tax under these rules. The Company can give no assurance that it will not qualify as a FPHC in the future. Passive Foreign Investment Companies Certain United States income tax legislation contains rules governing "passive foreign investment companies" ("PFIC") which can have significant tax effects on Unconnected U.S. Shareholders of foreign corporations. These rules do not apply to non-Unconnected U.S. Shareholders. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is "passive income," which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the Company is a controlled foreign corporation or makes an election, adjusted tax basis) of its assets that produce or are held for the production of "passive income" is 50% or more. The Company believes that it may qualify as a PFIC for the current fiscal year and may qualify as a PFIC in subsequent years. The Company can give no assurances regarding its current or future PFIC status or that it will be able to satisfy record keeping requirements which will be imposed on qualified electing funds ("QEFs") as defined in Section 1293 of the Code. Each Unconnected U.S. Shareholder of the Company is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation. An Unconnected U.S. Shareholder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to United States federal income taxation under one of two alternative tax regimes at the election of each such Unconnected U.S. Shareholder. The following is a discussion of such two alternative tax regimes applied to such Unconnected U.S. Shareholders of the Company. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a "controlled foreign corporation" (as defined below) and a Unconnected U.S. Shareholder owns, directly or indirectly, ten percent (10%) or more of the total combined voting power of classes of shares of such foreign corporation (See more detailed discussion at "Controlled Foreign Corporation" below). An Unconnected U.S. Shareholder who elects in a timely manner to treat the Company as a QEF (an "Electing Unconnected U.S. Shareholder") will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Company qualifies as a PFIC on his pro rata share of the Company's (i) "net capital gain" (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing Unconnected U.S. Shareholder and (ii) "ordinary earnings" (the excess of earnings and -42- profits over net capital gain), which will be taxed as ordinary income to the Electing Unconnected U.S. Shareholder, in each case, for the shareholder's taxable year in which (or with which) the Company's taxable year ends, regardless of whether such amounts are actually distributed. The effective QEF election also allows the Electing Unconnected U.S. Shareholder to (i) generally treat any gain realized on the disposition of his Company Common Shares (or deemed to be realized on the pledge of his shares) as capital gain; (ii) treat his share of the Company's net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Company's annual realized net capital gain and ordinary earnings subject, however, to an interest charge. If the Electing Unconnected U.S. Shareholder is not a corporation, such an interest charge would be treated as "personal interest" that is not deductible. The procedure an Unconnected U.S. Shareholder must comply with in making an effective QEF election will depend on whether the year of the election is the first year in the Unconnected U.S. Shareholder's holding period in which the Company is a PFIC. If the Unconnected U.S. Shareholder makes a QEF election in such first year, i.e., a timely QEF election, then the Unconnected U.S. Shareholder may make the QEF election by simply filing the appropriate documents at the time the Unconnected U.S. Shareholder files his tax return for such first year. If, however, the Company qualified as a PFIC in a prior year, then in addition to filing documents, the Unconnected U.S. Shareholder must elect to recognize (i) under the rules of Section 1291 of the Code (discussed below), any gain that he would otherwise recognize if the Unconnected U.S. Shareholder sold his stock on the qualification date or (ii) if the Company is a controlled foreign corporation, the Unconnected U.S. Shareholder's pro rata share of the Company's post-1986 earnings and profits as of the qualification date. The qualification date is the first day of the Company's first tax year in which the Company qualified as a "qualified electing fund" with respect to such Unconnected U.S. Shareholder. The elections to recognize such gain or earnings and profits can only be made if such Unconnected U.S. Shareholder's holding period for the Common Shares of the Company includes the qualification date. By electing to recognize such gain or earnings and profits, the Unconnected U.S. Shareholder will be deemed to have made a timely QEF election. Unconnected U.S. Shareholders are urged to consult a tax advisor regarding the availability of and procedure for electing to recognize gain or earnings and profits under the foregoing rules. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a "controlled foreign corporation" (as defined below) and a Unconnected U.S. Shareholder owns, directly or indirectly, ten percent (10%) or more of the total combined voting power of classes of shares of such foreign corporation. When a timely QEF election is made, if the Company no longer qualifies as a PFIC in a subsequent year, normal Code rules will apply. It is unclear whether a new QEF election is necessary if the Company thereafter re-qualifies as a PFIC. Unconnected U.S. Shareholders should seriously consider making a new QEF election under those circumstances. If an Unconnected U.S. Shareholder does not make a timely QEF election during a year in which it holds (or is deemed to have held) the shares in question and the Company is a PFIC (a "Non-electing Unconnected U.S. Shareholder"), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reasons of a pledge) of his Company Common Shares and (ii) certain "excess distributions," as specifically defined, by the Company. A Non-electing Unconnected U.S. Shareholder generally would be required to pro rate all gains realized on the disposition of his Company Common Shares and all excess distribution of his Company Common Shares and all excess distributions over the entire holding period for the Company. All gains or excess distributions allocated to prior years of the Unconnected U.S. Shareholder (other than years prior to the first taxable year of the Company during such Unconnected U.S. Shareholder's holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing Unconnected U.S. Shareholder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing -43- Unconnected U.S. Shareholder that is not a corporation must treat this interest charge as "personal interest" which, as discussed above, is wholly nondeductible. The balance of the gain of the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance. If the Company is a PFIC for any taxable year during which a Non-electing Unconnected U.S. Shareholder holds Company Common Shares, then the Company will continue to be treated as a PFIC with respect to such Company Common Shares, even if it is no longer definitionally a PFIC. A Non-electing Unconnected U.S. Shareholder may terminate this deemed PFIC status by electing to recognize a gain (which will be taxed under the rules discussed above for Non-electing Unconnected U.S. Shareholders) as if such Company Common Shares had been sold on the last day of the last taxable year for which it was a PFIC. Unconnected U.S. Shareholders who hold (actually or constructively) marketable stock of a foreign corporation that qualifies as a PFIC, may annually elect to mark such stock to the market (a "mark-to-market election"). If such an election is made, such Unconnected U.S. Shareholder will not be subject to the special taxation rules of Section 1291 described below for the taxable year for which the mark-to-market election is made. An Unconnected U.S. Shareholder who makes such an election will include in income for the taxable year for which the election was made in an amount equal to the excess, if any, of the fair market value of the Common Shares of the Company as of the close of such tax year over such Unconnected U.S. Shareholder's adjusted basis in such Common Shares. In addition, the Unconnected U.S. Shareholder is allowed a deduction for the lesser of (i) the excess, if any, of such Unconnected U.S. Shareholder's adjusted tax basis in the Common Shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market gains for the Common Shares in the Company included by such Unconnected U.S. Shareholder for prior tax years, including any amount which would have been included for any prior tax year but for Section 1291 interest on tax deferral rules discussed below with respect to Non-electing Unconnected U.S. Shareholders, over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. Unconnected U.S. Shareholder's adjusted tax basis in the Common Shares of the Company will be increased to reflect the amount included or deducted as a result of a mark-to-market election. A mark-to-market election only applies to the taxable year in which the election was made. A separate election must be made by a Unconnected U.S. Shareholder for each subsequent taxable year. Because the Internal Revenue Service has not established procedures for making a mark-to-market election, Unconnected U.S. Shareholders should consult their tax advisor regarding the manner of making such an election. Under Section 1291(f) of the Code, the IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by Non-Electing Unconnected U.S. Shareholders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases the basis of the Company Common Shares in the hands of the transferee and the basis of any property received in the exchange for those Common Shares would be increased by the amount of gain recognized. An Electing Unconnected U.S. Shareholder would not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. The transferee's basis in this case will depend on the manner of the transfer. In a transfer at death, for example, the transferee's basis is equal to (i) the fair market value of the Electing Unconnected U.S. Shareholder's Common Shares, less (ii) the excess of the fair market value of the Electing Unconnected U.S. Shareholder's Common Shares reduced by the Unconnected U.S. Shareholder's adjusted basis in these Common Shares at death. The specific tax effect to the Unconnected U.S. Shareholder and the transferee may vary based on the manner in which the Common Shares are transferred. Each Unconnected U.S. Shareholder of the Company is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation. Certain special, generally adverse, rules will apply with respect to Company Common Shares while the Company is a PFIC whether or not it is treated as a QEF. For example under Section 1297(b)(6) of the Code, an Unconnected U.S. Shareholder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such shares. -44- Controlled Foreign Corporation If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by citizens of the United States, U.S. domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company ("United States Shareholder"), the Company could be treated as a "controlled foreign corporation" under Subpart F of the Code. This classification would effect many complex results, including the required inclusion by such United States Shareholders in income of their pro rata shares of "Subpart F Income" (as specifically defined by the Code) of the Company. In addition, under Section 1248 of the Code, gain from the sale or exchange of stock by a holder of Common Shares who is or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged. The Company does not believe that it is a controlled foreign corporation and it is not anticipated that the Company will become a controlled foreign corporation as a result of the Offering. The Company can give no assurance that it will not qualify as a controlled foreign corporation in the future. Certain Canadian Federal Income Tax Considerations The following discussion summarizes certain tax considerations relevant to an acquisition of the Company's Common Shares pursuant to the Acquisition by individuals and corporations who, for the purposes of the Income Tax Act (Canada), as amended (the "Tax Act"), as modified by the Canada-United States Income Tax Convention, 1980, as amended (the "Convention"), are resident in the United States and not in Canada, hold Common Shares as capital property for purposes of the Tax Act, deal at arm's length with the Company, do not use or hold the Common Shares in carrying on a business through a permanent establishment or in connection with a fixed base in Canada and, in the case of individual holders, are also U.S. citizens (collectively, "Unconnected U.S. Shareholders"). The tax consequences of a purchase of Common Shares by holders who are not Unconnected U.S. Shareholders may be expected to differ substantially from the tax consequences discussed herein. The Tax Act contains recently enacted rules (the "market-to-market rules") relating to securities held by certain financial institutions. This discussion does not take into account these market-to-market rules and holders that are "financial institutions" for purposes of these rules should consult their own tax advisors. The discussion is based upon the current provisions of the Tax Act and regulations thereunder, the Convention, counsel's understanding of the current administrative policies and practices published by Revenue Canada and all specific proposals to amend the Tax Act and the regulations thereunder that have been publicly announced by the Minister of Finance (Canada) prior to the date hereof, and judicial decisions, all of which are subject to change. This discussion does not take into account the tax laws of the various provinces or territories of Canada or the tax laws of the various state and local jurisdictions of the United States or foreign jurisdictions. This discussion is intended to be a general description of Canadian federal income tax considerations material to an acquisition of Common Shares and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective holder and no opinion or representation with respect to the income tax consequences to any such prospective holder is made. This discussion does not take into account the individual circumstances of any particular holder and does not address consequences peculiar to any holder subject to special provisions Canadian income tax law. Therefore, a prospective holder should consult his, her or its own tax advisors with respect to the tax consequences of an acquisition of Common Shares. Dividends paid or credited or deemed to have been paid or credited on the Common Shares to Unconnected U.S. Shareholders will be subject to a Canadian withholding tax at a rate of 25% under the Tax Act. Under the Convention, the rate of withholding tax generally applicable to Unconnected U.S. Shareholders who beneficially own the dividends is reduced to 15%. In the case of Unconnected U.S. Shareholders who are companies which beneficially own at least 10% of the voting stock of the Company, the rate of withholding tax is 5% for dividends paid or credited. -45- If Common Shares are acquired by the Company from a holder who is an Unconnected U.S. Shareholder, such holder will be deemed to have received a dividend to the extent that the amount paid on the Acquisition exceeds the paid-up capital, as defined in the Tax Act, of the Common Shares acquired. Furthermore, such holder will be deemed to have disposed of the Common Shares for proceeds of disposition equal to the amount paid on the acquisition less the amount deemed to have been received as a dividend. Capital gains realized on the deemed disposition, if any, will have the income tax consequences described below. The portion, if any, of the proceeds of disposition that are deemed to be a dividend will be subject to a Canadian withholding tax on dividends, as described above. Capital gains realized on the disposition or deemed disposition of Common Shares by a holder who is an Unconnected U.S. Shareholder will not be subject to taxation under the Tax Act unless such Common Shares are "taxable Canadian property," as defined in the Tax Act, to such holder. Common Shares will generally not constitute taxable Canadian property to such a holder unless, at any time during the five-year period immediately preceding the disposition or deemed disposition of the Common Shares, the holder, persons with whom the holder did not deal at arm's length, or any combination thereof owned, had an interest in or an option in respect of, 25% or more of the issued shares of any class or series of the capital stock of the Company. If the Common Shares constitute taxable Canadian property to such a holder, the Convention will generally exempt the holder from income tax under the Tax Act in respect of the disposition or deemed disposition of the Common Shares, provided the value of the Common Shares is not derived principally from real property situated in Canada, as defined for purposes of the Convention. Canada does not currently impose any estate taxes or succession duties, however, where an Unconnected U.S. Shareholder dies, there is a deemed disposition of the Common Shares held at that time for proceeds of disposition equal to the fair market value of the Common Shares immediately before the death. Capital gains realized on the deemed disposition, if any, will have the income tax consequences described above. SECURITIES ELIGIBLE FOR FUTURE SALE Prior to this Offering, there has been no market for the Company's Common Shares in the United States. Upon the completion of this Offering, assuming the maximum amount of shares offered hereby (5,000,000) are issued, there will be 23,479,425 of the Company's Common Shares outstanding, including 2,300,000 Common Shares issuable upon the exercise of Special Warrants and excluding 2,875,000 shares issuable upon exercise of presently outstanding options. Of these shares, the 5,000,000 shares being sold in this Offering will be freely tradable without restriction or further registration under the Securities Act, except for any such shares issued to persons who, as a result of positions with the Company (such as directors and officers) or stock ownership, are or were "affiliates" of the Company ("Affiliates"). Any person who is deemed to be such an Affiliate may not resell in the United States the Company's Common Shares held by such person in the absence of registration under the Securities Act unless an exemption from registration is available, such as Rule 144 discussed below. A total of 3,709,684 Common Shares (including 2,300,000 Common Shares issuable upon exercise of the Special Warrants) were issued and sold by the Company in reliance on an exemption from registration under the Securities Act provided by Rule 504 thereunder. Such Common Shares are unrestricted and freely tradeable in the United States. Affiliates of the Company holding 9,290,844 Common Shares, 7,790,843 shares of which are subject to the Pooling Agreement described below, are entitled to sell in the United States within any three-month period, that number of shares that does not exceed the greater of (i) one percent of the number of Common Shares then outstanding (approximately 234,794 shares immediately after this Offering) or (ii) the average weekly trading volume of the Common Shares during the four calendar weeks preceding such sale. A total of 14,769,741 Common Shares were issued by the Company in reliance upon Regulation S under the Securities Act to persons whom the Company believes were outside the United States at the time of sale and who -46- are not Affiliates of the Company. Common Shares sold outside the United States in reliance upon Regulation S may, under certain circumstances, be resold in the United States by persons other than Affiliates of the Company without registration under the Securities Act, subject to fulfillment of certain resale conditions imposed by Rule 144 under the Securities Act described below. Under Regulation S, any Common Shares held by persons other than the Company, any underwriter, dealer or other person who participates, pursuant to a contractual arrangement, in the distribution of the Common Shares sold in reliance thereon, any of their respective Affiliates (other than directors or officers who are Affiliates solely by virtue of holding such position) or any person acting on behalf of any of the foregoing, may resell the Common Shares in an "offshore transaction," as defined in Regulation S, provided that the sale is not prearranged with a buyer in the United States and no directed selling efforts (as such term is defined in Regulation S) are made in the United States by the seller, any affiliate or any person acting on their behalf. Officers and directors who are Affiliates solely by virtue of holding such position may also resell Common Shares on the same basis, provided that no selling commission, fee or other remuneration is paid in connection with such offers and sales other than usual and customary brokers commissions. All other Affiliates of the Company and such persons would be required to comply with Regulation S restrictions applied to primary offerings by issuers which, in addition to the offshore transaction and no directed selling efforts requirements, may include certain other offering restrictions. In general, under Rule 144, a person (or persons whose shares are aggregated) who has beneficially owned shares for at least one year (including the holding period of any prior owner, except an Affiliate) is entitled to sell in "broker's transactions" or to market makers, within any three-month period commencing 90 days after the date of this Prospectus, a number of shares that does not exceed the greater of (i) one percent of the number of Common Shares then outstanding (approximately 234,794 shares immediately after this Offering) or (ii) the average weekly trading volume of the Common Shares during the four calendar weeks preceding the required filing of a Form 144 with respect to such sale. Sales under Rule 144 are generally subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an Affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell such shares without having to comply with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Certain shareholders of iQ Canada and the former shareholders and Atypical Shareholders of iQ Germany have agreed to place their shares into escrow subject to the terms of the Pooling Agreement. An aggregate of 13,514,844 Common Shares of iQ Canada are held in escrow pursuant to the Pooling Agreement. Under the terms of the Pooling Agreement, 3,378,711 Common Shares will be released from escrow on April 1, 2000 and an additional 25% of the Common Shares will be released from escrow every three months thereafter until all Common Shares are released, and any shareholder who holds less than or equal to 50,000 shares at a release date shall have all such shares released at such release date. See "Description of Capital Stock -- Pooling and Escrow Agreements." -47- AVAILABLE INFORMATION Our Company does not report under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form SB-1 covering the shares we are offering. We have not included in this Prospectus certain information contained in the registration statement and you should refer to the registration statement and its exhibits for further information. For a fee, you may get a copy of the registration statement from the public reference section of the SEC at: Judiciary Plaza, 450 5th Street, N.W., Washington, D.C. 20549; and at the SEC's Regional Office located at: 1400 Citicorp Center, 500 West Madison Street, Chicago, IL 60661. In addition, the SEC maintains a web site on the Internet at the address http://www.sec.gov that contains reports, proxy information statements and other information regarding registrants that file electronically with the SEC. After completion of this Offering, we will be exempt from the rules under the Exchange Act that require us to furnish proxy statements to our shareholders, and our officers, directors and principal shareholders will be exempt from the reporting and short swing profit recovery provisions of Section 16 under the Exchange Act. However, we will be subject to the reporting requirements of the Exchange Act that are applicable to foreign private issuers. We are not required under the Exchange Act to publish financial statements as frequently or as promptly as United States companies who are subject to the Exchange Act. We intend, however, to continue to furnish our shareholders with annual reports containing consolidated financial statements audited by independent accountants and with quarterly reports containing unaudited summary financial information for each of the first three fiscal quarters of each fiscal year, as well as any other reports as our Board of Directors may authorize or that are required by law. LEGAL MATTERS The legality of the Common Shares offered by this Prospectus will be passed upon for the Company by Werbes Sasges & Company, Canadian Counsel to the Company. Certain legal matters in connection with this offering will be passed upon for the Company by Bogle & Gates P.L.L.C., Seattle, Washington special United States counsel to the Company. Bogle & Gates P.L.L.C. will rely on the opinions of Werbes Sasges & Company as to matters of Canadian law. INTRODUCTION TO FINANCIAL STATEMENTS The Financial Statements included in this Prospectus are those for iQ Canada and iQ Germany. The iQ Canada and iQ Germany Financial Statements are set forth on the pages that follow. -48- iQ POWER TECHNOLOGY, INC. INDEX TO FINANCIAL STATEMENTS iQ Power Technology, Inc.......................................................1 Auditors'Report.............................................................2 Balance Sheets..............................................................3 Statements of Loss and Deficit..............................................4 Statements of Cash Flow.....................................................5 Notes to the Financial Statements...........................................6 IQ BATTERY Research & Development GmbH........................................11 Independent Auditor's Report...............................................11 Balance Sheets.............................................................12 Statements of Operations...................................................13 Statements of Cash Flows...................................................14 Notes to Financial Statements..............................................15 Selected Unaudited Pro Forma Financial Information............................22 Unaudited Pro Forma Consolidated Balance Sheet.............................23 Unaudited Pro Forma Consolidated Statement of Loss For the Six Month Period ended June 30, 1998....................................24 Unaudited Pro Forma Consolidated Statement of Loss For the Year Ended December 31, 1997............................................25 Notes to the Unaudited Pro Forma Consolidated Financial Information........26 F-1 AUDITORS' REPORT To the Directors of IQ Power Technology Inc. (a development stage company) We have audited the balance sheets of IQ Power Technology Inc. (a development stage company) as at December 31, 1997 and 1996 and the statements of loss and deficit and cash flow for the year ended December 31, 1997, the seven month period ended December 31, 1996, and the cumulative from date of inception of the development stage, June 21, 1996, to December 31, 1997. 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 audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1997 and 1996 and the results of its operations and cash flows for the year ended December 31, 1997, the seven month period ended December 31, 1996 and cumulative from date of inception of the development stage, June 21, 1996, to December 31, 1997 in accordance with generally accepted accounting principles in Canada applied on a consistent basis with that of the preceding year. /s/ Deloitte & Touche LLP Chartered Accountants Vancouver, British Columbia October 15, 1998 COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA - -- U.S. REPORTING CONFLICT To the Directors of IQ Power Technology Inc. In the United States of America, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the auditor concludes that there is substantial doubt about the entities' ability to continue as a going concern such as described in Note 2 of the financial statements. Our report to the shareholders dated October 15, 1998 is expressed in accordance with Canadian reporting standards, which do not permit a reference to such an uncertainty in the auditors' report when the uncertainty is adequately disclosed in the financial statements. /s/ Deloitte & Touche LLP Chartered Accountants Vancouver, British Columbia October 15, 1998 F-2 IQ POWER TECHNOLOGY INC. (a development stage company) Balance Sheets (Expressed in U.S. Dollars) - -------------------------------------------------------------------------------- June 30 December 31 1998 1997 1996 --------- ---------- -------- (Unaudited) ASSETS CURRENT Cash and cash equivalents $ 78,731 $ 43,525 $ - Accounts receivable 6,001 3,060 - Deposits 4,600 4,600 - Promissory notes receivable (Note 4) 464,256 368,076 147,977 - -------------------------------------------------------------------------------- $553,588 $419,261 $147,977 - -------------------------------------------------------------------------------- LIABILITIES CURRENT Accounts payable $ 84,733 $ 56,841 $ - Accrued liabilities 5,000 15,725 - Due to shareholders (Note 5) - - 5,877 Share subscription 75,000 - 152,603 - -------------------------------------------------------------------------------- 164,733 72,566 158,480 - -------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY (DEFICIT) Capital stock (Note 6) Authorized An unlimited number of common shares Issued 2,543,225 common shares (1997 - 1,969,741; 1996 - 1) 635,806 492,435 1 Accumulated deficit, during development stage (246,951) (145,740) (10,504) - -------------------------------------------------------------------------------- 388,855 346,695 (10,503) - -------------------------------------------------------------------------------- $553,588 $419,261 $147,977 - -------------------------------------------------------------------------------- CONTINUANCE OF OPERATIONS (Note 2) F-3 IQ POWER TECHNOLOGY INC. (a development stage company) Statements of Loss and Deficit (Expressed in U.S. Dollars) - -------------------------------------------------------------------------------- Cumulative Cumulative from date of Twelve months Seven months from date of Six months Six months inception to period ended period ended inception to ended ended December 31, December 31, December 31, June, 30 1998 June 30,1998 June 30, 1997 1997 1997 1996 ------------- ------------ ------------- ----------- ------------ ------------ (Unaudited) (Unaudited) (Unaudited) Expenses Advertising and promotion $ 4,463 $ 4,463 $ - $ - $ - $ - Loss on foreign exchange 32,394 - - 32,394 32,394 - Management fees 63,999 20,801 21,802 43,198 43,198 - Office 5,845 5,634 29 211 211 Professional fees 82,296 56,030 1,085 26,266 21,640 4,626 Technical reports 5,878 - - 5,878 - 5,878 Travel 52,076 14,283 19,555 37,793 37,793 - - ----------------------------------------------------------------------------------------------------------------- 246,951 101,211 42,471 145,740 135,236 10,504 - ----------------------------------------------------------------------------------------------------------------- Net Loss (246,951) (101,211) (42,471) (145,740) (135,236) (10,504) Accumulated deficit during development stage, beginning of period $ - $(145,740) $(10,504) $ - $(10,504) $ - - ----------------------------------------------------------------------------------------------------------------- Accumulated deficit during development stage, end of period $(246,951) $(246,951) $(52,975) $(145,740) $(145,740) $(10,504) - ----------------------------------------------------------------------------------------------------------------- Basic and diluted loss per share $ - $ (0.04) $ (0.08) $ - $ (0.14) N/A - ----------------------------------------------------------------------------------------------------------------- Weighted average number of shares outstanding 2,286,461 547,271 - 950,294 - - -----------------------------------------------------------------------------------------------------------------
F-4 IQ POWER TECHNOLOGY INC. (a development stage company) Statements of Cash Flow (Expressed in U.S. Dollars) Cumulative Twelve months Cumulative from date of period ended Seven months from date of Six months Six months inception to December 31, period ended inception to ended ended December 31, 1997 December 31, June 30, 1998 June 30, 1998 June 30, 1997 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) (Unaudited) OPERATING ACTIVITIES Net loss $ (246,951) $ (101,211) $ (42,471) $ (145,740) $ (135,236) $ (10,504) Items not affecting cash Increase in accounts receivable (6,001) (2,941) (1,562) (3,060) (3,060) Increase in prepaid and deposits (4,600) - - (4,600) (4,600) - Increase in accounts payable 84,733 27,892 40,265 56,841 56,841 - (Decrease) increase in accrued liabilities 5,000 (10,725) - 15,725 15,725 - - ----------------------------------------------------------------------------------------------------------------------- (167,819) (86,985) (3,768) (80,834) (70,330) (10,504) - ----------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITY Increase in notes receivable (464,256) (96,180) - (368,076) (220,099) (147,977) - ----------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES (Decrease) increase in due to shareholder Increase (decrease) - - (5,877) - (5,877) 5,877 in share subscriptions Issuance of common 227,603 75,000 36,199 152,603 - 152,603 shares 483,203 143,371 - 339,832 339,831 1 - ----------------------------------------------------------------------------------------------------------------------- 710,806 218,371 30,322 492,435 333,954 158,481 - ----------------------------------------------------------------------------------------------------------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 78,731 35,206 26,554 43,525 43,525 - CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 43,525 - ----------------------------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 78,731 $ 78,731 $ 26,554 $ 43,525 $ 43,525 $ - - -----------------------------------------------------------------------------------------------------------------------
F-5 IQ POWER TECHNOLOGY INC. (a development stage company) Notes to the Financial Statements December 31, 1997 and 1996 (Expressed in U.S. Dollars) (Information as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 is unaudited) - -------------------------------------------------------------------------------- 1. NATURE OF BUSINESS IQ Power Technology Inc. (the "Company") was incorporated under the Canada Business Corporations Act on December 20, 1994. The Company commenced operations on June 21, 1996. The Company's current business strategy is to acquire 100% interest in IQ Battery Research and Development GmbH (IQ Germany) which is legally domiciled in Floha, Germany. The Company's strategic objectives include the commercial exploitation of a new generation of computer optimized vehicle batteries researched and developed by IQ Germany. 2. CONTINUANCE OF OPERATIONS These financial statements have been prepared on a going concern basis. The Company's ability to continue as a going concern is dependent upon the ability of the Company to attain future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company plans to raise a maximum of $4,240,000 to a minimum of $2,440,000, net of commissions and costs of issues, through the issuance of 5,000,000 or 3,000,000 shares of common stock pursuant to a Registration Statement on Form SB-1. The Company intends to use the proceeds to fund research and development of iQ Germany, expansion of the Company's marketing and sales activities and general working capital. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with generally accepted accounting principles in Canada, which for these financial statements conform with those in the United States except as outlined in Note 10. (a) Foreign currency translation The Company is a Canadian corporation but considers the United States dollar to be the appropriate functional currency for the Company's operations and these financial statements. Accordingly, for the purposes of preparing these financial statements, transactions in Canadian dollars and German deutsche marks have been measured into United States dollars so that monetary assets and liabilities are translated at the rate in effect at the balance sheet date. Other balance sheet items and revenues and expenses are translated at the rates prevailing on the respective transaction dates. Exchange gains and losses related to current monetary items are included in income. Exchange gains and losses related to noncurrent monetary items are deferred and amortized over the remaining lives of the monetary items. (b) Estimates and assumptions The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-6 IQ POWER TECHNOLOGY INC. (a development stage company) Notes to the Financial Statements December 31, 1997 and 1996 (Expressed in U.S. Dollars) (Information as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 is unaudited) - -------------------------------------------------------------------------------- (c) Cash and cash equivalents. Cash and cash equivalents consist of cash on hand, deposits in banks, deposits in trust, and highly liquid investments with an original maturity of three months or less. (d) Unaudited interim financial statements. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, all adjustments (consisting of only normal recurring accruals) considered necessary to present fairly the consolidated financial position as of June 30, 1998 and the consolidated statements of loss, shareholders' equity and cash flows for the six-month periods ended June 30, 1998 and 1997 have been included. 4. PROMISSORY NOTES RECEIVABLE Promissory notes receivable are unsecured, do not bear interest and are payable on demand. 5. DUE TO SHAREHOLDER The amounts due to shareholder are unsecured, non-interest bearing and have no specific terms of repayment. 6. SHARE CAPITAL June 30 December 31 -------------------------------- --------------------------------------------------------------- 1998 1997 1996 -------------------------------- ------------------------------- ------------------------------ Number of Common Number of Number of Common shares Amount Common shares Amount shares Amount ---------------- ------ ------------- ------ ---------------- ------ Balance, beginning of period 1,969,741 $ 492,435 1 $ 1 1 $ 1 Private Placement 573,484 143,371 1,969,740 $ 492,434 - - - ------------------------------------------------------------------------------------------------------------------------ 2,543,225 $ 635,806 1,969,741 $ 492,435 1 $ 1 - ------------------------------------------------------------------------------------------------------------------------
On July 1, 1998, the Company issued 300,000 common shares for proceeds of $75,000. 7. FINANCIAL INSTRUMENTS The Company's financial instruments include cash, accounts receivable, prepaids and deposits, travel advances, promissory notes receivable, accounts payable and accrued liabilities, due to shareholder and share subscriptions. The fair value of these financial instruments approximates carrying values due to the F-7 IQ POWER TECHNOLOGY INC. (a development stage company) Notes to the Financial Statements December 31, 1997 and 1996 (Expressed in U.S. Dollars) (Information as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 is unaudited) - -------------------------------------------------------------------------------- short-term to maturity of the financial instruments and similarity to market rates. The Company is exposed to currency risk in respect of financial instruments. Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Company does not attempt to hedge currency risk. 8. RELATED PARTY TRANSACTIONS Related party transactions and balances not disclosed elsewhere in the financial statements include: (a) management fees as of June 30, 1998 of $20,801 (June 30, 1997 - $21,802; December 31, 1997 - 43,198; 1996 - nil) paid to a company with a common director. (b) a lawyer was appointed secretary of the Company effective December 1, 1998. The law firm of which this officer is a partner provided legal services to the Company for fees of $16,445 during the year ended December 31, 1997 and $16,630 during the six months ended June 30, 1998. (c) accounts payable and accrued liabilities, June 30, 1998 of $56,947 (1996 - $Nil) due to a company with a common director; and (d) issuance of 236,213 common shares at an price of $0.25 per share for proceeds of $59,053 to a company with a common director. 9. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE The Company may experience the effects of the Year 2000 issue before, on, or after January 1, 2000, and the impact on operations and financial reporting, if not addressed, may range from minor errors to significant systems failure which could affect the Company's ability to conduct normal business operations. It is not possible to be certain that all aspects of the Year 2000 issue affecting the Company, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. 10. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (a) Accounting for income taxes U.S. GAAP requires, pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109, that a deferred tax asset amount be recognized for loss carry-forwards. Although the Corporation has Canadian non-capital tax loss carry-forwards, due to uncertainty as to utilization prior to their expiry, the deferred tax asset amounts would have been completely offset in these consolidated financial statements by a valuation provision. (b) Recent accounting pronouncements (i) In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income", which requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from non-owner sources; and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" which establishes annual and interim reporting standards for an F-8 IQ POWER TECHNOLOGY INC. (a development stage company) Notes to the Financial Statements December 31, 1997 and 1996 (Expressed in U.S. Dollars) (Information as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 is unaudited) - -------------------------------------------------------------------------------- enterprise's business segments and related disclosures about its products, services, geographic areas, and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows. (ii) In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which standardizes the accounting for derivative instruments. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. The Company is currently assessing the impact of SFAS No. 133 on the Company's financial statements and has not yet determined what if any changes will be necessary. 11. SUBSEQUENT EVENTS Subsequent to December 31, 1997, the Company: (a) (i) entered into a share exchange agreement dated August 25, 1998 with IQ Germany whereby the shareholders of IQ Germany shall sell and transfer their IQ Germany shares to the Company for, in the aggregate, 10,000,000 common shares to be issued by the Company to the shareholders on execution and delivery of the agreement for deemed proceeds of $2,500,000. The shareholders of IQ Germany have the option to cancel the share exchange agreement if after the four month anniversary of the initial filing by IQ Canada of a registration statement on Form SB-1 with the United States Securities and Exchange Commission: (a) IQ Canada has failed to complete an equity offering with gross proceeds of at least $3 Million and (b) the shareholders of IQ Germany have repaid to IQ Canada the full amount of all funds advanced to iQ Germany. (See note 11(d)). The option shall terminate and shall not be-exercisable as of such date that IQ Canada shall complete an equity financing with gross proceeds of not less than $3,000,000; (ii) entered into a share exchange agreement dated August 25, 1998 to issue 2,800,000 common shares of the Company to the holders of Atypical Shares of IQ Germany. Atypical Shares means certain shares of IQ Germany which are not part of the ordinary capital of IQ Germany and were issued pursuant to agreements between IQ Germany and the holders of those shares under German tax incentives. The Common Shares and Atypical Shares will be held in escrow until the completion of the offering. (See Note 11(d)). The share exchange will not be completed if the option in (i) above is exercised; (b) entered into a consulting agreement dated August 25, 1998 with a company having a common director. Under the terms of the agreement the Company is obligated to pay the consultant $6,000 per month for a term of three years commencing August 25, 1998; (c) entered into employment agreements with two directors of the Company to occupy the positions of President and Chief Executive Officer and Vice President, Research and Development and Technical Advisor. Under the terms of these agreements the Company is obligated to pay these employees $8,500 and $8,000 per month, respectively, for a term of five years commencing August 31, 1998; and F-9 IQ POWER TECHNOLOGY INC. (a development stage company) Notes to the Financial Statements December 31, 1997 and 1996 (Expressed in U.S. Dollars) (Information as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 is unaudited) - -------------------------------------------------------------------------------- (d) entered into an offering agreement with IPO Capital Corp. (the "Agent") to raise seed financing of up to $5,000,000 for a fee of 10% in cash of gross proceeds raised, plus Agent's Options in an amount equal to 10% of the common shares sold. (e) issued 2,300,000 Special Warrants for net proceeds of $575,000. Each Special Warrant comprises one common share. The Special Warrant holder has the right to require the Company to repurchase all Special Warrants not yet exchanged into Common Shares of the Company for the initial subscription price at any time prior to December 31, 1998. (f) issued 536,200 common shares for $134,050 cash. (g) adopted a Stock Option Plan. The maximum number of Common Shares reserved for issuance under the Stock Option Plan, including options currently outstanding, is 3,000,000 Common Shares. As at December 1, 1998, a total of 2,875,000 options are issued and unexercised at an exercise price of $1.00 per share, expiring on December 1, 2008. F-10 INDEPENDENT AUDITORS' REPORT To the Board of Directors We have audited the accompanying balance sheets of iQ BATTERY Research & Development GmbH as of December 31, 1997 and December 31, 1996, and the related statements of operations and of cash flows for each of the years in the three year period ended December 31, 1997. 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 generally accepted in Germany and the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, an 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 audit 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 iQ BATTERY Research & Development GmbH as of December 31, 1997 and December 31, 1996, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 1997 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 2 to the financial statements, the Company's recurring losses, negative operating cash flows and shareholders' capital deficiency raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Deloitte & Touche GmbH Deloitte & Touche GmbH Wirtschaftsprufungsgesellschaft Munich, October 15, 1998 F-11 IQ BATTERY Research & Development GmbH Balance Sheets as of June 30, 1998, December 31, 1997 and December 31, 1996 (DM in thousands) June 30, December 31, -------------------------------- 1998 1997 1996 DM DM DM ------------ -------------- -------------- (unaudited) Assets Current Assets Cash and cash equivalents 31 31 31 Receivable from shareholders 109 36 64 Other receivables, primarily refundable value added taxes 334 241 135 Prepaid expenses 0 3 0 ----------- -------------- -------------- Total current assets 474 311 230 Non-current assets Equipment-net 97 75 17 Patents and other intangibles, net of amortization 260 280 320 ------------ -------------- -------------- Total assets 831 666 567 ============ ============== ============== Liabilities and Shareholders' Deficit Current liabilities Short-term bank debt 235 88 82 Trade accounts payable 635 387 272 Due to shareholders 103 66 70 Accrued payroll 132 138 116 Advances 838 663 223 Other accrued liabilities 177 158 113 ------------ -------------- -------------- Total current liabilities 2.120 1.500 876 Long-term bank debt 6 8 0 Non-Current liabilities due to shareholders 495 555 555 ------------ -------------- -------------- Total liabilities 2.621 2.063 1.431 Commitments and Contingencies Shareholders' deficit Registered Capital 100 100 100 Atypical paid in capital 1.842 1.442 902 Accumulated deficit Allocation to Atypical capital -1.842 -1.442 -902 Allocation to voting shareholders -1.890 -1.497 -964 ------------ -------------- -------------- Total deficit -1.790 -1.397 -864 ------------ -------------- -------------- Total liabilities and shareholders' deficit 831 666 567 ============ ============== ============== F-12 IQ BATTERY Research & Development GmbH Statements of operations for the six month period ended June 30, 1998 and for the years ended December 31, 1997, 1996 and 1995 (DM in thousands) June 30, December 31, ------------------------------------- 1998 1997 1996 1995 DM DM DM DM ----------- ----------- ----------- ----------- (unaudited) Revenues Sales 0 45 0 0 Grants received 0 0 0 160 ----------- ----------- ----------- ----------- 0 45 0 160 ----------- ----------- ----------- ----------- Operating Expenses Research and development expenses -643 -881 -695 -622 General administrative and other expenses -110 -162 -127 -91 ----------- ----------- ----------- ----------- Operating loss -753 -998 -822 -553 Interest Income 0 1 3 0 Interest and other financial expense -40 -76 -12 -28 ----------- ----------- ----------- ----------- Loss before taxes -793 -1,073 -831 -581 Income taxes 0 0 0 0 =========== =========== =========== =========== Net loss -793 -1.073 -831 -581 =========== =========== =========== =========== F-13 IQ BATTERY Research & Development GmbH Statements of Cash Flows for the six month period ended June 30, 1998 and for the years ended December 31, 1997, 1996 and 1995 (DM in thousands) June 30 December 31, ------------------------------------- 1998 1997 1996 1995 DM DM DM DM ----------- ----------- ----------- ----------- (unaudited) Operating activities: Net loss -793 -1.073 -831 -581 Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 36 61 50 49 Loss on disposal of equipment 0 10 Changes in assets and liabilities: Other receivables and prepaid expenses -163 -81 -54 -98 Accounts payable and other current liabilities 262 181 272 -30 ----------- ----------- ----------- ----------- Net cash used in operating activities -658 -912 -553 -660 ----------- ----------- ----------- ----------- Investing Activities: Proceeds from sales of equipment 0 0 3 0 Additions to property, plant and equipment -38 -80 -13 -24 ----------- ----------- - --------- ----------- Net cash used in investing activities -38 -80 -10 -24 ----------- ----------- ----------- ----------- Financing Activities: Atypical capital increases 400 540 215 587 Increase (decrease) in short-term debt 146 6 28 -1 Increase (decrease) in debt due to shareholders -23 -4 107 118 Advances received from external parties 175 440 223 0 Increase (decrease) in other long-term debt -2 10 0 0 ----------- ----------- ----------- ----------- Net cash used in financing activities 696 992 573 704 ----------- ----------- ----------- ----------- Increase in Cash and cash equivalents 0 0 10 20 Cash and cash equivalents, beginning of period 31 31 21 1 =========== =========== =========== =========== Cash and cash equivalents, end of period 31 31 31 21 =========== =========== =========== =========== F-14 Notes to Financial Statements of IQ BATTERY Research & Development GmbH June 30, 1998, December 31, 1997 and 1995 (DM in thousands) 1 Description of Business iQ BATTERY Research & Development GmbH ("iQ BATTERY"), established in 1991, is developing a chargeable battery which allows an improved current output at low outside temperatures. The process engineering for this chargeable battery and the know-how is based an a patent acquired from the founding shareholders of iQ BATTERY Research and Development GmbH. Patents have been granted for Germany, thirteen other European countries and for the United States of America. International patents applications have been filed in nine additional countries. The Company's legal domicile is Floha, Germany, and it maintains a branch near Munich, where management has its offices. The Company intends to grant licenses for this process to the automotive and related industries in the future. 2 Summary of Significant Accounting Policies a) Basis of accounting The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements during the years ended December 31, 1997, 1996 and 1995, the Company incurred net losses of DM 1.703, DM 831, and DM 581 and had negative operating cash flows of DM 912, DM 553 and DM 1.059, respectively. The shareholders capital deficit of December 31, 1997 exceeded DM 1 million. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to obtain additional financing. Management is continuing its efforts to obtain additional financing as follows: Offering activities On April 29, 1998, iQ BATTERY and its prospective parent company iQ Power Technology Inc. entered into an agreement with a lead agent in Vancouver, Canada to attempt to raise seed financing of at least US$500,000 and, subsequently, to conduct an offering of US$3,000,000. Of these proceeds, US$500,000 will be placed in trust and advanced to iQ BATTERY periodically pursuant to a mutually agreed upon budget and achievement of certain milestones, among them a share exchange of iQ Power Technology Inc. common shares to the existing shareholders of iQ BATTERY. The net proceeds remaining from the offering will be placed in trust and released to iQ Power Technology Inc. at such time that iQ Power Technology Inc.'s common shares are eligible for quotation on the NASDAQ OTC system. The share exchange has not yet been completed. (See Note 14). F-15 Additional financing activities In February 1998, iQ BATTERY filed an application with "Technologia-Beteiligungs-Geselischaft mbH der Deutschen Ausgleichsbank" in Bonn for a participation of DM 3 million. A similar application was filed in July 1997 with Sachsische Aufbaubank GmbH in Dresden aiming at an investment grant of DM 1.7 million. Management believes that iQ BATTERY will obtain sufficient funds from the offering and special financing activities during the next twelve months to continue its operations. Furthermore, management believes that it would be possible to enter in the short run into agreements with other parties if the offering with iQ Power Technology Inc. cannot be completed. b) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. c) Equipment Equipment is stated at cost. Depreciation is recorded using the straight-line method based upon the useful lives of the assets, generally estimated at 3-5 years. When assets are sold or retired, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. d) Patent and Intangibles Patent and intangibles are recorded at cost. Amortization is recorded using the straight-line method based upon the shorter of the legal life or the useful lives of the assets, estimated at 10 years. Management regularly reviews the carrying value of patent and intangible based upon future anticipated cash flows. To date no impairment has been indicated. e) Long-term Liabilities to shareholders Liabilities due to shareholders including interest only in case the Company has generated sufficient net assets or liquidation proceeds are shown under non-current liabilities. f) Research and Development Research and development costs are expensed as incurred. g) Earnings per share Earnings per share are not presented because the Company is privately held. h) Income taxes Income taxes have been provided for in accordance with the asset and liability method. Deferred tax assets, net of valuation allowances, and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. F-16 i) Supplemental cash flow information Cash paid for interest and income taxes for the years ended December 31 was as follows: -------------------------------------------------------------------- December 31, 1997 1996 1995 -------------------------------------------------------------------- Interest 55.480 7.266 6.461 Income taxes 0 0 0 --------------------------------------------------------------------- j) Unaudited Interim Financial Statements The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, all adjustments (consisting of only normal recurring accruals) considered necessary to present fairly the consolidated financial position as of June 30, 1998 and the consolidated statements of income, stockholders' equity and cash flows for the six-month period ended June 30, 1998 have been included. 3 Equipment Equipment at December 31 was as follows: --------------------------------------------------------------------- December 31, 1997 1996 --------------------------------------------------------------------- Equipment-at cost 112 37 Less accumulated depreciation 37 20 ------------------------ ------------------------ Equipment-net 75 17 ======================== ======================== --------------------------------------------------------------------- Depreciation expense was DM 22 for the year ended December 31, 1997 (1996: DM 10; 1995: DM 9). 4 Patent and Other Intangibles During the year ended December 31, 1995, the Company purchased intangible assets, comprising a patent and registered design from shareholders of the Company. June 30 December 31 1998 (Unaudited) 1997 1996 Cost 400 400 400 Accumulated Amortization -140 -120 -80 ========== ======= ======= 260 280 320 ========== ======= ======= F-17 5 Shareholders' Equity The registered capital of the Company is DM 100, which has been fully paid in by the Company's shareholders. Such ownership shares are not negotiable. In addition, the Company has also received a total of DM 1.442 of capital from Atypical share agreements. The Atypical shareholders have certain information rights, but no voting powers. Losses are debited to the Atypical shareholders' capital account and in the profits of the Company as stipulated in the individual capital agreements. The Atypical shareholders are entitled to terminate the agreements at the end of 1999 or 2002 depending on their entrance dates; iQ BATTERY can terminate in 2001 or 2002. Generally the compensation to be paid upon termination is based on the applicable fair value of the company under exclusion of created goodwill. The following table presents the changes in shareholders deficit for the period from January 1, 1995 to December 31, 1997. Accumulated deficit Registered Atypical Voting capital capital Atypical shareholders Total ------- ------- -------- ------------ ----- January 1, 1995 100 100 -80 -374 -254 Capital contributions 587 587 Net loss -601 20 -581 December 31, 1995 100 687 -681 -354 -248 Capital contributions 215 215 Net loss -221 -610 -831 December 31, 1996 100 902 -902 -964 -864 Capital contributions 540 540 Net loss -540 -533 -1.073
Accumulated deficit Registered Atypical Voting capital capital Atypical shareholders Total ------- ------- -------- ------------ ----- December 31, 1997 100 1.442 -1.442 -1.497 -1.397 Capital Contributions 400 - - 400 Net Loss -400 -393 -793 June 30, 1998 (unaudited) 100 1.842 -1.842 -1.890 -1.790
6 Short-term Bank Debt Short-term bank debt is summarized as follows (amounts in DM): --------------------------------------------------------------------- December 31, 1997 1996 --------------------------------------------------------------------- Commerzbank AG, Ottobrunn 65 58 Dresdner Bank Attorney General, Dresden 21 24 Current portion of Behncke Bank GmbH, Hamburg 2 0 ------------- ------------ Total short-term bank debt 88 82 ============= ============ --------------------------------------------------------------------- The Commerzbank debt is personally guaranteed by four shareholders up to a maximum total of DM 320; any cash and deposits maintained with Commerzbank have been pledged. The Dresdner Bank debt is personally guaranteed by a shareholder up to a maximum total of DM 50. Interest expense for the short-term bank debt amounts to DM 22 for the year ended December 31, 1997 (1996: DM 5; 1995: DM 6). The weighted average interest rates were 11%. F-18 7 Long-term bank debt Long-term bank debt is determined as follows (amounts in DM): --------------------------------------------------------------------- December 31, 1997 1996 --------------------------------------------------------------------- Behncke Bank GmbH, Hamburg 10 0 Dresdner Bank Attorney General, Dresden 2 2 ------------- ----------- Long-term debt, excluding current portion 8 0 ============= =========== --------------------------------------------------------------------- The Behncke Bank debt is a financing loan for the telephone equipment in the Munich office. The loan was contracted in 1997 and the term is over five years. Current portion of the long term debt is DM 2 (1996: DM 0). Payments to be made for the years ending December 31 (amounts in DM): 1998 2 1999 2 2000 2 2001 2 2002 2 8 Non-current Liabilities due to Shareholders Non-current liabilities due to shareholders are summarized as follows (amounts in DM): --------------------------------------------------------------------- December 31, 1997 1996 --------------------------------------------------------------------- Due to other shareholders 400 400 Due to founding shareholders 155 155 ------------- ----------- Total, all non current 555 555 ============= =========== --------------------------------------------------------------------- Interest, which has to be repaid only in case the company has generated sufficient net assets or liquidation proceeds, has been accrued for 1997 (DM 31). For 1996 and prior years the shareholders have ultimately waived their interest claims on long-term debt. Payments are expected for the years ending December 31 (amounts in DM): 1999 95 2000 60 2001 0 2002 0 2003 400 9 Leases The Company has operating leases for certain equipment and facilities. Rental expense was DM 29 for the year ended December 31, 1997 (1996: DM 12; 1995: DM 9). As of December 31, 1997 obligations to make future minimum lease payments were as follows: F-19 Payments to be made in the years ending December 31 (DM): 1998 50 1999 43 2000 30 2001 4 2002 3 Thereafter 0 10 Income Taxes The provision for income taxes differed from the federal corporation income tax rate of 45% because no benefit was realized for the operating losses incurred in 1995, 1996 and 1997. As of December 31, 1997 and 1996, the Company had a total deferred tax asset relating to loss carryforwards of DM 736.241 and DM 363.385, respectively, which were reduced to zero by valuation allowances. The valuation allowance represents the amount of deferred tax assets that may not be realized based upon expectations of taxable income that are consistent with the Company's operating history. As of December 31, 1997, the Company had net operating loss carry forwards of approximately DM 1.193.804 for corporation income taxes and DM 2.615.528 for municipal trade taxes. Such loss carry forwards have no set expiry dates. 11 Fair Value of Financial Instruments Management has determined that the carrying values of cash, accounts receivable, accounts payable and short-term bank debt approximate fair value at December 31, 1997 and 1996 because of immediate or short-term maturities, The carrying amount reported for noncurrent liabilities due to shareholders approximates fair value because the interest rate of 5.5% provided for the accrued interest in 1997 approximates the market rate. 12 Related Party Transactions The Company paid management fees of DM 132 for the year ended December 31, 1997 (1996: DM 132; 1995: DM 132) to the company's two founding shareholders based on contracts dated October 11, 1991, March 28, 1992 and August 28, 1994. iQ BATTERY acquired patents and know-how improving the current output of a chargeable battery at low outside temperatures and the registered design "iQ" based on a contract dated March 15, 1995 from two shareholders and managing directors of iQ BATTERY. The intangibles purchased relate to a German patent, an international patent application as well as the registered design "iQ". The purchase price consists of a one time payment of DM 400. The DM 400 has not been paid and is not payable as long as the Company is in a deficit position. No other amounts are due as the Company has not realized any applicable revenues or royalties. 13 Commitments and Contingencies The Company is not currently involved in any legal proceedings in the ordinary course of business. 14 Letter of Intent On June 11, 1996 iQ BATTERY entered into a letter of intent with Mayon Management Corporation, Vancouver, Canada, pursuant to which Mayon will, subject to the terms of the letter, cause a company to F-20 be incorporated for the purpose of acquiring from iQ BATTERY the right to exploit in North America the patents and know how of iQ BATTERY against issuance of shares of the company to be incorporated. The name of the Company incorporated is iQ Power Technology Inc. (iQ Canada) having its registered office in Vancouver, British Columbia. On August 25, 1998, iQ Canada acquired all the issued and outstanding stock of iQ Battery in exchange for 10,000,000 common shares of iQ Canada. Pursuant to the terms of the Share Exchange Agreement, the former shareholders of iQ Battery, as a group, have a limited right to require iQ Canada to repurchase all of the iQ Canada common shares received by such shareholders (the "Put Option"). The Put Option is exercisable at and after the four month anniversary of the initial filing of a prospectus with the Securities and Exchange Commission if (i) iQ Canada has failed to complete an equity offering with gross proceeds of at least US$3 Million and (ii) such shareholders have repaid to iQ Canada the full amount of all funds iQ Canada has advanced or invested in iQ Battery. As a result of the business combination, the shareholders of iQ Battery will acquire control of the combined entity. Due to this acquisition of control, iQ Battery is identified as the acquiror (reverse acquisition) and the business combination will be accounted for under the purchase method. Pursuant to the terms of the Atypical Share Exchange Agreements, iQ Canada has also issued into escrow an additional 2,800,000 Common Shares against the deposit into escrow of the Atypical shares of iQ Battery held by twenty-one Atypical shareholders. The Common Shares and the Atypical Shares will be released from escrow to the Atypical shareholders and iQ Canada, respectively, on the completion of a minimum equity financing of US$3 Million. In the event the Put Option is exercised, the common shares and the Atypical shares will be released from escrow and returned to iQ Canada and the Atypical shareholders, respectively. F-21 Selected Unaudited Pro Forma Consolidated Financial Information The selected unaudited pro forma consolidated financial information for the Company set forth below gives effect to the acquisition of the shares of IQ Power Technology Inc. (IQ Canada) and IQ Battery Research and Development GmbH (IQ Germany). The historical financial information set forth below has been derived from and is qualified by reference to, the financial statements of the Company and IQ Germany and should be read in conjunction with those financial statements and the notes thereto included elsewhere herein. The June 30, 1998 pro forma balance sheet has been prepared as if the transactions described in Notes 1 and 2 had occurred on June 30, 1998, and represents the consolidation of the June 30, 1998 balance sheet of IQ Germany with the June 30, 1998 balance sheet of the Company. The pro forma statement of net loss for the six month period ended June 30, 1998 and the year ended December 31, 1997 has been prepared as if the transactions described in Notes 1 and 2 had occurred at the commencement of the relevant period. They represent the consolidation of the IQ Germany statements of loss for the six months ended June 30, 1998 and the year ended December 31, 1997 with the statement of loss of the Company for the six months ended June 30, 1998 and the year ended December 31, 1997. The pro forma consolidated financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions described in Notes 1 and 2 been effected on the dates indicated. Further, the pro forma financial information is not necessarily indicative of the results of operations or the financial position that may be obtained in the future. F-22 IQ POWER TECHNOLOGY INC. (a development stage company) Unaudited Pro Forma Consolidated Balance Sheet As at June 30, 1998 (Expressed in Thousands of United States Dollars) - ------------------------------------------------------------------------------------------------------------------------ Business Combination Pro forma after iQ Germany Capital capital June 30, Pro forma IQ Canada transaction transaction 1998 Acquisition Consolidated --------- ----------- ----------- ---- ----------- ------------ (Note 1) (Note 2) (Note 2) - ------------------------------------------------------------------------------------------------------------------------ ASSETS CURRENT Cash $ 78 $ 5,000 $ 4,318 $ 17 $ 4,335 (760) Accounts receivable 6 6 215 221 Prepaids and deposits 5 5 8 13 Receivable from shareholders - - 22 22 Promissory notes receivable 464 464 - $ (464) - - ------------------------------------------------------------------------------------------------------------------------ 553 4,240 4,793 262 (464) 4,591 EQUIPMENT, net - 56 56 Patent and intangibles, net - - - 150 - 150 ======================================================================================================================== $ 553 $ 4,240 $ 4,793 $ 468 $ (464) $ 4,797 ======================================================================================================================== LIABILITIES CURRENT Accounts payable $ 84 $ - $ 84 $ 294 $ - $ 378 Accrued liabilities 5 - 5 139 - 144 Share subscriptions 75 - 75 - - 75 Current portion of bank debt - - 132 - 132 Due to shareholders - - 36 - 36 Advances - - 458 (458) - - ------------------------------------------------------------------------------------------------------------------------ 164 - 164 1,059 (458) 765 BANK DEBT NON-CURRENT - - - 4 - 4 LIABILITIES DUE TO SHAREHOLDERS - - - 303 - 303 - ------------------------------------------------------------------------------------------------------------------------ 164 - 164 1,366 (458) 1,072 - ------------------------------------------------------------------------------------------------------------------------ SHAREHOLDERS EQUITY Capital stock 636 5,000 5,636 62 1,150 6,600 (248) Atypical paid in capital - - - 1,150 (1,150) - Cumulative foreign exchange adjustment - - - 153 - 153 Deficit (247) (760) (1,007) (2,263) 242 (3,028) - ------------------------------------------------------------------------------------------------------------------------ 389 4,240 4,629 (898) (6) 3,725 ======================================================================================================================== $ 553 $ 4,240 $ 4,793 $ 468 $ (464) $ 4,797 ========================================================================================================================
F-23 IQ POWER TECHNOLOGY INC. (a development stage company) Unaudited Pro Forma Consolidated Statement of Loss For the Six Month Period ended June 30, 1998 (Expressed in Thousands of United States Dollars) Business Combination - IQ Germany ---------------------------------------- Pro forma IQ Canada June 30, 1998 Acquisition Consolidated --------- ------------- ------------ ------------ (Note 2) OPERATING EXPENSES Research and development grants $ - $ 283 $ 294 General administrative and other expenses 101 62 163 - -------------------------------------------------------------------------------- (101) (356) (457) INTEREST INCOME - 1 1 INTEREST AND OTHER FINANCE EXPENSE - (7) (7) - -------------------------------------------------------------------------------- NET LOSS FOR THE PERIOD $ (101) $ (362) $ (463) - -------------------------------------------------------------------------------- Loss per share $ (0.04) $ (0.03) - -------------------------------------------------------------------------------- Weighted average common shares outstanding 2,286,461 15,086,461 - -------------------------------------------------------------------------------- F-24 IQ POWER TECHNOLOGY INC. (a development stage company) Unaudited Pro Forma Consolidated Statement of Loss For the Year Ended December 31, 1997 (Expressed in Thousands of United States Dollars) Acquisition of IQ Germany -------------------------------------- December 31, Pro forma IQ Canada 1997 Acquisition Consolidated --------- (Note 2) ----------- ------------ REVENUE $ - $ 27 $ 27 - -------------------------------------------------------------------------------- OPERATING EXPENSES Research and development grants - 528 528 General administrative 135 97 232 - -------------------------------------------------------------------------------- 135 625 760 - -------------------------------------------------------------------------------- INTEREST AND OTHER FINANCE EXPENSE - 46 46 - -------------------------------------------------------------------------------- 135 671 806 - -------------------------------------------------------------------------------- NET LOSS FOR THE PERIOD $ (135) $ (644) $ (779) - -------------------------------------------------------------------------------- Loss per share $ (0.14) $ (0.06) - -------------------------------------------------------------------------------- Weighted average common shares outstanding 950,294 13,750,294 - -------------------------------------------------------------------------------- F-25 IQ POWER TECHNOLOGY INC. Notes to the Unaudited Pro Forma Consolidated Financial Information (U.S. Dollars) - -------------------------------------------------------------------------------- 1. CAPITAL TRANSACTION The pro forma balance sheet reflects the public offering of 5,000,000 shares of common stock for net proceeds, estimated at a minimum of $4,240,000. The pro forma financial statements reflect the following adjustments related to the public offering and related transactions: Balance sheet - Cash Gross proceeds from offering $ 5,000,000 10% Agents' financing fee (500,000) ----------------------------------------------------------------------- Expenses of Offering (260,000) ----------------------------------------------------------------------- Increase in cash $ 4,240,000 ----------------------------------------------------------------------- Increase in shareholders' equity Share capital $ 5,000,000 Deficit (760,000) ----------------------------------------------------------------------- $ 4,240,000 ----------------------------------------------------------------------- 2. BUSINESS COMBINATION On August 25, 1998, the Company exchanged 10,000,000 common shares for 100% of the issued and outstanding voting stock of IQ Germany, The Company also issued 2,800,000 common shares in exchange for 100% of the Atypical shares of IQ Germany. As a result of these exchanges, IQ Canada will hold all the equity securities of IQ Germany. The acquisition has been accounted for using the purchase method. The acquiror involved in the business combination has been identified as IQ Germany, as it is the shareholders of IQ Germany who, as a group, has the ability to control the combined enterprise. The shares of the Company's common stock that were issued have been recorded at a fair value of $389,000 based on the fair market value of the Company's net assets acquired. Intercompany advances have been eliminated. F-26 IQ POWER TECHNOLOGY INC. (a development stage company) Notes to the Unaudited Pro Forma Consolidated Financial Information (Expressed in Thousands of United States Dollars) 2. BUSINESS COMBINATION (Continued) The effect of the business combination on the unaudited pro forma consolidated balance sheet at June 30, 1998 is summarized below: Purchase price Common stock held by IQ Power Technology Inc. shareholders $ 389 ----------------------------------------------------------------------- Allocation of purchase price Current assets 553 Current liabilities 164 ----------------------------------------------------------------------- $ 389 ======================================================================= Elimination of IQ Power Technology Inc. Share capital $ 636 Deficit (242) ----------------------------------------------------------------------- The effect of the business combination of the unaudited pro forma consolidated statements of loss is summarized below: Historical results of IQ Germany are summarized as follows: ----------------------------------------------------------------------- Period Ended ------------------------------------------- June 30 December 1998 1997 -------------------- ------------------ Revenue $ - $ 27 Operating expenses (356) (760) Interest income 1 - Interest expense (7) (46) $ (362) $ (779) ----------------------------------------------------------------------- F-27 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 1. Indemnification of Directors and Officers The By-laws of the Company provide that, subject to the Canada Business Corporations Act (the "CBCA"), the Company shall indemnify a director or officer of the Company, a former director or officer of the Company or a person who acts or acted at the Company's request as a director or officer of a body corporate of which the Company is or was a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses reasonably incurred by him in respect of certain actions or proceedings to which he is made a party by reason of his office, if he met certain specified standards of conduct and shall also indemnify any such person in such other circumstances as the CBCA or law permits or requires. Under the CBCA, except in respect of an action by or on behalf of the Company to procure a judgment in its favor, the Company may indemnify a present or former director or officer or a person who acts or acted at the Company's request as a director or officer of another corporation of which the Company is or was a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of his position with the Company and provided that the director or officer acted honestly and in good faith with a view to the best interests of the Company, and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his conduct was lawful. Such indemnification may be made in connection with a derivative action only with court approval. A director or officer is entitled to indemnification from the Company as a matter of right if he was substantially successful on the merits and fulfilled the conditions set forth above. The Company is considering obtaining Director's and Officer's Liability Insurance for its directors, but it does not currently maintain Director's and Officer's Liability Insurance. Reference is made to Item 3 for the undertakings of the Company with respect to indemnification for liabilities under the Securities Act of 1933, as amended. Item 2. Other Expenses of Issuance and Distribution Amount(1) SEC Registration Fee.................................. $ 1,390 NASD Filing Fee....................................... 1,000 Accounting Fees and Expenses.......................... 50,000 Legal Fees and Expenses............................... 75,000 Blue Sky Qualification Fees and Expenses.............. 15,000 Transfer and Custody Agent Fees....................... 10,000 Printing Expenses..................................... 4,000 Miscellaneous......................................... 103,610 Total............................................ 260,000 (1) All the amounts have been estimated except for the SEC and NASD fees. All of the above expenses will payable by the Company. II-1 Item 3. Undertakings Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC 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 whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant will: (1) for determining any liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) , or (4) or 497(h) under the Securities Act as part of this Registration Statement as of the time the SEC declared it effective; and (2) for determining any liability under the Securities Act, treat each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the Registration Statement, and that offering of the securities at that time as the initial bona fide offering of those securities. Item 4. Unregistered Securities Issued or Sold within One Year On December 1, 1998, the Company issued 536,200 Common Shares at a price of US$0.25 per share for an aggregate purchase price of $134,050. The Common Shares were issued to the following persons: Noble Larsen, Ronald Nichols, Erin French, Jeff French, Victor French, Margo French, Gregory A. Sasges, Dawn B. Sasges, Helga Fisher, Terry Fields, Bill Mairs, Christiane Bauer, Alexa Schluren and Janice Irving. The Common Shares were issued pursuant to an exemption from registration under Rule 504 of Regulation D under the Securities Act. On December 1, 1998, the Company issued Special Warrants to purchase 2,300,000 Common Shares without payment of additional consideration at US$0.25 per Special Warrant. The aggregate purchase price of the Special Warrants was $575,000. The names and identities of the persons or entities to whom the Common Shares and Special Warrants were issued are Haliun Hongorzul, Nuni Wee, Che Wia Ho, Majorie Polland and Highland Resources Ltd. The special warrants were issued pursuant to an exemption from registration under Rule 504 of Regulation D under the Securities Act. On August 25, 1998, the Company agreed to issue 12,800,000 common shares pursuant to the terms of a Share Exchange Agreement between iQ Canada, iQ Germany and all of the shareholders of iQ Germany, including holders of atypical shares of iQ Germany (the "Atypical Shareholders"). For purposes of the share exchange, each common share of iQ Canada was issued at a deemed price of US$0.25 per share based on the agreed upon value of the iQ Germany shares received by iQ Canada. The names of the shareholders of iQ Germany were Gunther Bauer, Peter E. Braun, Horst Dieter Braun, Karin Wittkewitz and Rainer Welke. The names and identities of persons who are Atypical Shareholders of iQ Germany were Eckehard Endler, Falk Von Craushaar, Thea and Constantin Von Walthausen, Steffen Tschirch, Rainer Welke, Manfred Plesker, Karl Schneider, Dr. Ellen Riep, Annett Heyde, Klaus Suhl, Herbert Rachny, Lidia Bartkowiek-Rachny, Dr. Monika Gottwald, Herman Dickschat, Thomas Peine, Christine Staedecke/Peine, Barbara Bergschmidt/Wolfgang Schmitt, Eduard Gabriel, Magnus Olsson, Johanna Wolff, Gerhard Trenz and Setrak Tokpinar. The Company issued the Common Shares pursuant to an exemption from registration available under Regulation S under the Securities Act. On July 1, 1998, the Company issued 300,000 Common Shares at a price of US$0.25 per share for an aggregate purchase price of US$75,000. The Common Shares were issued to Abu B. Khan and Gary O. Khan pursuant to an exemption from registration under Rule 504 of Regulation D under the Securities Act. II-2 On May 29, 1998, the Company issued 573,484 Common Shares at a price of US$0.25 per share for an aggregate purchase price of US$143,371. The Common Shares were issued to Mercator Profits Ltd. and Dunkirk Investments Ltd. pursuant to an exemption from registration under Rule 504 of Regulation D under the Securities Act. On December 31, 1997, the Company issued 1,969,740 Common Shares at a price of US$0.25 per share for an aggregate purchase price of US$492,435. The Common Shares were issued to Helmut Krack, Mayon Management Corp. and Mercator Profits Ltd. pursuant to an exemption from registration under Regulation S under the Securities Act. II-3 Item 5. Index to Exhibits Exhibit Number Exhibit Description - -------------- ------------------- 1.1* Form of Agency Agreement between iQ Power Technology Inc. and IPO Capital Corp. 2.1 Certificate of Incorporation dated December 20, 1994, for 3099458 Canada Inc. 2.2 Articles of Incorporation dated December 21, 1994, for 3099458 Canada Inc. 2.3 Certificate of Amendment dated May 9, 1997, together with Form 4, Articles of Amendment for iQ Power Technology Inc. 2.4 Certificate of Amendment dated March 31, 1998, for iQ Power Technology Inc. 2.5 By-law Number One General By-Law of iQ Power Technology Inc. dated December 31, 1997, as confirmed on June 30, 1998 3.1* Form of Common Stock Certificate 3.2 Form of Special Warrant 4.1* Form of Subscription Agreement to be used in connection with the offering 6.1 Form of Atypical Share Exchange Agreement 6.2 Share Exchange Agreement dated August 25, 1998, between iQ Power Technology Inc., iQ Battery Research and Development GmbH and the Shareholders of iQ Battery Research and Development GmbH 6.3 Pooling Agreement No. 1 dated August 25, 1998, between iQ Power Technology Inc., Montreal Trust Company of Canada and the Shareholders of iQ Power Technology Inc. 6.4 Form of Pooling Amendment Agreement dated August 15, 1998, between iQ Power Technology Inc., Montreal Trust Company of Canada and the Shareholders of iQ Power Technology Inc. 6.5 Management Agreement dated January 1, 1997, between 3099458 Canada Inc. and Mayon Management Corp. 6.6 Consulting Agreement dated August 25, 1998, between iQ Power Technology Inc. and Mayon Management Corp. 6.7 Employment Agreement dated August 31, 1998 with Dr. Gunther C. Bauer 6.8 Employment Agreement dated August 31, 1998 with Peter E. Braun 6.9 Employment Agreement dated September 1, 1998 with Gerhard K. Trenz 6.10 Form of Confidentiality Agreement between iQ Power Technology Inc. and certain Officers of the Company II-4 6.11 Lease Agreement by and between iQ Battery Research and Development GmbH and Spima Spitzenmanufaktur GmbH dated December 9, 1997 (Translated to English) 6.12 Commercial Lease Agreement by and between iQ Battery Research and Development GmbH and Josef Landthaler, GmbH dated May 9, 1996, as amended (Translated to English) 6.13 Form of iQ Germany Confidentiality Agreement (Translated to English) 6.14 Form of iQ Germany Employee Confidentiality and Nondisclosure Agreement (Translated to English) 6.15 Cooperation Agreement by and between iQ Battery Research and Development GmbH and BASF Aktiengesellschaft (Translated to English) 6.16 Confidentiality Agreement by and between iQ Battery Research and Development GmbH and Bayerische Motoren Werke dated July 29, 1997 (Translated to English) 6.17 Mutual Confidentiality Agreement among iQ Battery Research and Development GmbH, Akkumulatorenfabrik Moll GmbH & Co. KG, and Audi dated May 26, 1998 (Translated to English) 6.18 Confidentiality Agreement between iQ Battery Research and Development GmbH and Mercedes Benz Aktiengessellschaft dated March 21, 1997 (Translated to English) 6.19 Letter Agreement between iQ Battery Research and Development GmbH and Manufacturer of Batteries Moll Ltd. dated August 3, 1998 (Translated to English) 6.20 Mutual Confidentiality Agreement between iQ Battery Research and Development GmbH and Manufacturer of Batteries Moll dated September 8, 1997 (Translated to English) 6.21 Loan Contract by and between Karin Wittkewitz and iQ Battery Research and Development GmbH dated December 28, 1996 (Translated to English) 6.22 Contract Concerning Industrial Property Rights and Know How by and between Dieter Braun and Peter E. Braun and iQ Battery Research and Development GmbH dated March 15, 1995 (Translated to English) 6.23 Supplementary Contract to the Contract concerning Industrial Property Rights and Know How by and between H. Deiter Braun and Peter E. Braun and iQ Battery Research and Development GmbH dated August 16, 1996 (Translated to English) 6.24 Extension of Contract regarding Industrial Property Rights and Know How by and between Deiter Braun and Peter Braun and iQ Battery Research and Development GmbH dated September 20, 1996 (Translated to English) 6.25 Consulting Contract by and between iQ Battery Research and Development GmbH and Peter Braun dated August 28, 1994 (Translated to English) 6.26 Consulting Contract by and between iQ Battery Research and Development GmbH and Dr. Gunther Bauer dated October 30, 1996 (Translated to English) 6.27 Agreement (Debt Deferral) by and between iQ Battery Research and Development GmbH and Dieter Braun and Peter Braun dated December 27, 1996 (Translated to English) II-5 6.28 Agreement (Debt Deferral) by and between iQ Battery Research and Development GmbH and Gunther Bauer dated December 27, 1996 (Translated to English) 6.29 Waiver among H. Dieter Braun, Peter E. Braun, Gunther Bauer, Karin Wittkewitz and iQ Battery Research and Development GmbH dated December 19, 1997 (Translated to English) 6.30 Agreement by and between iQ Battery Research and Development GmbH and Dieter Braun and Peter Braun dated October 9, 1998 (Translated to English) 6.31 1998 Stock Option Plan 6.32 Form of Stock Option Agreement 6.33 License Agreement dated September 1, 1998 between iQ Power Technology Inc. and Mattalex Management Ltd. 6.34 Agreement Re Rights and Interests dated December 9, 1998 by and among the Company, H. Dieter Braun and Peter E. Braun 6.35 Trademark Assignment dated December 9, 1998 by and between the Company and H. Dieter Braun 6.36 Patent Assignment dated December 9, 1998 by and between the Company and H. Dieter Braun and Peter E. Braun 7.1 List of Material Foreign Patents 10.1 Consent of Deloitte & Touche, LLP, Chartered Accountants 10.2 Consent of Deloitte & Touche GmbH Wirtschaftsprufungsgesellschaft 10.3* Consent of Werbes Sasges & Company (included in Exhibit 11.1) 11.1* Legal Opinion of Werbes Sasges & Company 13.1 Form F-X Consent * To be filed by amendment II-6 SIGNATURES In accordance with 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 of filing on Form SB-1 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Unterhaching, Germany on December 7, 1998. iQ POWER TECHNOLOGY INC. By /s/ Peter E. Braun --------------------------------- Peter E. Braun, President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears in this Registration Statement in any capacity hereby constitutes and appoints Peter E. Braun and Russell French, and each of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and 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 the 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 all that the attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof. 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. Signatures Title Date - ---------- ----- ---- /s/ Peter E. Braun - ------------------------ President, Chief Executive December 7, 1998 Peter E. Braun Officer, and Director (Principal Executive Officer) /s/ Gerhard K. Trenz - ------------------------ Vice-President, Finance December 7, 1998 Gerhard K. Trenz (Principal Financial and Accounting Officer) /s/ Dr. Gunther C. Bauer - ------------------------ Vice-President, Research & December 7, 1998 Dr. Gunther C. Bauer Development and Director /s/ Russell French - ------------------------ Director December 8, 1998 Russell French II-7 EXHIBIT INDEX Exhibit Number Exhibit Description Page -------------- ------------------- ---- 1.1* Form of Agency Agreement between iQ Power Technology Inc. and IPO Capital Corp. 2.1 Certificate of Incorporation dated December 20, 1994, for 3099458 Canada Inc. 2.2 Articles of Incorporation dated December 21, 1994, for 3099458 Canada Inc. 2.3 Certificate of Amendment dated May 9, 1997, together with Form 4, Articles of Amendment for iQ Power Technology Inc. 2.4 Certificate of Amendment dated March 31, 1998, for iQ Power Technology Inc. 2.5 By-law Number One General By-Law of iQ Power Technology Inc. dated December 31, 1997, as confirmed on June 30, 1998 3.1* Form of Common Stock Certificate 3.2 Form of Special Warrant 4.1* Form of Subscription Agreement to be used in connection with the offering 6.1 Form of Atypical Share Exchange Agreement 6.2 Share Exchange Agreement dated August 25, 1998, between iQ Power Technology Inc., iQ Battery Research and Development GmbH and the Shareholders of iQ Battery Research and Development GmbH 6.3 Pooling Agreement No. 1 dated August 25, 1998, between iQ Power Technology Inc., Montreal Trust Company of Canada and the Shareholders of iQ Power Technology Inc. 6.4 Form of Pooling Amendment Agreement dated August 15, 1998, between iQ Power Technology Inc., Montreal Trust Company of Canada and the Shareholders of iQ Power Technology Inc. 6.5 Management Agreement dated January 1, 1997, between 3099458 Canada Inc. and Mayon Management Corp. 6.6 Consulting Agreement dated August 25, 1998, between iQ Power Technology Inc. and Mayon Management Corp. 6.7 Employment Agreement dated August 31, 1998 with Dr. Gunther C. Bauer 6.8 Employment Agreement dated August 31, 1998 with Peter E. Braun 6.9 Employment Agreement dated September 1, 1998 with Gerhard K. Trenz 6.10 Form of Confidentiality Agreement between iQ Power Technology Inc. and certain Officers of the Company 6.11 Lease Agreement by and between iQ Battery Research and Development GmbH and Spima Spitzenmanufaktur GmbH dated December 9, 1997 (Translated to English) 6.12 Commercial Lease Agreement by and between iQ Battery Research and Development GmbH and Josef Landthaler, GmbH dated May 9, 1996, as amended (Translated to English) 6.13 Form of iQ Germany Confidentiality Agreement (Translated to English) 6.14 Form of iQ Germany Employee Confidentiality and Nondisclosure Agreement (Translated to English) 6.15 Cooperation Agreement by and between iQ Battery Research and Development GmbH and BASF Aktiengesellschaft (Translated to English) 6.16 Confidentiality Agreement by and between iQ Battery Research and Development GmbH and Bayerische Motoren Werke dated July 29, 1997 (Translated to English) 6.17 Mutual Confidentiality Agreement among iQ Battery Research and Development GmbH, Akkumulatorenfabrik Moll GmbH & Co. KG, and Audi dated May 26, 1998 (Translated to English) 6.18 Confidentiality Agreement between iQ Battery Research and Development GmbH and Mercedes Benz Aktiengessellschaft dated March 21, 1997 (Translated to English) 6.19 Letter Agreement between iQ Battery Research and Development GmbH and Manufacturer of Batteries Moll Ltd. dated August 3, 1998 (Translated to English) 6.20 Mutual Confidentiality Agreement between iQ Battery Research and Development GmbH and Manufacturer of Batteries Moll dated September 8, 1997 (Translated to English) 6.21 Loan Contract by and between Karin Wittkewitz and iQ Battery Research and Development GmbH dated December 28, 1996 (Translated to English) 6.22 Contract Concerning Industrial Property Rights and Know How by and between Dieter Braun and Peter E. Braun and iQ Battery Research and Development GmbH dated March 15, 1995 (Translated to English) 6.23 Supplementary Contract to the Contract concerning Industrial Property Rights and Know How by and between H. Deiter Braun and Peter E. Braun and iQ Battery Research and Development GmbH dated August 16, 1996 (Translated to English) 6.24 Extension of Contract regarding Industrial Property Rights and Know How by and between Deiter Braun and Peter Braun and iQ Battery Research and Development GmbH dated September 20, 1996 (Translated to English) 6.25 Consulting Contract by and between iQ Battery Research and Development GmbH and Peter Braun dated August 28, 1994 (Translated to English) 6.26 Consulting Contract by and between iQ Battery Research and Development GmbH and Dr. Gunther Bauer dated October 30, 1996 (Translated to English) 6.27 Agreement (Debt Deferral) by and between iQ Battery Research and Development GmbH and Dieter Braun and Peter Braun dated December 27, 1996 (Translated to English) 6.28 Agreement (Debt Deferral) by and between iQ Battery Research and Development GmbH and Gunther Bauer dated December 27, 1996 (Translated to English) 6.29 Waiver among H. Dieter Braun, Peter E. Braun, Gunther Bauer, Karin Wittkewitz and iQ Battery Research and Development GmbH dated December 19, 1997 (Translated to English) 6.30 Agreement by and between iQ Battery Research and Development GmbH and Dieter Braun and Peter Braun dated October 9, 1998 (Translated to English) 6.31 1998 Stock Option Plan 6.32 Form of Stock Option Agreement 6.33 License Agreement dated September 1, 1998 between iQ Power Technology Inc. and Mattalex Management Ltd. 7.1 List of Material Foreign Patents 10.1 Consent of Deloitte & Touche, LLP, Chartered Accountants 10.2 Consent of Deloitte & Touche GmbH Wirtschaftsprufungsgesellschaft 10.3* Consent of Werbes Sasges & Company (included in Exhibit 11.1) 11.1* Legal Opinion of Werbes Sasges & Company 13.1 Form F-X Consent * To be filed by amendment EX-2.1 2 CERTIFICATE OF INCORPORATION Exhibit 2.1 CERTIFICATE OF INCORPORATION CANADA BUSINESS CORPORATIONS ACT 3099458 CANADA INC. __________________________ Name of corporation I hereby certify that the above-named corporation, the articles of incorporation of which are attached, was incorporated under the Canada Business Corporations Act. December 20, 1994 Date of Incorporation (Signed) Director December 21, 1994 MCCARTHY TETRAULT ATTN: ANGELINE C. DUNCAN 275 SPARKS SUITE 1000 OTTAWA, ONT K1R 7X9 Re - 3099458 CANADA INC. Enclosed herewith is the document issued in the above matter. A notice of issuance of CBCA documents will be published in the Canada Corporations Bulletin. A notice of issuance of CCA documents will be published in the Canada Corporations Bulletin and the Canada Gazette. IF A NAME OR CHANGE OF NAME IS INVOLVED, THE FOLLOWING CAUTION SHOULD BE OBSERVED: This name is available for use as a corporate name subject to and conditional upon the applicants assuming full responsibility for any risk of confusion with existing business names and trade marks (including those set out in the relevant NUANS search report(s)). Acceptance of such responsibility will comprise an obligation to change the name to a dissimilar one in the event that representations are made and established that confusion is likely to occur. The use of any name granted is subject to the laws of the jurisdiction where the company carries on business. For the Director General, Corporations Directorate EX-2.2 3 ARTICLES OF INCORPORATION Exhibit 2.2 Consumer and Corporate Affairs Canada Canada Business Corporations Act FORM 1 ARTICLES OF INCORPORATION (SECTION 6) 1. Name of corporation: 3099458 CANADA, INC. 2. The place in Canada where the registered office is to be situated: The Municipality of Metropolitan Toronto in the Province of Ontario. 3. The classes and any maximum number of shares that the corporation is authorized to issue: The Corporation is authorized to issue an unlimited number of common shares, the rights, privileges, restrictions and conditions of which are set out in the annexed Schedule 1 which is incorporated in this form. 4. Restrictions, if any, on share transfers: The annexed Schedule 2 is incorporated in this form. 5. Number (or minimum and maximum number) of directors: Minimum of 1 and maximum of 10. 6. Restrictions, if any, on business the corporation may carry on: There are no restrictions. 7. Other provisions, if any: The annexed Schedule 3 is incorporated in this form. 8. Incorporators: Name: CARTAN LIMITED Address: Suite 4700, Toronto Dominion Bank Tower, Toronto-Dominion Centre, Toronto, Ontario M5K 1E6 Signature: CARTAN LIMITED Per _______________________ Vice-President ----------------------- Vice-President For Departmental Use Only - Corporation No.: 309945-8 Filed: December 21, 1994 -1- SCHEDULE 1 ARTICLES OF INCORPORATION (1) The rights, privileges, restrictions and conditions attaching to the common shares are as follows: (a) Payment of Dividends: The holders of the common shares shall be entitled to receive dividends if, as and when declared by the board of directors of the Corporation out of the assets of the Corporation properly applicable to the payment of dividends in such amounts and payable in such manner as the board of directors may from time to time determine. Subject to the rights of the holders of any other class of shares of the Corporation entitled to receive dividends in priority to or rateably with the holders of the common shares, the board of directors may in their sole discretion declare dividends on the common shares to the exclusion of any other class of shares of the Corporation. (b) Participation upon Liquidation, Dissolution or Winding-up: In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the holders of the common shares shall, subject to the rights of the holders of any other class of shares of the Corporation entitled to receive the assets of the Corporation upon such a distribution in priority to or rateably with the holders of the common shares, be entitled to participate rateably in any distribution of the assets of the Corporation. (c) Voting Rights: The holders of the common shares shall be entitled to receive notice of and to attend all annual and special meetings of the shareholders of the Corporation and to 1 vote in respect of each common share held at all such meetings. -2- SCHEDULE 2 ARTICLES OF INCORPORATION No share in the capital of the Corporation shall be transferred without the consent of the directors expressed by the votes of a majority of the directors present at a meeting of the directors or by an instrument or instruments in writing signed by a majority of the directors. -3- SCHEDULE 3 ARTICLES OF INCORPORATION (1) The number of shareholders of the Corporation, exclusive of persons who are in its employment and exclusive of persons who, having been formerly in the employment of the Corporation, were, while in that employment and have continued after the termination of that employment to be, shareholders of the Corporation, is limited to not more than 50, 2 or more persons who are the joint owners of 1 or more shares being counted as 1 shareholder. (2) Any invitation to the public to subscribe for securities of the Corporation is prohibited. (3) The actual number of directors within the minimum and maximum number set out in paragraph 5 may be determined from time to time by resolution of the directors. Any vacancy among the directors resulting from an increase in the number of directors as so determined may be filled by resolution of the directors. -4- EX-2.3 4 CERTIFICATE OF AMENDMENT Exhibit 2.3 CERTIFICATE OF AMENDMENT CANADA BUSINESS CORPORATIONS ACT IQ Power Technology Inc. 309945-8 ------------------------- Name of corporation I hereby certify that the articles of the above-named corporation were amended (a) under section 13 of the Canada Business Corporations Act in accordance with the attached notice; (b) under section 27 of the Canada Business Corporations Act as set out in the attached articles of amendment designating a series of shares; (c) under section 179 of the Canada Business Corporations Act as set out in the attached articles of amendment; (d) under section 191 of the Canada Business Corporations Act as set out in the attached articles or reorganization. (Signed) Director FORM 4 ARTICLES OF AMENDMENT (SECTION 27 OR 177) 1. 3099458 Canada Inc. 2. Corporation No. 309945-8 3. The articles of the above-named corporation are amended as follows: 1. The name of the Company be changed from 3099458 Canada Inc. to IQ Power Technology Inc. 2. The place in Canada where the registered office is situated be changed from Toronto, Ontario to Vancouver, British Columbia. 3. The rights, privileges, restrictions and conditions attached to the Common Shares set forth in Schedule 1 attached to the Articles of Incorporation be repealed. 4. The restrictions on the transfer of shares set forth in Schedule 2 attached to the Articles of Incorporation be repealed. 5. The provisions set forth in Schedule 3 attached to the Articles of Incorporation be repealed. EX-2.4 5 CERTIFICATE OF AMENDMENT Exhibit 2.4 Industry Canada Certificate of Amendment Canada Business Corporations Act IQ Power Technology Inc. - --------------------------------------------------- Name of corporation-Denomination de la societe I hereby certify that the articles of the above-named corporation were amended (a) under section 13 of the Canada Business Corporations Act in accordance with the attached notice; (b) under section 27 of the Canada Business Corporations Act as set out in the attached articles of amendment designating a series of shares; (c) under section 179 of the Canada Business Corporations Act as set out in the attached articles of amendment; (d) under section 191 of the Canada Business Corporations Act as set out in the attached articles of reorganization. March 31, 1998 Director Date of Amendment CANADA BUSINESS CORPORATIONS ACT FORM 4 ARTICLES OF AMENDMENT (SECTION 27 OR 171) 1 - Name of Corporation - Denomination de la societe IQ POWER TECHNOLOGY INC. 3 - The articles of the above-named corporation are amended as follows: Pursuant to section 173(1)(o) of the Canada Business Corporations Act, Article 7 is amended to provide that the Directors may appoint one or more directors who shall hold office for a term expiring not later than the close of the next annual meeting of shareholders provided further that the total number of directors so appointed may not exceed one-third of the number of directors elected at the previous annual meeting of shareholders. Date Description of Office March 27, 1998 President EX-2.5 6 BY-LAWS Exhibit 2.5 BY-LAW NUMBER ONE GENERAL BY-LAW OF IQ POWER TECHNOLOGY INC. _________________ TABLE OF CONTENTS PART SECTION SUBJECT 1 INTERPRETATION 1.01 Definitions 2 BUSINESS OF THE CORPORATION 2.01 Registered Office 2.02 Corporate Seal 2.03 Financial Year 2.04 Execution of Instruments 2.05 Banking Arrangements 2.06 Voting Rights In Other Bodies Corporate 3 BORROWING AND SECURITIES 3.01 Borrowing Power 3.02 Delegation 4 DIRECTORS 4.01 Number of Directors and Quorum 4.02 Qualification 4.03 Election And Term 4.04 Removal of Directors 4.05 Vacation of Office 4.06 Vacancies 4.07 Action By The Board 4.08 Canadian Majority 4.09 Meeting By Telephone 4.10 Place of Meetings 4.11 Calling of Meetings 4.12 Notice of Meeting 4.13 First Meeting Of New Board 4.14 Adjourned Meeting 4.15 Regular Meetings 4.16 Chairman 4.17 Votes To Govern 4.18 Conflict of Interest 4.19 Remuneration And Expenses 5 COMMITTEES 5.01 Committee Of Directors 5.02 Transaction Of Business 5.03 Advisory Committees 5.04 Procedures 6 OFFICERS 6.01 Appointment 6.02 Chairman Of The Board 6.03 Managing Director 6.04 President 6.05 Vice-President 6.06 Secretary 6.07 Treasurer 6.08 Powers and Duties Of Other Officers 6.09 Variation Of Powers And Duties 6.10 Term Of Office 6.11 Terms Of Employment And Remuneration 6.12 Conflict of Interest 6.13 Agents and Attorneys 6.14 Fidelity Bonds 7 PROTECTION OF DIRECTORS, OFFICERS AND OTHERS 7.01 Limitation Of Liability 7.02 Indemnity 7.03 Insurance 8 SHARES 8.01 Allotment 8.02 Commissions 8.03 Registration Of Transfer 8.04 Transfer Agents And Registrars 8.05 Lien For Indebtedness 8.06 Non-Recognition Of Trusts 8.07 Share Certificates 8.08 Replacement Of Share Certificates 8.09 Joint Shareholders 8.10 Deceased Shareholders 9 DIVIDENDS AND RIGHTS 9.01 Dividends 9.02 Dividend Cheques 9.03 Non-Receipt Of Cheques 9.04 Record Date For Dividends And Rights 9.05 Unclaimed Dividends save as aforesaid, words and expressions defined in the Act have the same meanings when used herein; and words importing the singular number include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders, and words importing persons include individuals, bodies corporate, partnerships, trusts and unincorporated organizations. PART 2 BUSINESS OF THE CORPORATION --------------------------- 2.01 Registered Office - The registered office of the Corporation shall be at ------------------ the place within Canada from time to time specified in the Articles and at such location therein as the Board may from time to time determine. 2.02 Corporate Seal - Until changed by the Board, the corporate seal of the --------------- Corporation shall be in the form impressed hereon. 2.03 Financial Year - Until changed by the Board, the financial year of the --------------- Corporation shall end on the last day of December of each and every year. 2.04 Execution Of Instruments - The corporate seal of the Corporation shall not ------------------------ be affixed to any instrument except in the presence of the following persons; and deeds, transfers, assignments, contracts, obligations, certificates and other instruments may be signed on behalf of the Corporation by the following persons: (i) any two Directors, or (ii) one of the Chairman of the Board, the President, the managing Director, a Director and a Vice-President together with one of the Secretary, the Treasurer, the Secretary-Treasurer, an Assistant Secretary, an Assistant Treasurer and an Assistant Secretary-Treasurer; or (iii) such person or persons as the Directors may from time to time by resolution appoint, and the said Directors, Officers, person or persons in whose presence the seal is so affixed to an instrument, shall sign such instrument. For the purpose of certifying under seal true copies of any document or resolution, the seal may be affixed in the presence of any one of the foregoing persons. 2.05 Banking Agreements - The banking business of the Corporation including, ------------------- without limitation, the borrowing of money and the giving of security therefor, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of the Board. Such banking business or any part thereof will be transacted under such agreements, instructions and delegations of powers as the Board may from time to time prescribe and authorize. 2.06 Voting Rights In Other Bodies Corporate - The signing Officers of the ------------------------------------------ Corporation may execute and deliver proxies and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights attaching to any securities held by the Corporation. Such instruments, certificates or other evidence shall be in favour of such person or persons as may be determined by the Officers executing such proxies or arranging for the issuance of voting certificates or such other evidence of the right to exercise such voting rights. In addition, the Board may from time to time direct the manner in which and the person or persons by whom any particular voting rights or class of voting rights may or shall be exercised. PART 3 BORROWING AND SECURITTES ------------------------ 3.01 Borrowing Power - Without limiting the borrowing powers of the Corporation --------------- as set forth in the Act, the Board may from time to time: (a) borrow money upon the credit of the Corporation; (b) issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the Corporation, whether secured or unsecured; (c) charge, mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable property of the Corporation, including book debts, rights, powers, franchises and undertakings, to secure any such bonds, debentures notes or other evidences of indebtedness or guarantee or any other present or future indebtedness or liability of the Corporation: and (d) to the extent permitted by the AM give a guarantee on behalf of the Corporation to secure performance of any present or future indebtedness, liabilities, or obligation of any person. Nothing in this section limits or restricts the borrowing of money by the Corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the Corporation. 3.02 Delegation - The Board may from time to time delegate to such one or more ---------- of the Directors and Officers of the Corporation as may be designated by the Board all or any of the powers conferred on the Board by section 3.01 or by the Act to such extent and in such manner as the Board shall determine at the time of each such delegation PART 4 DIRECTORS --------- 4.01 Number Of Directors And Quorum - Until changed in accordance with the Act, ------------------------------ the Board shall consist of not fewer than one (1) and not more than ten (10) Directors. Subject to section 4.08 and the provisions contained in this section, the quorum for the transaction of business at any meeting of the Board shall consist of a majority of Directors or such greater or lesser number of Directors as the Board may from time to time determine. If, within half an hour from the time appointed for the meeting of the Board, a quorum is not present, the meeting will stand adjourned to the same day in the next week, at the same time and place, and, if at the adjourned meeting a quorum is not present within 30 minutes from the time appointed for the meeting, the Director or Directors present will be a quorum. 4.02 Qualification - No person will be qualified for election as a Director if ------------- he is less than 18 years of age; if he is of unsound mind and has been so found by a court in Canada or elsewhere; if he is not an individual; or if he has the status of a bankrupt. A Director need not be a Shareholder. A majority of the Directors shall be resident Canadians unless the Corporation is a holding Corporation as defined in the Act. 4.03 Election And Term - The election of Directors shall take place at the first ----------------- meeting of Shareholders and at each annual meeting of Shareholders and all the Directors then in office shall retire but, if qualified, shall be eligible for re-election. The number of Directors to be elected at any such meeting shall if a maximum and a minimum number of Directors is authorized, be the number of Directors then in office unless the Directors or the Shareholders otherwise determine or shall, if a fixed number of Directors is authorized, be such fixed number. The election shall be by resolution. If an election of Directors is not held at the proper time, the incumbent Directors shall continue in office until their successors are elected. 4.04 Removal Of Directors - Subject to the provisions of the Act, the ---------------------- Shareholders may by resolution passed at a meeting specifically called for such purpose, remove any Director from office and the vacancy created by such removal may be filled at the same meeting, failing which, it may be filled by the Directors. 4.05 Vacation Of Office - A Director ceases to hold office when he dies; he is ------------------ removed from office by the Shareholders; he ceases to be qualified for election as a Director-, or his written resignation is sent or delivered to the Corporation, or, if a time is specified in such resignation, at the time so specified, whichever is later. 4.06 Vacancies - Subject to the Act, a quorum of the Board may fill a vacancy in --------- the Board, except a vacancy resulting from an increase in the minimum number of Directors or from a failure of the Shareholders to elect the minimum number of Directors. In the absence of a quorum of the Board, or if the vacancy has arisen from a failure of the Shareholders to elect the minimum number of Directors, the Board shall forthwith call a special meeting of Shareholders to fill the vacancy. If the Board fails to call such meeting or if there are no Directors then in office, any Shareholder may call the meeting. 4.07 Action By The Board - Subject to any unanimous Shareholder agreement, the ------------------- Board shall manage the business and affairs of the Corporation. Subject to sections 4.08 and 4.09, the powers of the Board may be exercised by resolution passed at a meeting at which a quorum is present or by resolution in writing signed by all the Directors entitled to vote on that resolution at a meeting of the Board. Where there is a vacancy in the Board, the remaining Directors may exercise all the powers of the Board, so long as a quorum remains in office. Where the Corporation has only one Director, that Director may constitute a meeting. 4.08 Canadian Majority - If the Corporation is not a holding corporation as ------------------ defined in the Act, the Board shall not transact business at a meeting, other than filling a vacancy in the Board, unless a majority of the Directors present are resident Canadians, except where: (a) a resident Canadian Director who is unable to be present approves in writing or by telephone or other communication facilities the business transacted at the meeting; and (b) a majority of resident Canadians would have been present had that Director been present at the meeting. 4.09 Meeting By Telephone - Except in the case of an emergency meeting referred -------------------- to in section 4.12 hereto, if all the Directors of the Corporation consent, a Director may participate in a meeting of the Board or of a committee of the Board by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a Director participating in such a meeting by such means is deemed to be present at that meeting. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the Board and of committees of the Board. In the event of an emergency meeting referred to in section 4.12 hereto, a Director may, without the unanimous consent of the Directors, participate in a meeting of the Board or of a committee of the Board by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a Director participating in such a meeting by such means is deemed to be present at that meeting. 4.10 Place Of Meetings - Meetings of the Board may be held at any place in or ------------------ outside Canada. 4.11 Calling of Meetings - Meetings of the Board shall be held from time to time ------------------- at such time and at such place as the Board, the Chairman of the Board, the managing Director, the President or any two Directors may determine. 4.12 Notice Of Meetings - Notice of the time and place of each meeting of the ------------------- Board shall be given in the manner provided in section 12.01 to each Director not less than one week before the time when the meeting is to be held save and except for when an emergency meeting of the Board is required, in which case notice of the time and place of such emergency meeting of the Board shall be given to each Director not less am forty-eight (48) hours before the time when the emergency meeting is to be held. A notice of a meeting of Directors need not specify the purpose of or the business to be transacted at the meeting except where the Act requires such purpose or business to be specified, including, if required by the Act, any proposal to: (a) submit to the Shareholders any question or matter requiring approval of the Shareholders, (b) fill a vacancy among the Directors or in the office of Auditor', (c) issue securities: (d) declare dividends; (e) purchase, redeem or otherwise acquire shares issued by the Corporation; (f) pay a commission for the sale of shares of the Corporation; (g) approve a management proxy circular, (h) approve a take-over bid circular or Directors' circular-, (i) approve annual financial statements; or (j) adopt amend or repeal by-laws. 4.13 First Meeting Of New Board - Provided a quorum of Directors is present, --------------------------- each newly elected Board may without notice hold its first meeting immediately following the meeting of Shareholders at which such Board is elected. 4.14 Adjourned Meeting - Notice of an adjourned meeting of the Board is not ------------------ required if the time and place of the adjourned meeting is announced at the original meeting. 4.15 Regular Meetings - The Board may appoint a day or days in any month or ----------------- months for regular meetings of the Board at a place and hour to be named. A copy of any resolution of the Board fixing the place and time of such regular meetings shall be sent to each Director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted thereat to be specified. 4.16 Chairman - The Chairman of any meeting of the Board shall be the first -------- mentioned of such of the following Officers as have been appointed and who is a Director and is present at the meeting: Chairman of the Board, Managing Director, President or a Vice-President. If no such Officer is present, the Directors present shall choose one of their number to be Chairman. 4.17 Votes To Govern - At all meetings of the Board every question shall be --------------- decided by the majority of the votes cast on the question. In case of an equality of votes the Chairman of the meeting shall be entitled to a second or casting vote. 4.18 Conflict Of Interest - A Director or Officer who is a party to, or who is a -------------------- Director or Officer of or has a material interest in a person who is a party to, a material contract or proposed material contract with the Corporation shall disclose the nature and extent of his interest at the time and in the manner provided by the Act. Any such contract or proposed contract shall be referred to the Board or Shareholders for approval even if such contract is one that in the ordinary course of the Corporation's business would not require approval by the Board or Shareholders, and a Director interested in a contract so referred to the Board shall not vote on any resolution to approve the same except as provided by the Act. 4.19 Remuneration And Expenses - Subject to an unanimous Shareholder agreement, ------------------------- the Directors shall be paid such remuneration for their services as the Board may from time to time determine. The Directors shall also be entitled to be reimbursed for travelling and other expenses properly incurred by them in attending meetings of the Board or a committee thereof. Nothing contained herein shall preclude any Director from serving the Corporation in any other capacity and receiving remuneration therefor. PART 5 COMMITTEES ---------- 5.01 Committee Of Directors - The Board may appoint a committee of Directors, ----------------------- however designated, and delegate to such committee any of the powers of the Board except those which pertain to items which, under the Act, a committee of Directors has no authority to exercise. A majority of the members of such committee shall be resident Canadians. 5.02 Transaction Of Business - Subject to the provisions of section 4.09, the ------------------------ powers of a committee of Directors may be exercised by a meeting of the committee at which a quorum is present or by resolution in writing signed by all members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetings of such committee may be held at any place in or outside of Canada. 5.03 Advisory Committees - The Board may from time to time appoint such other -------------------- committees as it may deem advisable, but the functions of any such other committees shall be advisory only. 5.04 Procedure - Unless otherwise determined by the Board, each committee shall --------- have power to fix its quorum at not less than a majority of its members, to elect its Chairman and to regulate its procedure. PART 6 OFFICERS -------- 6.01 Appointment - Subject to any unanimous Shareholder agreement, the Board may ----------- from time to time appoint a President, one or more Vice-President(s) (to which title may be added words indicating seniority or function), a Secretary, a Treasurer and such other Officers as the Board may determine, including one or more Assistants to any of the Officers so appointed. The Board may specify the duties of and, in accordance with this by-law and subject to the provisions of the Act, delegate to such Officers powers to manage the business and affairs of the Corporation. Subject to sections 6.02 and 6.03, an Officer may, but need not be, a Director and one person may hold more than one office. 6.02 Chairman Of The Board - The Board may from time to time also appoint a ---------------------- Chairman of the Board who shall be a Director. If appointed, the Board may assign to him any of the powers and duties that are by any provisions of this by-law assigned to the Managing Director or to the President; and he shall, subject to the provisions of the Act, have such other powers and duties as the Board may specify. During the absence or disability of the Chairman of the Board, his duties shall be performed and his powers exercised firstly by the Managing Director, if any, or secondly by the President. 6.03 Managing Director - The Board may from time to time also appoint a Managing ----------------- Director who shall be a resident Canadian and a Director. If appointed, he shall have general supervision of the business and affairs of the Corporation; and he shall, subject to the provisions of the AM have such other powers and duties as the Board may specify. During the absence or disability of the President, or if no President has been appointed, the Managing Director shall also have the powers and duties of that office. 6.04 President - If appointed, the President shall have general supervision of --------- the business of the corporation; and he shall have such other powers and duties as the Board may specify. During the absence or disability of the Managing Director, or if no Managing Director has been appointed, the President shall also have the powers and duties of that office. 6.05 Vice-President - A Vice-President shall have such powers and duties as the -------------- Board may specify. 6.06 Secretary - The Secretary shall attend and be the Secretary of all meetings --------- of the Board, Shareholders and committees of the Board and shall enter or cause to be entered in records kept for that purpose minutes of all proceedings thereat; he shall give or cause to be given, as and when instructed, all notices to Shareholders, Directors, Officers, Auditors and members of committees of the Board; he shall be the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Corporation and of all books, papers, records, documents and instruments belonging to the Corporation, except w ' hen some other Officer or agent has been appointed for that purpose; and he shall have such other powers and duties as the Board may specify. 6.07 Treasurer - The Treasurer shall keep proper accounting records in --------- compliance with the Act and shall be responsible for the deposit of money, the safekeeping of securities and the disbursement of the funds of the Corporation; he shall render to the Board whenever required an account of all his transactions as Treasurer and of the financial position of the Corporation; and he shall have such other powers and duties as the Board may specify. 6.08 Powers and Duties Of Other Officers - The powers and duties of all other ------------------------------------- Officers shall be such as the terms of their engagement call for or as the Board may specify. Any of the powers and duties of an Officer to whom an Assistant has been appointed may be exercised and performed by such an Assistant, unless the Board otherwise directs. 6.09 Variation Of Powers And Duties - The Board may from time to time and ---------------------------------- subject to the provisions of the AM vary, add to or limit the powers and duties of any Officer. 6.10 Term Of Office - The Board, in its discretion, may remove any Officer of -------------- the Corporation, without prejudice to such Officer's rights under any employment contract. Otherwise each Officer appointed by the Board shall hold office until his successor is appointed, or until his earlier termination. 6.11 Terms Of Employment and Remuneration - The terms of employment and the -------------------------------------- remuneration of an Officer appointed by the Board shall be settled by it from time to time. 6.12 Conflict Of Interest - An Officer shall disclose his interest in any ---------------------- material contract or proposed material contract with the Corporation in accordance with section 4.18. 6.13 Agents And Attorneys - The Board shall have power from time to time to ---------------------- appoint agents or attorneys for the Corporation in or outside Canada with such powers of management or otherwise (including the powers to sub-delegate) as may be thought fit. 6.14 Fidelity Bonds - The Board may require such Officers, employees and agents -------------- of the Corporation as the Board deems advisable to furnish bonds for the faithful discharge of their powers and duties, in the form and with the surety as the Board may from time to time determine. PART 7 PROTECTION OF DIRECTORS, OFFICERS AND OTHERS -------------------------------------------- 7.01 Limitation Of Liability - Every Director or Officer of the Corporation in ----------------------- exercising his powers and discharging his duties shall act honestly and in good faith with a view to the best interests of the Corporation and exercise care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to the foregoing, no Director or Officer will be liable for the acts, receipts, neglects or defaults of any other Director, Officer or employee, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon which any of the monies of the Corporation shall be invested, or for loss or damage arising from the bankruptcy, insolvency or tortious acts of any person with whom any of the monies, securities or effects of the Corporation shall be deposited, or for any loss occasioned by any error of judgment or oversight on his part, or for any other loss, damage or misfortune whatever which shall happen in the execution of his duties of his office or in relation thereto; provided that nothing herein shall relieve any Director or Officer from the duty to act in accordance with the provisions of the Act and the regulations thereunder or from liability for ant breach thereof. 7.02 Indemnity - Subject to the limitations contained in the Act, the --------- Corporation shall indemnify a Director or Officer, a former Director or Officer, or a person who acts or acted at the Corporation's request as a Director or Officer of a body corporate of which the Corporation is or was a Shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a Director or Officer of the Corporation or such body corporate, if: (a) he acted honestly and in good faith and with a view to the best interests of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he has reasonable grounds for believing that his conduct was lawful. The Corporation shall also indemnify such person in such other circumstances as the Act permits or requires. 7.03 Insurance - The Corporation may purchase and maintain insurance for the --------- benefit of any person referred to in section 7.02 against such liabilities and in such amounts as the Board may from time to time determine. PART 8 SHARES ------ 8.01 Allotment - The Board may from time to time allot or grant options to --------- purchase the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the Board shall determine, provided that no share shall be issued until it is fully paid as provided by the Act. 8.02 Commissions - The Board may from time to time authorize the Corporation to ----------- pay a commission to any person in consideration of his purchasing or agreeing to purchase shares of the Corporation, whether from the Corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares. 8.03 Registration Of Transfers - Subject to the provisions of the Act, no --------------------------- transfer of shares shall be registered in a securities register except upon presentation of the certificate representing such shares with an endorsement which complied with the Act, made thereon or delivered therewith duly executed by an appropriate person as provided by the Act, together with such reasonable assurance that the endorsement is genuine and effective as the Board may from time to time prescribe, upon payment of all applicable taxes and any fees prescribed by the Board, upon compliance with such restrictions on transfer, if any, as are authorized by the articles and upon satisfaction of any lien referred to in section 8.05. 8.04 Transfer Agents And Registrars - The Board may from time to time appoint -------------------------------- one or more agents to maintain, in respect of each class of securities of the Corporation issued by it in a registered form, a central securities register and one or more branch securities registers. Such a person may be designated as Transfer Agent or registrar according to his functions and one person may be designated both registrar and Transfer Agent. The Board may at any time terminate such appointment 8.05 Lien For Indebtedness - If the articles provide that the Corporation shall --------------------- have a lien on shares registered in the name of a Shareholder indebted to the Corporation, such lien may be enforced, subject to any other provision of the articles and to any unanimous Shareholder agreement, by the sale of the shares thereby affected or by any other action, suit, remedy or proceeding authorized or permitted by law or by equity and, pending such enforcement, the Corporation may refuse to register a transfer of the whole or any part of such shares. 8.06 Non-recognition Of Trusts - Subject to the provisions of the Act, the -------------------------- Corporation may treat as absolute owner of any share the person in whose name the share is registered in the securities register as if that person had full legal capacity and authority to exercise all rights of ownership, irrespective of any indication to the contrary through knowledge or notice or description in the Corporation's records or on the share certificate. 8.07 Share Certificates - Every holder of one or more shares of the Corporation ------------------- shall be entitled, at his option, to a share certificate, or to a nontransferable written acknowledgment of his right to obtain a share certificate, stating the number and class or series of shares held by him as shown on the securities register. Share certificates and acknowledgments of a Shareholder's right to a share certificate, respectively, shall be in such form as the Board shall from time to time approve. Any share certificate shall be signed in accordance with section 2.04 and need not be under the corporate seal; provided that, unless the Board otherwise determines, certificates representing shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar. The signature of one of the signing Officers or, in the case of share certificates which are not valid unless countersigned by or on behalf of a transfer agent and/or registrar, the signatures of both signing Officers, may be printed or mechanically reproduced in facsimile upon share certificates any every such facsimile signature shall for all purposes be deemed to be the signature of the Officer whose signature it reproduces and shall be binding upon the Corporation. A share certificate executed as aforesaid shall be valid notwithstanding that one or both of the Officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate. 8.08 Replacement Of Share Certificates - The Board or any Officer or agent ----------------------------------- designated by the Board may in its or his discretion direct the issue of a new share certificate in lieu of and upon cancellation of a share certificate that has been mutilated or in substitution for a share certificate claimed to have been lost, destroyed or wrongfully taken upon payment of such fee, not exceeding Three Dollars ($3.00), and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the Board may from time to time prescribe, whether generally or in any particular case. 8.09 Joint Shareholders - If two or more persons are registered as joint holders ------------------ of any share, the Corporation shall not be bound to issue more than one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such share. 8.10 Deceased Shareholders - In the event of the death of a holder, or of one of --------------------- the joint holders, of any share, the Corporation shall not be required to make any entry in the securities register in respect thereof or to make payment of any dividends thereon except upon production of all such documents as may be required by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents. PART 9 DIVIDENDS AND RIGHTS -------------------- 9.01 Dividends - Subject to the provisions of the Act, the Board may from time --------- to time declare dividends payable to the Shareholders according to their respective rights and interest in the Corporation. Dividends may be paid in money or property or by issuing fully paid shares of the Corporation. 9.02 Dividend Cheques - A dividend payable in cash shall be paid by cheque drawn ---------------- on the Corporation's bankers or one of them to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at his recorded address, unless such holder otherwise directs. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at their recorded address. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. 9.03 Non-Receipt Of Cheques - In the event of non-receipt of any dividend cheque ---------------------- by the person to whom it was sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as the Board may from time to time prescribe, whether generally or in any particular case. 9.04 Record Date For Dividends And Rights - The Board may fix in advance a date, ------------------------------------ preceding by not more than Fifty (50) days, the date for the payment of any dividend or the date for the issue of any warrant or other evidence of the right to subscribe for securities of the Corporation, as a record date for the determination of the persons entitled to receive payment of such dividend or to exercise the right to subscribe for such securities, and notice of any record date shall be given not less than Fourteen (14) days before such record date, in the manner provided by the Act. If no record date is so fixed, the record date for the determination of the persons entitled to receive payment of any dividend or to exercise the right to subscribe for securities of the Corporation will be at the close of business on the day on which the resolution relating to such dividend or right to subscribe is passed by the Board. 9.05 Unclaimed Dividends - Any dividend unclaimed after a period of Six (6) -------------------- years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation. PART 10 MEETINGS OF SHAREHOLDERS ------------------------ 10.01 Annual Meetings - The Annual Meeting of Shareholders shall be held at such --------------- time in each year and, subject to section 10.03, at such place as the Board, the Chairman of the Board, the Managing Director or the President may from time to time determine, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing Directors, appointing an Auditor and for the transaction of such other business as may properly be brought before the meeting. 10.02 Special Meetings - The Board, the Chairman of the Board, the Managing ----------------- Director or the President shall have power to call a special meeting of Shareholders at any time. 10.03 Place Of Meetings - Meetings of Shareholders shall be at the registered ----------------- office of the Corporation or elsewhere in the municipality in which the registered office is situated or, if the Board shall so determine, at some other place in Canada or, if all the Shareholders entitled to vote at the meeting so agree, at some place outside Canada. 10.04 Notice Of Meeting - Notice of the time and place of each meeting of ------------------- Shareholders shall be given in the manner provided in section 12.01 not less than Twenty-one (21) nor more than Fifty (50) days before the date of the meeting to each Director, to the Auditor and to each Shareholder who, at the close of the business on the record date for notice, if any, is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of Shareholders called for any purpose other than consideration of the financial statements and Auditor's report, election of Directors and reappointment of the incumbent Auditor shall state the nature of such business in sufficient detail to permit the Shareholder to form a reasoned judgment thereon and shall state the text of any special resolution to be submitted to the meeting. A Shareholder may in any manner waive notice of or otherwise consent to a meeting of Shareholders. 10.05 List Of Shareholders Entitled To Notice - For every meeting of --------------------------------------------- Shareholders, the Corporation shall prepare a list of Shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of shares held by each Shareholder entitled to vote at the meeting. If a record date for the meeting is fixed pursuant to section 10.06, the Shareholders listed shall be those registered at the close of business on such record date. If no record date is fixed, the Shareholders listed shall be those registered at the close of business on the day immediately preceding the day on which notice of the meeting is given, or where no such notice is given, the day on which the meeting is held. The list shall be available for examination by any Shareholder during usual business hours at the registered office of the Corporation or at the place where the central securities register is maintained and at the meeting for which the list was prepared. 10.06 Record Date For Notice - The Board may fix in advance a date, preceding ----------------------- the date of any meeting of Shareholders by not more than Fifty (50) days and not less than Twenty-one (21) days, as a record date for the determination of the Shareholders entitled to notice of the meeting, and notice of any such record date shall be given not less than Fourteen (14) days before such record date by newspaper advertisement in the manner provided in the Act. If no record date is so fixed, the record date for the determination of Shareholders entitled to notice of the meeting shall be at the close of business on the day immediately preceding the day on which the notice is. given, or if no notice is given, the day on which the meeting is held. 10.07 Meetings Without Notice - A meeting of Shareholders may be held without ------------------------ notice at any time and place permitted by the Act (a) if all the Shareholders entitled to vote thereat are present in person or represented by proxy or if those not present or represented by proxy waive notice of or otherwise consent to such meeting being held, and (b) if the Auditors and the Directors are present or waive notice of or otherwise consent to such meeting being held; so long as such Shareholders, Auditors or Directors are not attending for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. At such a meeting any business may be transacted which the Corporation at a meeting of Shareholders may transact If the meeting is held at a place outside Canada, Shareholders not present or represented by proxy, but who have waived notice of or otherwise consented to such meeting, shall also be deemed to have consented to the meeting being held at such place. 10.08 Chairman, Secretary And Scrutineers - The Chairman of any meeting of -------------------------------------- Shareholders shall be the first mentioned of such of the following Officers as have been appointed and who is present at the meeting: President, Managing Director, Chairman of the Board, or a Vice-President who is a Shareholder. If no such Officer is present and willing to act as Chairman at the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number or some other person present to be Chairman. If the Secretary of the Corporation is absent, the Chairman shall appoint some other person, who need not be a Shareholder, to act as Secretary of the meeting. If desired, one or more scrutineers, who need not be Shareholders, may be appointed by a resolution or by the Chairman with the consent of the meeting. 10.09 Persons Entitled To Be Present - The only persons entitled to be present ------------------------------- at a meeting of Shareholders shall be those entitled to vote thereat, the Directors and Auditors of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or by4aws to be present at the meeting. Any other person may be admitted only on the invitation of the Chairman of the meeting or with the consent of the meeting. 10.10 Quorum - A quorum for the transaction of business at any meeting of ------ Shareholders shall be two persons present in person, each being a Shareholder entitled to vote thereat or a duly appointed Proxyholder for an absent Shareholder so entitled. If a quorum is present at the opening of any meeting of Shareholders, the Shareholders present or represented by proxy may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. If a quorum. is not present at the opening of any meeting of Shareholders, the Shareholders present or represented by proxy may adjourn the meeting to a fixed time and place but may not transact any other business. 10.11 Right To Vote - Subject to the provisions of the Act as to authorized ------------- representatives of any other body corporate or association, at any meeting of Shareholders for which the Corporation has prepared the list referred to in section 10.05, every person who is named in such list shall be entitled to vote the shares shown opposite his name except to the extent that, where the Corporation has fixed a record date in respect of such meeting pursuant to section 10.06, such person has transferred any of his shares after such record date and the transferee, having produced properly endorsed certificates evidencing such shares or having otherwise established that he owns such shares, has demand not later than Ten (10) days before the meeting that his name be included in such list. In any such case, the transferee shall be entitled to vote the transferred shares at the meeting. At any meeting of Shareholders for which the Corporation has not prepared the list referred to in section 10.05, every person shall be entitled to vote at the meeting who at the time is entered in the securities register as the holder of one or more shares carrying the right to vote at such meeting. 10.12 Proxies - Every Shareholder entitled to vote at a meeting of Shareholders ------- may appoint a proxyholder, or one or more alternate proxyholders, who need not be Shareholders, to attend and act at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy. A proxy shall be in writing executed by the Shareholder or his attorney and shall conform to the requirements of the Act. In the case of a corporate Shareholder or an association, such Shareholders may authorized by resolution of its Directors or governing bodies, an individual to represent it at a meeting of Shareholder and such individual may exercise on the Shareholder's behalf, all the powers it could exercise if it were an individual Shareholder. The authority of such an individual shall be established by depositing with the Corporation, a certified copy of such resolution, or in such other manner as may be satisfactory to the Secretary of the Corporation or the Chairman of the Meeting. Any such proxyholder or representation need not be a Shareholder. 10.13 Time For Deposit Of Proxies - The Board may specify in a notice calling a --------------------------- meeting of Shareholders a time, preceding the time of such meeting by not more than Forty-eight (48) hours exclusive of nonbusiness days, before which time proxies to be used at such meeting must be deposited. A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice or, if no such time is specified in such notice, unless it has been received by the Secretary of the Corporation or by the Chairman of the meeting or any adjournment thereof prior to the time of voting. 10.14 Joint Shareholders - If two or more persons hold shares jointly, any one ------------------- of them present in person or represented by proxy at a meeting of Shareholders may, in the absence of the other or others, vote the shares; but if two or more of those persons are present in person or represented by proxy and vote, they shall vote as one the shares jointly held by them. 10.15 Votes To Govern - At a meeting of Shareholders every question shall, --------------- unless otherwise required by the articles or by-laws or by law, be determined by a majority of the votes cast on the question. In case of an equality of votes either upon a show of hands or upon a poll, the Chairman of the meeting shall be entitled to a second or casting vote. 10.16 Show Of Hands - Subject to the provisions of the Act, any question at a ------------- meeting of Shareholders shall be decided by a show of hands unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands every person who is present and entitled to vote shall have one vote. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the Chairman of the meeting that the vote upon the question has been carried or carried by a particular majority or not carried and an entry to that effect in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of the said question, and the result of the vote so taken shall be the decision of the Shareholders upon the question. 10.17 Ballots - On any question proposed for consideration at a meeting of ------- Shareholders, and whether or not a show of hands has been taken thereon, any Shareholder or proxyholder entitled to vote at the meeting may require or demand a ballot. A ballot so required or demanded shall be taken in such manner as the Chairman shall direct. A requirement or demand for a ballot may be withdrawn at any time prior to the taking of the ballot. If a ballot is taken each person present shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question, to that number of votes provided by the Act or the articles, and the result of the ballot so taken shall be the decision of the Shareholders upon the said question. 10.18 Adjournment - If a meeting of Shareholders is adjourned for less than ----------- Thirty (30) days, it shall not be necessary to give notice of the adjourned meeting, other than by announcement at the earliest meeting that it is adjourned. If a meeting of Shareholders is adjourned by one or more adjournments for an aggregate of Thirty (30) days or more, notice of the adjourned meeting shall be given as for an original meeting. 10.19 Resolution In Writing - A resolution in writing signed by all the ----------------------- Shareholders entitled to vote on that resolution at a meeting of Shareholders is as valid as if it had been passed at a meeting of the Shareholders unless a written statement with respect to the subject matter of the resolution is submitted by a Director or the Auditors in accordance with the Act. 10.20 Only One Shareholder - Where the Corporation has only one Shareholder or --------------------- only one holder of any class or series of shares, the Shareholder present in person or by proxy constitutes a meeting. PART 11 DIVISIONS AND DEPARTMENTS ------------------------- 11.01 Creation And Consolidation Of Divisions - The Board may cause the business --------------------------------------- and operations of the Corporation or any part thereof, to be divided or to be segregated into one or more divisions upon such basis, including without limitation, character or type of operation, geographical territory, product manufactured or service rendered, as the Board may consider appropriate in each case. The Board may also cause the business and operations of any such division to be further divided into sub-units and the business and operations of any such divisions or sub-units to be consolidated upon such basis as the Board may consider appropriate in each case. 11.02 Name Of Division - Any division or its sub-units may be designated by such ---------------- name as the Board may from time to time determine and may transact business under such name, provided that the Corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders for goods and services issued or made by or on behalf of the Corporation. 11.03 Officers Of Divisions - From time to time the Board, or if authorized by --------------------- the Board, the President, may appoint one or more Officers for any division, prescribe their powers and duties and settle their terms of employment and remuneration. The Board or, if authorized by the Board, the President, may remove at its or his pleasure any Officer so appointed, without prejudice to such Officer's rights under any employment contract. Officers of divisions of their sub-units shall not, as such, be Officers of the Corporation. PART 12 NOTICES ------- 12.01 Method Of Giving Notices - Any notice (which term includes any ---------------------------- communication or document) to be given (which term includes sent delivered or served) pursuant to the Act, the regulations thereunder, the articles, the by-laws or otherwise to a Shareholder, Director, Officer, Auditor or member of a committee of the Board shall be sufficiently given if delivered personally to the person to whom it is to be given or if delivered to his recorded address or if mailed to him at his recorded address by prepaid ordinary or air mail or it sent to him at his recorded address by any means of prepaid transmitted or recorded communication. A notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice so sent by any means of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch. The Secretary may change or cause to be changed the recorded address of any Shareholder, Director, Officer, Auditor or member of a committee of the Board in accordance with any information believed by him to be reliable. 12.02 Notice To Joint Shareholders - If two or more persons are registered as ----------------------------- joint holders of any share, any notice shall be addressed to all of such joint holders but notice to one of such persons shall be sufficient notice to all of them. 12.03 Computation Of Time - In computing the date when notice must be given -------------------- under any provision requiring a specified number of days' notice of any meeting or other event, the date of giving the notice will be excluded and the date of the meeting or other event shall be included. 12.04 Undelivered Notices - If a notices given to a Shareholder pursuant to -------------------- section 12.01 is returned on three consecutive occasions because he cannot be found, the Corporation shall not required to give any further notices to such Shareholder until he informs the Corporation in writing of his new address. 12.05 Omissions And Errors - The accidental omission to give any notice to any -------------------- Shareholder, Director, Officer, Auditor or member of a committee of the Board or the non-receipt of any notice by such person or any error in any notice not affecting the substance thereof shall not invalidate an action taken at any meeting held pursuant to such notice or otherwise founded thereon. 12.06 Persons Entitled By Death Or Operation Of Law - Every person who, by ------------------------------------------------- operation of law, transfer, death of a Shareholder or any other means whatsoever, shall become entitled to any share, shall be bound by every notice in respect of such share which shall have been duly given to the Shareholder from whom he derives his title to such share prior to his name and address being entered on the securities register (whether such notice was given before or after the happening of the event upon which he became so entitled) and prior to his furnishing to the Corporation the proof of authority or evidence of his entitlement prescribed by the Act. 12.07 Waiver Of Notice - Any Shareholder (or his duly appointed proxyholder), ---------------- Director, Officer, Auditor or member of a committee of the Board may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the regulations thereunder, the articles, the by-laws or otherwise and such waiver or abridgement, whether given before or after the meeting or other event of which notice is required to be given, shall cure any default in the giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of Shareholders or of the Board or of a committee which may be given in arty manner. PART 13 EFFECTIVE DATE -------------- 13.01 Effective Date - This by-law shall come into force when confirmed by the --------------- Shareholders in accordance with the Act. 13.02 Repeal - All previous by-laws of the Corporation, except such by-laws of ------ the Corporation as have been confirmed by the issue of supplementary letters patent, are repealed as of the coming into force of this by-law provided such repeal shall not affect the previous operation of any by-law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under or the validity of any contract or agreement made pursuant to any such by-law prior to its repeal. All Officers and persons acting under any by-law so repealed shall continue to act as if appointed under the provisions of this by-law and all resolutions of the Shareholders or Board with continuing effect passed under any repealed by-law shall continue good and valid except to the extent inconsistent with this by-law and until amended or repealed. The foregoing by-law was amended by the directors of the Corporation on the 31st day of December, 1997, and was confirmed without variation by the shareholders of the Corporation on the 30th day of June, 1998. (Signed) Secretary EX-3.2 7 FORM OF SPECIAL WARRANT Exhibit 3.2 FORM OF SPECIAL WARRANT iQ POWER TECHNOLOGY INC. (Incorporated under the Canada Business Corporations Act) NUMBER OF SPECIAL WARRANTS: RIGHT TO ACQUIRE: ___________ ______ Common Shares VOID AFTER 4:30 P.M., PACIFIC TIME, DECEMBER 31, 1998 SPECIAL WARRANTS AT A PRICE OF US$0.25 TO ACQUIRE COMMON SHARES OF IQ POWER TECHNOLOGY INC. EACH SPECIAL WARRANT SHALL BE EXCHANGEABLE, FOR NO ADDITIONAL CONSIDERATION ON OR BEFORE 4:30 P.M., PACIFIC TIME, DECEMBER 31, 1998. THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER RESTRICTIONS This is to certify that, for value received is entitled, without payment of any additional consideration, to be issued at any time before 4:30 p.m., Pacific time, December 31, 1998, the number of common shares of iQ Power Technology Inc. (the "Corporation") set out above, by surrendering to iQ Power Technology Inc. at Suite 708-A, 1111 West Hastings Street, Vancouver, British Columbia, V6E 2J3, this Warrant Certificate with a Notice of Exercise in the form set out on the reverse side hereof duly completed and executed. Each Special Warrant entitles the holder to receive one Common shares. The Special Warrants represented by this Certificate are subject to the terms and conditions referred to on the reverse hereof. The Special Warrants may be transferred by the Holder only in accordance with the terms and conditions of the Special Warrants. The Special Warrants may be exercised only at the offices iQ Power Technology Inc. at Suite 708-A, 1111 West Hastings Street, Vancouver, British Columbia, V6E 2J3. IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be executed. DATED at Vancouver, British Columbia as of the ____ day of _______________________, 199__. iQ POWER TECHNOLOGY INC. Per: - ---------------------------------------------------------- RUSSELL FRENCH, DIRECTOR TERMS AND CONDITIONS ATTACHED TO THE 1998 SPECIAL WARRANTS ISSUED BY IQ POWER TECHNOLOGY INC. ARTICLE ONE - INTERPRETATION - ---------------------------- Section 1.01 - Definitions Unless the subject matter or context is inconsistent herewith the terms and conditions herein referred to shall bear the following meanings: (a) "Company" means iQ Power Technology Inc. until a successor corporation is established in the manner prescribed in Article Seven, and thereafter "Company" shall mean such successor corporation. (b) "Company's Auditors" means an independent firm of accountants duly appointed as Auditors of the Company. (c) "Director" means a Director of the Company for the time being, and reference, without more, to action by the Directors means action by the Directors of the Company as a Board, or whenever duly empowered, action by an executive committee of the Board. (d) "herein", "hereby" and similar expressions refer to these Terms and Conditions; and the expression "Article" and "Section" followed by a number refer to the specified Article or Section of these Terms and Conditions. (e) "person" means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons having a similar meaning. (f) "shares" means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the shares; (g) "Warrants" means the Special Warrants of the Company issued and presently authorized, as set out in Section 2.01 hereof and for the time being outstanding. (h) "Warrant Holders" or "Holders" means the bearers of the Warrants for the time being. Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders. Section 1.02 - Interpretation Not Affected by Headings The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation thereof. Section 1.03 - Applicable Law The rights and restrictions attached to the Warrants shall be construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable thereto and shall be treated in all respects as British Columbia contracts. ARTICLE TWO - ISSUE OF WARRANTS - ------------------------------- Section 2.01 - Issue of 2,300,000 Special Warrants 2,300,000 Special Warrants are authorized to be issued by the Company entitling the holders thereof to acquire, without any further payment, an aggregate of 2,300,000 common shares of the Company (the "Shares"). Section 2.02 - Additional Warrants The Company may at any time and from time to time do further equity or debt financing and may issue additional shares, warrants or grant options or similar rights to purchase shares of its capital stock. Section 2.03 - Replacement of Lost Warrants (l) In case a Warrant shall become mutilated, lost, destroyed or stolen, the Company in its discretion may issue and deliver a new Warrant of like date and tenure as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant and the substituted Warrant shall be entitled to all benefits hereunder and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company. (2) The applicant for the issue of a new Warrant pursuant hereto shall bear the cost of the issue thereof and in case of loss, destruction or theft shall furnish to the Company such evidence of ownership and of loss, destruction or theft of the Warrant so lost, destroyed or stolen as shall be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion and shall pay the reasonable charges of the Company in connection therewith. Section 2.04 - Warrant Holder Not a Shareholder The holding of a Warrant shall not constitute the holder thereof a shareholder of the Company, nor entitle him to any right or interest in respect thereof except as in the Warrant expressly provided. ARTICLE THREE - OWNERSHIP AND TRANSFER - -------------------------------------- Section 3.01 - Exchange of Warrants (l) Warrants in any authorized denomination may, upon compliance with the reasonable requirements of the Company, be exchanged for Warrants in any other authorized denomination, of the same Sub-series and date of expiry entitling the holder thereof to acquire an equal aggregate number of Shares on the same terms as the Warrants so exchanged. (2) Warrants may be exchanged at the office of the Company. Any Warrants tendered for exchange shall be surrendered to the Company and canceled. Section 3.02 - Charges for Exchange On exchange of Warrants, the Company, except as otherwise herein provided, may charge a sum not exceeding $1.00 for each new Warrant issued; and payment of such charges and of any transfer taxes or governmental or other charges required to be paid shall be made by the party requesting such exchange. Section 3.03 - Ownership of Warrants The Company may deem and treat the bearer of any Warrant as the absolute owner of such Warrant for all purposes, and shall not be affected by any notice or knowledge to the contrary. The bearer of any Warrant shall be entitled to the rights evidenced by such Warrant free from all equities or rights of set-off or counterclaim between the Company and the original or any intermediate holder thereof and all persons may act accordingly and the receipt of any such bearer for the Shares issuable upon exercise thereof shall be a good discharge to the Company for the same and neither the Company shall be bound to inquire into the title of any such bearer. Section 3.04 - Transfer of Warrants Provided that all applicable securities laws and stock exchange rules are complied with, any Warrant holder may transfer its Warrants in accordance with such reasonable regulations as the Company shall prescribe. Section 3.05 - Notice to Warrant Holders Unless herein otherwise expressly provided, any notice to be given hereunder to Warrant holders shall be deemed to be validly given if such notice is published once in the City of Vancouver, such publication to be made in a daily newspaper of general circulation in such City in the English language. Any notice so given shall be deemed to have been given on the date on which it had been published. ARTICLE FOUR - EXERCISE OF WARRANTS - ----------------------------------- Section 4.01 - Method of Exercise of Warrants The right to acquire Shares conferred by a Warrant may be exercised by the holder of such Warrant surrendering it, with a duly completed and executed subscription in the form attached thereto, to the Company at its principal office in the City of Vancouver. Each Special Warrant shall be exchangeable, without additional payment, into one fully paid and non-assessable common share of the Company on the following basis: 1. Upon the voluntary exchange of the Special Warrants into common shares as evidenced by the delivery of written notice thereof to the Company and the Trustee by the Special Warrant holder; or 2. Upon the deemed exchange of the Special Warrants into common shares in accordance with the following provisions: a. The first 40% of the Special Warrants shall be deemed exchanged into common shares upon the later of: i. August 15, 1998, ii. Closing of the issue of the Special Warrants, and iii. the acquisition of the issued and outstanding shares of iQ Battery Research & Development GmbH; b. The next 30% of the Special Warrants shall be deemed exchanged into common shares upon the later of: i. August 30, 1998, ii. the deemed exchange of the first 40% of the Special Warrants into common shares, and iii. the submission of a Form 1A or Form SB 1 to the United States Securities and Exchange Commission by the Company; c. The final 30% of the Special Warrants shall be deemed exchanged into common shares upon the later of: i. September 15, 1998, ii. the deemed exchange of the first 70% of the Special Warrants into common shares, and iii. the filing of a Form 20-F or Form 8A with the United States Securities and Exchange Commission by the Company; and d. All Special Warrants outstanding at the Expiry Time (as defined below) shall be deemed to have been exchanged into common shares immediately prior to such time. The holders of the Special Warrants shall have the right to require the Company to repurchase all and not less than all of the Special Warrants not yet exchanged into common shares of the Company (the "Repurchase Rights") for their initial Subscription Price at any time prior to the earlier of the exchange or deemed exchange of the Special Warrants into common shares of the Company and 4:30 p.m. (Pacific Standard Time) December 31, 1998 (the "Expiry Time") by providing written notice to the Company and the Special Warrant Trustee (IPO Capital Corp.) of the exercise of these rights and the number of Special Warrants to be repurchased. For the purpose of any deemed exchange of Special Warrants, written notice by a duly authorized officer of the Company confirming the condition precedents to exchange have occurred shall be sufficient evidence for the Trustee of the happening of that condition precedent. Special Warrant holders are entitled to receive the shares which have been issued in the name of the registered holder upon the surrender of the Special Warrant Certificate(s) together with the Exercise Form attached thereto duly completed and executed to the Company. For the purpose of the rights of exchange and repurchase granted hereunder, the certificates for the Special Warrants shall be retained by the Trustee who shall surrender them to the Company upon either the exchange of the Special Warrants thereby represented into common shares of the Company or the exercise of the Repurchase Rights in respect of any given Special Warrants. Special Warrants may also be offered in the United States in accordance with the available exemptions from the registration and prospectus requirements under the United States federal and state securities legislation and, in addition, may be offered to other "off-shore purchasers". Section 4.02 - Effect of Exercise of Warrants (l) Upon exercise or deemed exercise of the Warrants as aforesaid, the Shares so subscribed for shall be deemed to have been issued and such person or persons shall be deemed to have become the holder or holders of record of such Shares on the date of such exercise or deemed exercise. (2) Within ten business days after surrender and payment as aforesaid, the Company shall forthwith cause to be delivered to the person or persons in whose name or names the Shares so subscribed for are to be issued as specified in such subscription or mailed to him or them at his or their respective addresses specified in such subscription, certificates for the appropriate numbers of common shares and Series "C" Warrants and not exceeding those which the Warrant holder is entitled to acquire pursuant to the Warrant surrendered. Section 4.03 - Exercise of Less than Entitlement The holder of any Warrants may exercise Warrants for a number of Shares less than the number which he is entitled to pursuant to the surrendered Warrants. In the event of any exercise for a number of Shares less than the number which can be purchased pursuant to a Warrants, the holder thereof upon exercise thereof shall in addition be entitled to receive a new Warrant Certificate in respect of the balance of the Shares which he was entitled to receive pursuant to the surrendered Warrants and which were not then issued. Section 4.04 - Warrants for Fractions of Shares To the extent that the holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a Unit, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the holder to receive a whole number of such Shares. Section 4.05 - Expiration of Warrants After the expiration of the period within which a Warrant is exercisable, all rights thereunder shall wholly cease and terminate and such Warrants shall be void and of no further force and effect. Section 4.06 - Exercise Price Each Warrant will entitle the holder to receive on the exercise of the Special Warrant, for no additional consideration, one Unit. Section 4.07 - Adjustment of Exercise Rights The number of shares within the Shares deliverable upon the exercise of the Warrants shall be subject to adjustment in the event and in the manner following: (1) If and whenever the common shares at any time outstanding shall be subdivided into a greater or consolidated into a lesser number of common shares, the number of common shares deliverable as part of the Shares deliverable upon the exercise of the Warrants shall be increased or decreased proportionately as the case may be. (2) In case of any capital reorganization or of any reclassification of the capital of the Company or in case of the consolidation, merger or amalgamation of the Company with or into any other company or of the sale of the property with assets of the Company as or substantially as an entirety or of any other company each Warrant shall, after such capital reorganization, reclassification of capital, consolidation, merger, amalgamation or sale, confer the right to acquire that number of shares or other securities or property of the Company or of the Company resulting from such capital reorganization, reclassification, consolidation, merger, amalgamation or to which such sale shall be made, as the case may be, to which the holder of the shares deliverable at the time of such capital reorganization, reclassification of capital, consolidation, merger, amalgamation or sale had the Warrants been exercised, would have been entitled on such capital reorganization, reclassification, consolidation, merger, amalgamation or sale and in any such case, if necessary, appropriate adjustments shall be made in the application of the provisions set forth in this Article Four with respect to the rights and interest thereafter of the holders of the Warrants to the end that the provisions set forth in this Article Four shall thereafter correspondingly be made applicable as nearly as may reasonably be expected in relation to any shares or other securities or property thereafter deliverable on the exercise of the Warrants. The subdivision or consolidation of common shares at any time outstanding into a greater or lesser number of common shares (whether with or without par value) shall not be deemed to be a capital reorganization or a reclassification of the capital of the Company for the purposes of this paragraph (2). (3) The adjustments provided for in this Section are to be cumulative and shall apply to successive adjustment events as provided for in this Article Four. Section 4.08 - Determination of Adjustments If any questions shall at any time arise with respect to the exercise of the Warrants, such questions shall be conclusively determined by the Company's Auditors or, if they decline to so act, any other independent firm of chartered accountants in Vancouver, British Columbia that the Company may designate and who shall have access to all appropriate records and such determination shall, absent manifest error, be binding upon the Company and the holders of the Warrants. ARTICLE FIVE - COVENANTS BY THE COMPANY - --------------------------------------- Section 5.01 (1) The Company will reserve and there will remain unissued out of its authorized capital a sufficient number of common shares to satisfy the rights of purchase provided for herein and in the Warrants should the holders of all the Warrants from time to time outstanding determine to exercise such rights in respect of all Shares which they are or may be entitled to purchase pursuant thereto. (2) The Company will at all times maintain its existence, will carry on and conduct its business in a prudent manner in accordance with industry standards and good business practice, and will keep or cause to be kept proper books of account in accordance with applicable law. ARTICLE SIX - WAIVER OF CERTAIN RIGHTS - -------------------------------------- Section 6.01 - Immunity of Warrant Agent, Shareholders, etc. The obligations hereunder are not personally binding upon, nor shall resort hereunder be had to, the private property of any of the past, present or future directors or shareholders of the Company or any of the past, present or future officers, employees, or agents of the Company, but only the property of the Company (or a successor corporation) shall be bound in respect hereof. ARTICLE SEVEN - MODIFICATION OF TERMS, MERGER, SUCCESSORS - --------------------------------------------------------- Section 7.01 - Modification of Terms and Conditions for Certain Purposes From time to time the Company may, subject to the provisions of these presents, and they shall, when so directed by these presents, modify the terms and conditions hereof, for any one or more of any of the following purposes: (1) Adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of Counsel for the Company, are necessary or advisable under the circumstances. (2) Making such provisions not inconsistent herewith as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining a listing or quotation of the Warrants on any Stock Exchange or House. (3) Adding to or altering the provisions hereof in respect of the registration and transfer of Warrants making provision for the exchange of Warrants of different denominations; and making any modification in the form of the Warrants which does not affect the substance thereof. (4) For any other purpose not inconsistent with the terms hereof, including the correction or rectification of any ambiguities, defective provisions, errors or omissions herein. (5) To evidence any succession of any corporation and the assumption of any successor of the covenants of the Company herein and in the Warrants contained as provided hereafter in this Article. Provided however no such modification of terms and conditions shall extend the period within which the Warrants may be exercised. Section 7.02 - Company May Consolidate, etc. on Certain Terms Nothing herein contained shall prevent any consolidation, amalgamation or merger of the Company with or into any other corporation or corporations, or a conveyance or transfer of all or substantially all the properties and estates of the Company as an entirety to any corporation lawfully entitled to acquire and operate the same; PROVIDED HOWEVER, that the corporation formed by such consolidation or into which such merger shall have been made or which acquired by conveyance or transfer all or substantially all the properties and estates of the Company as an entirety shall be a corporation organized and existing under the law of Canada or of the laws of the United States of America, or any Province, State, District or Territory thereof, and shall, simultaneously with such consolidation, amalgamation, merger, conveyance or transfer, assume the due and punctual performance and observance of all the covenants and conditions hereof to be performed or observed by the Company. Section 7.03 - Successor Corporation Substituted In case the Company, pursuant to Section 7.02 shall be consolidated, amalgamated or merged with or into any other corporation or corporations, or shall convey or transfer all or substantially all of the properties and estates of the Company as an entirety to any other corporation, the successor corporation formed by such consolidation or amalgamation, or into which the Company shall have been merged or which shall have received a conveyance or transfer as aforesaid, shall succeed to and be substituted for the Company hereunder. Such changes in phraseology and form (but not in substance) may be made in the Warrants as may be appropriate in view of such consolidation, amalgamation, merger or transfer. NOTICE OF EXERCISE TO: iQ Power Technology Inc. #708-A - 1111 West Hastings Street Vancouver, BC V6E 2J3 The undersigned holder of the Special Warrants evidenced by the within Special Warrant Certificate hereby exercises his right to be issued the common shares (or other securities or property to which such exercise entitles him in lieu thereof or in addition thereto under the provisions of the Special Warrant Terms and Conditions mentioned in such Special Warrant Certificate) that are issuable pursuant to such Special Warrants on the terms specified in such Special Warrant Certificate and Special Warrant Terms and Conditions. The undersigned hereby irrevocably directs that the said common shares be issued and delivered (by mail) as follows: Name(s) in full Address(es) Number of Shares - -------------------------- ----------------------------- ----------------- - -------------------------- ----------------------------- ----------------- - -------------------------- ----------------------------- ----------------- (Please print full name in which share certificate is to be issued. If any shares are to be issued to a Person or Persons other than the holder, the holder must pay to the Warrant Agent all applicable transfer taxes or other government charges.) DATED this _______ day of ______________________, 19___. - ---------------------------- ------------------------------------- Witness Signature Please print below your name and address in full. Mr. Mrs. _______________________ Address __________________________________ Miss __________________________________ Ms. __________________________________ FThe Subscriber acknowledges that: CHECK ONE i. it is not a U.S. Person and that these Special Warrants ----- are not being exercised within the United States or on behalf of, or for the account or benefit of, a U.S. Person or a person in the United States; ii. it has attached a written opinion of counsel or other ----- evidence satisfactory to the Corporation to the effect that the Securities have been registered under the U.S. Securities Act and applicable state securities laws or are exempt from registration thereunder; or iii. it was an original subscriber for Special Warrants who was a ----- U.S. Person at the time of acquisition of such Special Warrants and the representations and warranties made by such person in connection with the acquisition of such Special Warrants remain true and correct on the date of exercise. TERMS AND CONDITIONS The Special Warrants are issued subject to the Terms and Conditions for the time being governing the holding of the 1998 Special Warrants in the Corporation. EX-6.1 8 ATYPICAL SHARE EXCHANGE AGREEMENT Exhibit 6.1 CONTRACT THIS AGREEMENT made effective __________, 19___ (the "Effective Date"). BETWEEN: iQ POWER TECHNOLOGY INC., of Suite 708, 1111 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2J3, Telecopier (604) 689-4626 (hereinafter called "iQ Canada") AND: -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- (hereinafter called the "Shareholder") RECITALS: The Shareholder is an atypical silent shareholder in iQ Battery Research & Development GmbH (hereinafter refered to as "iQ Deutschland"), incorporated under German law, with a share in the amount of DM __________________in accordance with that certain contract dated __________ (the "iQ Deutschland Agreement"). iQ Canada intends to acquire all the issued and outstanding shares (Geschaftsanteile) in iQ Deutschland. With regard thereto the parties now enter into the following contract which is subject to the condition precedent that iQ Canada acquires all the issued and outstanding shares of iQ Deutschland: 1 In consideration for the issuance to the Shareholder of ______________ common shares of iQ Canada (the "Shares"), the Shareholder hereby agrees to convey, assign and transfer to iQ Canada all rights of the Shareholder under the iQ Deutschland Agreement. Upon execution of this Agreement, the Shareholder shall deliver his originally signed iQ Deutschland Agreement, an executed assignment document in the form attached hereto as Exhibit A and a signed copy of this contract (collectively, the "Assigned Documents") to ___________________ (the "Escrow Agent"), and iQ Canada shall issue a certificate (the "Certificate") representing the Shares in the name of the Shareholder and deliver such Certificate to the Escrow Agent. The Escrow Agent shall hold the Assigned Documents and the Certificate in Escrow until the conditions set forth in Section 2 of this Agreement have been satisfied. The parties have agreed upon the ratio for the exchange of Shares in iQ on the one hand and the value of the atypical silent partnership on the other hand in free negotiations. In that context they have assumed that the value of the Shares amounts to _______ DM per Share. 2 In the event that the current shareholders of iQ Deutschland exercise their put option pursuant to Section 8 of the Share Exchange Agreement dated August 24, 1998 (the "Share Exchange Agreement"), iQ Canada will immediately provide notice of such exercise to the Escrow Agent (the "Exercise Notice"), and the Escrow Agent shall deliver the Assigned Documents to the Shareholder and the Certificate to iQ Canada. In the event that the put option set forth in Section 8 of the Share Exchange Agreement has not previously been exercised, upon Closing of an equity financing by iQ Canada with gross proceeds of not less than US$3,000,000, iQ Canada will immediately provide notice of the Closing to the Escrow Agent, and the Escrow Agent shall deliver the Certificate to the Shareholder and the Assigned Documents to iQ Canada. For purposes of this Agreement, "Closing" shall mean the date on which equity securities of the Company are delivered against payment into escrow of the purchase price therefor. 3 1. This contract is governed by German law to the exclusion of conflict of laws rules and international treaties. 2. Amendments and supplements to this Contract, including this clause requiring the written form, must be made in writing and refer specifically to this Contract unless notarial certification or any other form is required by law. 3. In the event that any one of the provisions of this Contract should be or become invalid or impracticable, this shall not affect the validity of the remaining provisions. The invalid or impracticable provision shall be deemed replaced by a provision which most closely approximates the form, content, time, extent and scope of the invalid or impracticable provision without the necessity of the parties having to take additional action. IN WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement effective as of the day and year first above written. THE CORPORATE SEAL of ) iQ POWER TECHNOLOGY INC. was ) hereunto affixed in the presence of: ) ) (c/s) _____________________________________ ) ) _____________________________________ ) ) SIGNED, SEALED and DELIVERED ) by __________________________________ ) in the presence of ) ) _____________________________________ ) _________________________________ Witness ) Print Name:____________________ ) _____________________________________ ) Address ) ______________________________________ ) Postal Code ) ASSIGNMENT In consideration of the issuance of ______________common shares of iQ Power Technology Inc. ("iQ Canada"), ______________ (the "Shareholder") does hereby convey, assign and transfer to iQ Canada all his rights under that certain contract dated ________ attached hereto as Exhibit A (the "iQ Deutschland Agreement"). This assignment is made pursuant to the terms of that Contract dated August __, 1998 between the Shareholder and iQ Canada. DATED: August ___, 1998. ----------------------------------- [name of shareholder] Address: ----------------------------------- In presence of: - ----------------------------- EX-6.2 9 SHARE EXCHANGE AGREEMENT DATED 8/25/98 Exhibit 6.2 SHARE EXCHANGE AGREEMENT THIS AGREEMENT made effective August 25, 1998 (the "Effective Date"). AMONG: iQ POWER TECHNOLOGY INC., of Suite 708, 1111 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2J3, Telecopier (604) 689-4626 (hereinafter called "iQ Canada") AND: iQ BATTERY RESEARCH AND DEVELOPMENT GmbH, of Erlenhof Park, Inselkammer Strasse 4, D-82008 Unterhaching, Germany, Telecopier 4989-614483-40 (hereinafter called "iQ Germany") AND: THE SHAREHOLDERS OF iQ BATTERY RESEARCH AND DEVELOPMENT GmbH, whose names and addresses for service are set out in the Schedule of Shareholders to this Agreement (hereinafter collectively called the "Shareholders" and individually referred to as a "Shareholder") WHEREAS: A. The Shareholders named herein are the registered and beneficial owners of all of the issued and outstanding Ordinary Shares of iQ Germany (the "iQ Germany Shares"); B. iQ Canada has agreed to purchase the iQ Germany Shares from the Shareholders; and C. iQ Germany has been joined as a party to this Agreement to ensure delivery of the iQ Germany Shares to iQ Canada; NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the premises, the mutual covenants and agreements to be kept and performed by each of the parties hereto, the parties hereto hereby agree as follows: 1.0 INTERPRETATION - -------------------- 1.1 Interpretation In and for the purposes of this Agreement, unless there is something in the subject matter or context inconsistent therewith or unless otherwise specifically provided, the interpretation provisions set forth in the Schedule of Interpretation shall apply and each of the words, phrases and expressions described in the Schedule of Interpretation attached hereto shall have the meanings ascribed thereto. 1.2 Schedules The following are the Schedules attached to and incorporated in this Agreement by this reference and deemed to form a part hereof: Schedule of Shareholders Schedule of Interpretation Schedule of iQ Canada Financial Statements Schedule of iQ Germany Financial Statements Schedule of iQ Germany Assets (including Intellectual Property) Schedule of iQ Germany Material Contracts Schedule of iQ Germany Employees of Business Schedule of iQ Germany Representations Schedule of iQ Canada Representations Schedule of Pooling Agreement Schedule of Employment Agreements Schedule of Confidentiality Agreements Schedule of Consulting Agreements Schedule of Insider Agreements Schedule of Financing Arrangements Schedule of Atypical Share Exchange Agreement Schedule of Atypical Shareholder Consents Schedule of Legal Opinion of Counsel for iQ Germany - Intellectual Property Schedule of Legal Opinion of Counsel for iQ Germany - iQ Germany Schedule of Legal Opinion of Counsel for iQ Canada 2.0 SALE OF IQ GERMANY SHARES - ------------------------------- 2.1 Share Exchange Between the Shareholders and iQ Canada On the terms and subject to the conditions of this Agreement, on execution and delivery of this Agreement the Shareholders shall sell and transfer their iQ Germany Shares to iQ Canada for, in the aggregate, 10,000,000 iQ Canada Shares to be issued by iQ Canada to the Shareholders on execution and delivery of this Agreement at a deemed price of US$0.25 per share in the numbers set out opposite their respective names in the Schedule of Shareholders attached hereto. This Agreement, once executed by all parties, shall act without more as evidence of the transfer of the iQ Germany Shares to iQ Canada. 2.2 Share Exchange Between the Atypical Shareholders and iQ Canada iQ Canada agrees to reserve an aggregate of 2,800,000 common shares of iQ Canada for issuance to the holders of Atypical Shares of iQ Germany pursuant to the terms of the Atypical Share Exchange Agreement the form of which is set forth in the Schedule of Atypical Share Exchange Agreement hereto. 2.3 Form of Payments All payments required to be made under or pursuant to this Agreement shall be made by telegraphic transfer to, or certified cheque or bank cashier's cheque or solicitor's trust cheque drawn on, a Canadian or US chartered bank or trust company, payable in lawful money of the United States of America at par in immediately available funds in Vancouver, Canada. 2.4 Stock Not Registered in Canada or USA Each of the Shareholders represent and warrant to iQ Canada that: a. the Shareholders are acquiring the iQ Canada Shares for their own account for investment purposes only and not with a view to the distribution or public offering thereof, in the United States of America or Canada, nor with any present intention of reselling or distributing the same in the United States of America except pursuant to registration under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or pursuant to an exemption from such registration requirements; b. the Shareholders are not "U.S. Persons", as such term is defined by Regulation S under the U.S. Securities Act; were not offered by the iQ Canada Shares while in the United States; and were not in the United States at the time of execution and delivery of this Agreement. c. the Shareholders have such knowledge and experience in business and financial matters generally as to be capable of evaluating the merits and risks of their investment in iQ Canada contemplated to be made by each of them hereunder; d. the Shareholders have sufficient financial strength to hold the iQ Canada Shares as an investment and to bear the economic risks of such an investment (including possible total loss of investment) for an indefinite period of time, and that the Shareholders have been provided full and free access to the corporate books, financial statements, records, contracts, documents and other information concerning iQ Canada, and to their offices and facilities and have been afforded the opportunity to ask such questions and obtain such other relevant information as each deem necessary or desirable and to be given all such information as had been requested in order to evaluate the merits and risks of the prospective investment contemplated hereunder; and e. the iQ Canada Shares will be issued pursuant to exemptions contained in the Securities Act (British Columbia) (the "B.C. Securities Act"), and that the iQ Canada Shares may only be sold in a jurisdiction in accordance with the restrictions on resale prescribed under the laws of the jurisdiction in which such shares are sold, all of which may vary depending on the jurisdiction. 3.0 CLOSING - ------------- 3.1 Closing Date, Time and Place Subject to subsection 3.2, the Closing of the transactions contemplated by Section 2.0 hereof shall take place at the offices of the solicitors for iQ Germany on execution, notarization and delivery of this Agreement. 3.2 Deliveries by the Shareholders At the Closing, the Shareholders and iQ Germany shall deliver to iQ Canada: a. a legal opinion of counsel for iQ Germany in a form attached in the Schedule of Legal Opinion of Counsel for iQ Germany - iQ Germany; b. a legal opinion of counsel for iQ Germany in a form attached in the Schedule of Legal Opinion of Counsel for iQ Germany - Intellectual Property hereto; c. written consent to this Share Exchange Agreement from Messrs. von Waldthausen and von Craushaar in the form attached in the Schedule of Atypical Shareholder Consents hereto; d. a Pooling Agreement duly executed by each of the Shareholders in respect of all of the shares of iQ Canada issuable hereunder [other than the 1,500,000 iQ Canada Shares indicated as being exempt from pooling in the Schedule of Shareholders attached hereto] in the form attached as the Schedule of Pooling Agreement hereto; e. duly executed Employment Agreements in the form attached in the Schedule of Employment Agreements hereto from each of Dr. Gunther Bauer, Peter Braun and Gerhard Trenz; f. duly executed Confidentiality Agreement in the form attached in the Schedule of Confidentiality Agreements hereto from Horst Dieter Braun, Karin Wittkewitz and Rainer Welke; g. such other documents and instruments as counsel for iQ Canada may reasonably require to effectuate or evidence the transactions contemplated hereby. 3.3 Deliveries by iQ Canada At the Closing, iQ Canada shall deliver to the Shareholders the following: a. satisfactory proof that the iQ Canada Shares have been duly issued and registered in the name of the Shareholders in the amounts provided in the Schedule of Shareholders and confirmation that the certificates therefor [other than the 1,500,000 shares indicated as being exempt from pooling in the Schedule of Shareholders attached hereto] have been pooled under the Pooling Agreement, the form of which is attached in the Schedule of Pooling Agreement hereto; b. legal opinion of counsel for iQ Canada in a form attached in the Schedule of Legal Opinion of Counsel for iQ Canada. c. satisfactory evidence that Mr. Peter Braun, Dr. Gunther Bauer, and Mr. Russell French have been appointed directors of iQ Canada and that any additional directors have been consented to by the majority of those 3 directors; d. a Pooling Agreement duly executed by all Shareholders of iQ Canada who acquired their shares prior to 1998 in the form attached as the Schedule of Pooling Agreement hereto; e. a duly executed Consulting Agreement between iQ Canada and Mayon Management Corp. in the form attached in the Schedule of Consulting Agreements hereto which shall be nontransferable and shall contain usual and customary non-competition and confidentiality agreements; f. satisfactory proof that iQ Canada has established a reserve of not less than 2,800,000 common shares to be issued to the holders of the Atypical Shares who have agreed to the cancellation of their agreements and Atypical Shares; and g. such other documents and instruments as counsel for iQ Germany may reasonably require to effectuate or evidence the transactions contemplated hereby. 4.0 REPRESENTATIONS AND WARRANTIES OF iQ GERMANY AND THE ORDINARY ------------------------------------------------------------- SHAREHOLDERS ------------ 4.1 Representations and Warranties To induce iQ Canada to enter into and complete the transaction contemplated by this Agreement, iQ Germany and the Shareholders, to the best of the Shareholders' knowledge, jointly and severally represent and warrant to iQ Canada that the representations and warranties contained in the Schedule of iQ Germany Representations hereto are true and correct as at the date hereof and will be true and correct on the Closing Date as if such representations and warranties were made on the Closing Date (except insofar as such representations and warranties are stated to be given as of a particular date or for a particular period and relate solely to such date or period). 4.2 Representations and Warranties in Closing Documents All statements contained in any certificate or other instruments delivered by or on behalf of the Shareholders and iQ Germany pursuant hereto or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Shareholders and iQ Germany hereunder. 4.3 Reliance The Shareholders and iQ Germany acknowledge and agree that iQ Canada has entered into this Agreement relying on the warranties and representations and other terms and conditions of this Agreement notwithstanding any independent searches or investigations that may be undertaken by or on behalf of iQ Canada and that no information which is now known or should be known or which may hereafter become known to iQ Canada or its officers, directors or professional advisers shall limit or extinguish the right to indemnity hereunder. 5.0 REPRESENTATIONS AND WARRANTIES OF iQ CANADA - ------------------------------------------------- 5.1 Representations and Warranties To induce the Shareholders and iQ Germany to enter into and complete the transactions contemplated by this Agreement, iQ Canada hereby represents and warrants to the Shareholders and iQ Germany that the representations and warranties contained in the Schedule of iQ Canada Representations hereto are true and correct as at the date hereof and will be true and correct on the Closing Date as if such representations and warranties were made on the Closing Date (except insofar as such representations and warranties are stated to be given as of a particular date or for a particular period and relate solely to such date or period). 5.2 Representations and Warranties in Closing Documents All statements contained in any certificate or other instruments delivered by or on behalf of iQ Canada pursuant hereto or in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by iQ Canada hereunder. 5.3 Reliance iQ Canada acknowledges and agrees that the Shareholders and iQ Germany have entered into this Agreement relying on the warranties and representations and other terms and conditions of this Agreement notwithstanding any independent searches or investigations that may be undertaken by or on behalf of the Shareholders and iQ Germany and that no information which is now known or should be known or which may hereafter become known to the Shareholders and iQ Germany or its officers, directors or professional advisers shall limit or extinguish the right to indemnity hereunder. 6.0 COVENANTS - --------------- 6.1 The Shareholders, iQ Germany and iQ Canada covenant and agree that each of such parties will take all such actions deemed necessary or desirable to cause the cancellation of or repurchase of all outstanding Atypical Share agreements. 6.2 The Shareholders, iQ Germany and iQ Canada covenant and agree that each of such parties will take all such actions deemed necessary or desirable to obtain the financing for iQ Canada contemplated in the Letter Agreement dated August 14, 1998, attached hereto in the Schedule of Financing Arrangements. 7.0 INDEMNIFICATION - --------------------- 7.1 Survival of Representations, Warranties and Indemnification All representations, warranties, covenants and agreements herein contained on the part of each of the Shareholders, iQ Germany and iQ Canada shall survive the Closing provided that such representations and warranties except with respect to tax matters (which shall continue until the expiry of the applicable statute of limitations, and claims based on fraud which shall not expire) shall only survive until the day that is two years from the Closing Date after which time, if no claims shall have been made hereunder against the party hereto with respect to any incorrectness in or breach of any representation or warranty made herein by such party, such party shall have no further liability hereunder with respect to such representation and warranty. 7.2 Indemnification by iQ Germany and the Shareholders iQ Germany and the Shareholders agree, subject to subsection 7.4, to indemnify and hold harmless iQ Canada and any person claiming by or through its respective successors and assigns from, against, and in respect of, any and all costs, losses, claims, liabilities, fines, penalties, damages and expenses (including, without limitation, court costs, reasonable fees and disbursements of counsel) incurred by iQ Canada in respect of the breach of any representation or warranty made by iQ Germany and the Shareholders herein. 7.3 Indemnification by iQ Canada iQ Canada agrees to indemnify and hold harmless the Shareholders and iQ Germany from and against any and all costs, losses, claims, liabilities, fines, penalties, damages and expenses (including, without limitation, court costs, reasonable fees and disbursements of counsel) incurred by the Shareholders or iQ Germany in respect of the breach of any representation or warranty made by iQ Canada herein. 7.4 Limitation on Amount of Indemnification No breach of any representation or warranty shall give rise to a claim by either the Shareholders and iQ Germany on one hand, or iQ Canada on the other, against the other unless the amount determined to be owing by either of them to the other as a result thereof would exceed US$5,000 for any single breach or if the amount at issue when added to the sum of all prior amounts in respect of which a claim would otherwise be made, total in excess of US$10,000 in which case all of the amounts then at issue shall be recoverable. 8.0 SHAREHOLDER PUT OPTION - ---------------------------- The Shareholders and iQ Canada agree that the Shareholders shall collectively have the right to require iQ Canada to repurchase all, but not less than all, of the iQ Canada Shares received by the Shareholders at the Closing (the "Put Option") upon repayment by such Shareholders to iQ Canada the full amount of all funds that iQ Canada shall have advanced or loaned to, or invested in, iQ Germany. The purchase price for the iQ Canada Shares repurchased by iQ Canada shall be all of the issued and outstanding ordinary shares of iQ Germany. The Put Option shall be exercisable by the Shareholders on the four month anniversary of the date of filing by iQ Canada of an offering statement on Form 1-A with the United States Securities and Exchange Commission, provided that prior to such four month anniversary iQ Canada shall have failed to complete a financing substantially on the terms set forth in the Schedule of Financing Arrangements attached hereto with gross proceeds of not less than US$3,000,000. In the event that the Put Option is exercised, the Closing of the Put Option shall occur within two months of the date of receipt of written notice by each of the Shareholders of their election to exercise the Put Option. The Shareholders and iQ Canada agree that the Put Option shall terminate and shall not be exercisable as of such date that iQ Canada shall complete an equity financing with gross proceeds of not less than US$3,000,000. 9.0 GENERAL - ------------- 9.1 Expenses, Etc. Except as otherwise provided for herein, whether or not the transactions contemplated by this Agreement are consummated, each party hereto shall pay his or its own expenses and the fees and expenses of their respective counsel, accountants and other experts. 9.2 Waiver No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action or compliance with any representation, warranty, covenant or agreement contained herein, and the waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 9.3 Binding Effect, Benefits This Agreement shall enure to the benefit of and shall be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. 9.4 Notices All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or transmitted by telex or other telecommunication facility or on receipt after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the same is so given or made at the address or number for that party given or referenced on first page of this Agreement or to such other address as any party may designate by giving notice to the other parties hereto. 9.5 Further Assurances Each party shall, from time to time at or after the Closing, at the request of another party, and without further consideration, execute and deliver such other instruments and take such other actions as may be required to confer to the benefits contemplated by this Agreement. 9.6 Entire Agreement, Amendment This Agreement, including all Schedules attached hereto, constitutes the entire agreement and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof and may not be amended, modified or terminated unless in a written instrument executed by the party or parties sought to be bound. 9.7 Counterparts This Agreement may be executed in any number of counterparts, each of which when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument and a facsimile copy of this Agreement executed by a party hereto in counterpart or otherwise will be deemed to be a valid and binding Agreement and accepted as an original of the Agreement until such time as each of the parties has an originally executed Agreement in its possession. 9.8 Third Parties Nothing in this Agreement, whether expressed or implied, is intended to confer any rights or remedies on any person other than the parties to this Agreement, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third party, nor shall any provision give any person other than the parties any right of subrogation or action against any party to this Agreement. 9.9 Time of Essence Time is of the essence of this Agreement. 9.10 Independent Counsel Each of the parties acknowledges having obtained independent legal advice from its own solicitor with respect to this Agreement prior to its execution and further acknowledges that it understands the terms, and its rights and obligations under this Agreement. IN WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement effective as of the day and year first above written. SIGNED, SEALED AND DELIVERED by ) iQ BATTERY RESEARCH AND iQ BATTERY RESEARCH AND ) DEVELOPMENT GmbH DEVELOPMENT GmbH in the presence of: ) _____________________________________ ) ) ) _____________________________________ ) Per: _____________________________ Witness ) Signature _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SIGNED, SEALED AND DELIVERED by ) iQ POWER TECHNOLOGY, INC. iQ POWER TECHNOLOGY INC. ) in the presence of: ) _____________________________________ ) ) ) _____________________________________ ) Per: _____________________________ Witness ) Signature _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SIGNED, SEALED AND DELIVERED by ) DR. GUNTHER BAUER ) in the presence of: ) _____________________________________ ) _____________________________ ) DR. GUNTHER BAUER ) _____________________________________ ) Witness ) _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SIGNED, SEALED AND DELIVERED by ) PETER BRAUN in the presence of: ) _____________________________________ ) _____________________________ ) PETER BRAUN ) _____________________________________ ) Witness ) _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SIGNED, SEALED AND DELIVERED by ) HORST DIETER BRAUN in the presence of: ) _____________________________________ ) _____________________________ ) HORST DIETER BRAUN ) _____________________________________ ) Witness ) _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SIGNED, SEALED AND DELIVERED by ) KARIN WITTKEWITZ in the presence of: ) _____________________________________ ) _____________________________ ) KARIN WITTKEWITZ ) _____________________________________ ) Witness ) _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SIGNED, SEALED AND DELIVERED by ) RAINER WELKE in the presence of: ) _____________________________________ ) _____________________________ ) RAINER WELKE ) _____________________________________ ) Witness ) _____________________________________ ) Address ) ______________________________________ ) Postal Code ) SCHEDULE OF INTERPRETATION PART 1.00 INTERPRETATIONS - -------------------------- 1.1 Definitions In and for the purposes of this Agreement, unless there is something in the subject matter or context inconsistent therewith or unless otherwise specifically provided, each of the words, phrases and expressions described in Part 2.00 of this Schedule shall have the meanings ascribed thereto. 1.2 Words Defined in Canada Business Corporations Act Unless there is something in the subject matter or context inconsistent therewith, any words, phrases or expressions defined in the Canada Business Corporations Act and used herein shall have the meanings ascribed therein. 1.3 Governing Law and Forum This Agreement and all matters arising hereunder will be governed by and construed in accordance with the laws of the Province of British Columbia, and the laws of Canada applicable therein, and all disputes and claims, whether for specific performance, injunction, declaration or otherwise howsoever both at law and in equity, arising out of or in any way connected with this Agreement will be referred to the courts of the Province of British Columbia exclusively, and to the Supreme Court of Canada if need be, and, by execution and delivery of this Agreement, each party hereby irrevocably submits and attorns to such jurisdiction. 1.4 Severability If any one or more of the provisions contained in this Agreement should be invalid, illegal, or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision or provisions shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless in either case as a result of such determination this Agreement would fail in its essential purpose. 1.5 Included Words The singular of any term includes the plural, and vice versa, the use of any term is generally applicable to any gender and, where applicable, to a corporation, the word "or" is not exclusive and the word "including" is not limiting whether or not non-limiting language (such as "without limitation", or "but not limited to" or words of similar import) is used with reference thereto. 1.6 Headings The headings to the sections and subsections of this Agreement are inserted for convenience only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. 1.7 Cross-Reference Unless otherwise stated, all references in this Agreement to a designated "section", "subsection" or other subdivision or to a schedule is to the designated section, subsection or other subdivision of, or schedule to, this Agreement. 1.8 Referenced to Whole Agreement Unless otherwise stated, the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, subsection or other subdivision or schedule. 1.9 Statutes Unless otherwise stated, any reference to a statute includes and is a reference to such statute and to the regulations made pursuant thereto, with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which supplement or supersede such statute or such regulations. 1.10 References to Successors Included Any reference to a corporate entity includes and is also a reference to any corporate entity that is a successor to such entity. 1.11 No Contra Proferentum The language in all parts of this Agreement shall in all cases be construed as a whole and neither strictly for nor strictly against any of the parties. 1.12 No Merger The representations, warranties, covenant and agreements contained in this Agreement shall not merge in the Closing and shall continue in full force and effect from and after the Closing Date. 1.13 Joint and Several Each and every covenant, representation or warranty of a party hereto contained herein shall be a joint and several covenant, representation or warranty of each entity composing that party. 1.14 Accounting Terminology All accounting terms not expressly defined in this Agreement shall have the respective meanings usually ascribed to them in accordance with generally accepted accounting principles in Canada, applied on a basis consistent with prior years. 1.15 Currency Unless otherwise specifically stated, all references to money in this Agreement are or shall be to money in lawful money of the United States of America. If it is necessary to convert money from another currency to lawful money of United States of America, such money shall be converted as at the Effective Date. Part 2.00 DEFINITIONS a. "Act" means the German Securities Act. b. "Audited iQ Canada Financial Statements" means the audited financial statements of iQ Canada as at and for the years ended December 31, 1996 and 1997, copies of which are contained in the Schedule of iQ Canada Financial Statements attached hereto. c. "Audited Statements Date" means December 31, 1997. d. "B.C. Securities Act" means the Securities Act, S.B.C. 1997, c. 418. e. "Business" means the business carried on by iQ Germany. f. "By-Laws" means the By-Laws of iQ Canada, as amended. g. "Closing" means the closing of the transactions contemplated by section 2 hereof. h. "Closing Date" means ________________, 1998, or such other time or place as the parties shall mutually agree in writing. i. "iQ Canada Financial Statements" means Audited iQ Canada Financial Statements and the Interim iQ Canada Financial Statements. j. "Interim iQ Canada Financial Statements" means the unaudited consolidated financial statements of iQ Canada as at and for the 3 month period ended March 31, 1998, copies of which are contained in the Schedule of iQ Canada Financial Statements attached hereto. k. "Interim Period" means the period from and including the date of this Agreement to and including the Closing Date. l. "iQ Canada" means iQ Power Technology Inc. m. "iQ Canada Shares" means fully paid and non-assessable shares of iQ Canada. n. "iQ Germany" means iQ Battery Research and Development GmbH. o. "iQ Germany Shareholders" means the shareholders of iQ Germany. p. "iQ Share Exchange" means the exchange of iQ Germany Shares and iQ Canada Shares between the iQ Germany Shareholders and iQ Canada respectively pursuant to the Share Exchange Agreement. q. "iQ Share Exchange Closing" means the date of closing of the Share Exchange Agreement. r. "Partners" means those individuals who have entered into atypical silent partnership agreements with iQ Germany and whose names and addresses for service are set out in the Schedule of Atypical Silent Partners hereto. s. "Partnership Agreements" means the atypical silent partnership agreements entered into between the Partners and iQ Germany. t. "Second Closing" means the closing of a financing by iQ Canada to raise not less than US$3,000,000 occurring on or before December 31, 1998. u. "Share Exchange Agreement" means an agreement dated August ____, 1998, among iQ Canada, iQ Germany and the iQ Germany Shareholders. v. "Shareholders" means the shareholders of ordinary common shares of iQ Germany. SCHEDULE OF MATERIAL CONTRACTS - -------------------------------------------------------------------------------- Type of Agreement Contracting With Date - -------------------------------------------------------------------------------- Share Exchange Agreement iQ Germany and the August ____, 1998 Shareholders - -------------------------------------------------------------------------------- SCHEDULE OF PARTNERS' REPRESENTATIONS The Partners hereby jointly and severally represent and warrant that: 1.1 Authorizations and Enforceability 1.1.1 the Partners have all requisite power, authority and capacity to enter into, deliver and perform this Agreement and to consummate the transactions contemplated hereby without first obtaining the consent of any other person or body corporate; 1.1.2 the Partners have taken all necessary or desirable actions, steps and corporate and other proceedings to approve or authorize, validly and effectively, the entering into of, and the execution, delivery or performance of, this Agreement and the cancellation of their Partnership Agreements at Closing; 1.1.3 this Agreement is a legal, valid and binding obligation of the Shareholders enforceable against each of them in accordance with its terms subject to: a. bankruptcy, insolvency, moratorium, reorganization and other laws relating to or affecting the enforcement of creditors' rights generally; and b. the fact that equitable remedies, including the remedies of specific performance and injunction, may only be granted in the discretion of a court; 1.3 Restrictions, Burdensome Agreements the Partners are not party to any agreement, debt instrument, commitment or agreement and the Partners nor any of their respective properties and assets are subject to or bound or affected by any charter, by-law or other corporate restriction, or any order, judgment, decree, law, statute, ordinance, rule, regulation or other restriction of any kind or character which would prevent the Partners from entering into this Agreement or from consummating the transactions contemplated hereby; 1.4 Government and Other Consents no consent, authorization or approval of or exemption by or filing with any governmental, public or self-regulatory body or authority is required in connection with the execution, delivery and performance by the Shareholders of this Agreement or any of the instruments or agreements herein referred to or the taking of any action herein contemplated; 1.5 Schedule Information all information set out in the Schedules to this Agreement is accurate and correct in every material respect; SCHEDULE OF iQ CANADA REPRESENTATIONS iQ Canada hereby represents and warrants that: 1.1 Authorized Capitalization, Outstanding Shares and Title 1.1.1 immediately prior to Closing: a. the authorized capital of iQ Canada shall consist of an unlimited number of common shares without par value, of which not more than 15,000,000 shall have been issued and allotted as fully paid and non-assessable shares; and b. the issued common shares of iQ Canada represent 100% of the outstanding voting shares of iQ Canada; 1.2 Organization, Good Standing, Power, etc. 1.2.1 iQ Canada is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, is extra-provincially registered to do business in the province of British Columbia, and is not required at the date hereof to be authorized or licensed to do business as an extra-territorial or foreign corporation in any other jurisdiction by reason of the nature of the business conducted by it and has the requisite power and authority to own, lease and operate its properties and assets and to carry on its business as currently conducted; 1.3 Agreements Relating to Stock, Options, Warrants, Restrictions on Shares, Etc. iQ Canada is not party to any written or oral agreement, understanding, arrangement or commitment or bound by any certificate of incorporation, by-law or instrument (including options, warrants or convertible securities) which creates any rights in a person with respect to shares of the capital stock or any other securities of iQ Canada or which relates to the voting of, restricts the transfer of, requires iQ Canada to issue or sell, or create rights in any person with respect to the capital stock or other securities of iQ Canada (or warrants or rights with respect thereto) other than as may be issued pursuant to the Share Exchange Agreement, and there exists no option or other right to purchase, or right to convert any securities or obligations into any shares of the capital stock or other securities of iQ Canada other than as may be reserved or granted under the 1998 Stock Option Plan of iQ Canada (to a maximum of 3,000,000 shares) or the 1998 Incentive Plan of iQ Canada (to a maximum of 4,000,000 shares), none of which shall be granted prior to Closing; 1.4 Authorizations and Enforceability 1.4.1 iQ Canada has all requisite power, authority and capacity to enter into, deliver and perform this Agreement and to consummate the transactions contemplated hereby without first obtaining the consent of any other person or body corporate; 1.4.2 each of iQ Canada, and its Board of Directors have taken all necessary or desirable actions, steps and corporate and other proceedings to approve or authorize, validly and effectively, the entering into of, and the execution, delivery or performance of, this Agreement and the issue of the iQ Canada Shares by iQ Canada to the Partners; 1.4.3 this Agreement is a legal, valid and binding obligation of iQ Canada enforceable against it in accordance with its terms subject to: a. bankruptcy, insolvency, moratorium, reorganization and other laws relating to or affecting the enforcement of creditors' rights generally; and b. the fact that equitable remedies, including the remedies of specific performance and injunction, may only be granted in the discretion of a court; 1.5 Effect of Agreement, Etc. the execution, delivery and performance of this Agreement and each of the other agreements contemplated or referred to herein by iQ Canada, and the completion of the transactions contemplated hereby, will not constitute or result in a violation of breach of or default under, or cause the acceleration of any obligations of iQ Canada under: a. any term or provision of any of the Articles of Incorporation, By-Laws or other constating documents of iQ Canada; or b. the terms of any agreement (written or oral), indenture, instrument or understanding or other obligation or restriction to which iQ Canada is party or by which it is bound. 1.6 Restrictions, Burdensome Agreements iQ Canada is not party to any agreement, debt instrument, commitment or agreement and neither iQ Canada nor any of its respective properties and assets are subject to or bound or affected by any charter, by-law or other corporate restriction, or any order, judgment, decree, law, statute, ordinance, rule, regulation or other restriction of any kind or character which would: a. prevent iQ Canada from entering into this Agreement or from consummating the transactions contemplated hereby; or b. adversely affect, or in the future adversely affect the Business, properties, prospects or the conditions, financial or otherwise, of iQ Canada or accelerate the due date for payment of any liabilities of iQ Canada; 1.7 Shareholders' Agreement there are no shareholders' agreements, pooling agreements, voting trust or other similar agreements with respect to the ownership or voting of any of the shares of iQ Canada other than the proposed Pooling Agreement to be entered into in connection with the Share Exchange Agreement; 1.8 Government and Other Consents no consent, authorization or approval of or exemption by or filing with any governmental, public or self-regulatory body or authority is required in connection with the execution, delivery and performance by iQ Canada of this Agreement or any of the instruments or agreements herein referred to or the taking of any action herein contemplated; 1.9 Permits, Licenses, Compliance with Applicable Laws and Court Orders iQ Canada has all requisite corporate power and authority, and all permits, licenses, orders and approvals of governmental and administrative authorities to own, lease and operate its properties and to carry on its business as presently conducted and its business as conducted does not violate or infringe any domestic or foreign law, statute, ordinance or regulation currently in effect, scheduled to come into effect or, to the knowledge of the iQ Canada, proposed to be adopted, the enforcement of which would adversely affect the financial condition, results of operations, properties or business of iQ Canada, and iQ Canada is not aware of any default in any respect under any executive, legislative, administrative or private (such as arbitration) ruling, order, writ, injunction or decree; 1.10 Financial Statements of iQ Canada and Absence of Undisclosed Liabilities the following statements concerning the financial information presented to iQ Canada by iQ Canada are true and accurate: a. the iQ Canada Financial Statements are true and correct in every material respect and present fairly the financial position of iQ Canada as of the dates of the respective statements, and the results of its operations for the periods then ended and are prepared in accordance with generally accepted accounting principles applied on a consistent basis with that of the previous year except as specifically noted therein; b. except to the extent reflected or reserved against or otherwise disclosed in the balance sheet which forms part of the iQ Canada Financial Statements and except for debts, liabilities or obligations incurred in the ordinary course of business, iQ Canada has no liabilities, debts or obligations of any nature, whether absolute, accrued, contingent or otherwise or whether due or to become due including, without limitation, liabilities for any taxes which would not have been provided for in the iQ Canada Financial Statements; c. all accounts receivable of iQ Canada as at the date of the most recent iQ Canada Financial Statements referred to in most recent iQ Canada Financial Statements as recorded in the books of iQ Canada are genuine and at that date were owing without set-off or counterclaim, and adequate provision has been made in the most recent iQ Canada Financial Statements for doubtful accounts receivable as at the date of the most recent iQ Canada Financial Statements; d. since the Audited Statements Date; i. no payments of any kind have been made or authorized to be made by or on behalf of iQ Canada to any of its officers, directors or shareholders, or under any management agreements with iQ Canada, save and except in the ordinary course of business and at the regular rates of salary, management or consulting fees and regular staff bonuses payable to them; ii. iQ Canada has not made a distribution of retained earnings or made a payment out of iQ Canada's capital dividend account; iii. save and except for in connection with the Share Exchange Agreement, iQ Canada has not acquired or had the use of any property from a person with whom it was not dealing at arm's length; iv. iQ Canada has not disposed of anything to a person with whom iQ Canada was not dealing at arm's length for proceeds less than the fair market value thereof; v. iQ Canada has not made any capital expenditures in excess of US$5,000; vi. the business, affairs and assets of iQ Canada have only been dealt with in the ordinary course of business and iQ Canada has not incurred any liability to any person with whom iQ Canada does not deal at arm's length, except for any liability of iQ Canada to the Shareholders for unpaid salary (not exceeding US$10,000) and for monies actually loaned to iQ Canada (not exceeding US$20,000); vii. iQ Canada has not incurred any obligation or liability (fixed or contingent), except normal trade or business obligations incurred in the ordinary course of its business, none of which is materially adverse to iQ Canada; viii.iQ Canada has not paid or satisfied any obligational liability (fixed or contingent), except: A. current liabilities included in the Audited iQ Canada Financial Statements; B. current liabilities incurred since the Audited Statements Date in the ordinary course of its business; and C. scheduled payments pursuant to the obligations under loan agreements or other contract or commitments described in the Share Purchase Agreement or in the Schedules attached thereto; ix. iQ Canada has not: A. created any encumbrance upon any of its properties or assets, except as described in the Share Exchange Agreement or in the Schedules thereto; B. sold, assigned, transferred, leased or otherwise disposed of any of its properties or assets, except in the ordinary course of its business; C. purchased, leased or otherwise acquired any properties or assets, except in the ordinary course of its business; D. waived, canceled, surrendered or written off any rights, claims, accounts receivable or any amounts payable to iQ Canada, except in the ordinary course of its business; E. entered into any transaction, contract, agreement, or commitment, except in the ordinary course of its business and except the Share Purchase Agreement and any agreements entered into in connection thereto; F. terminated, discontinued, closed or disposed of any plant, facility or business operations; G. made any material change with respect to any method of management, operation, or accounting in respect of its business; H. suffered any damage, destruction or loss (whether or not covered by insurance) which has materially adversely affected or could materially adversely affect the business or the condition of iQ Canada; I. increased any form of compensation or other benefits payable or to become payable to any of the employees of iQ Canada, except increases made in the ordinary course of its business which do not exceed 5%, in the aggregate, of the amount of the aggregate salary compensation payable to all of iQ Canada's employees prior to such increase; J. suffered any extraordinary loss relating to its business; K. made or incurred any material change in or become aware of any event or condition with is likely to result in the material change in, the business or condition of iQ Canada save and except for in connection with the Share Exchange Agreement; and L. authorized, or agreed or otherwise become committed to do any of the foregoing; 1.11 Title to Properties, Absence of Liens and Encumbrances, Etc. 1.11.1 iQ Canada owns and has good and marketable title to its properties, assets and leases used in its business (including, without limitation, the assets reflected in the balance sheet contained in the iQ Canada Financial Statements), free and clear of all mortgages, security interests, claims, liens, charges, encumbrances, restrictions on use or transfer or other defects in title; no default or event of default exists and no event which, with notice or lapse of time or both, would constitute a default, has occurred and is continuing under the terms or provisions, express or implied, of any agreement to which any of the properties of iQ Canada is subject, nor has iQ Canada received notice of any claim of such default, nor has iQ Canada failed to comply in any respect with any provision or condition of any such agreement; and iQ Canada has not received a notice of violation of any applicable law, ordinance, regulation, order or requirement relating to its operations or its owned or leased properties; 1.11.2 all of the assets of iQ Canada are used in its business; 1.12 Accounts Receivable the accounts receivable of iQ Canada reflected in the most recent iQ Canada Financial Statements and all accounts receivable of iQ Canada arising since the date of the most recent iQ Canada Financial Statements arose from bona fide transactions in the ordinary course of its business and are valid, enforceable and fully collectable accounts (subject to a reasonable allowance, consistent with past practice, for doubtful accounts as reflected in the iQ Canada Financial Statements or as previously disclosed in writing to iQ Canada). Such accounts receivable are not subject to any set-off or counterclaim; 1.13 Deposit Accounts and Safe Deposit Boxes of iQ Canada iQ Canada currently maintains one bank account at The Canada Trust Company in British Columbia on which Russell French is the sole person authorized to draw thereon or to have access thereto; 1.14 No Insolvency Proceedings no proceedings are pending for, and iQ Canada is unaware of any basis for the institution of any proceedings which could lead to the placing of iQ Canada in bankruptcy or subject iQ Canada to any other laws governing the affairs of insolvent persons; 1.15 Real Properties 1.15.1 iQ Canada holds no real property and is not a party to any agreements, options, contracts or commitments to purchase, sell, or otherwise transfer Real Property; 1.16 Leased Premises iQ Canada is not party to any lease agreements, options to lease or other lease arrangements for leased premises; 1.17 Intellectual Property iQ Canada has no proprietary interests in any intellectual property other than the proprietary interests held or to be held through iQ Germany; 1.18 Leased Equipment iQ Canada is not party to any lease agreements, options to lease or other lease arrangements for equipment 1.19 Royalty Payments iQ Canada is not obligated to pay any royalty or similar payments to any person, firm or corporation; 1.20 Non-Arm's Length Matters iQ Canada is not a party to or bound by any agreement with, is not indebted to, and no amount is owing to iQ Canada by any officers, former officers, directors, former directors, shareholders, former shareholders, employees (except for oral employment agreements with employees) or former employees of iQ Canada or any person not dealing in arm's length with any of the foregoing. Since the Audited Statements Date, iQ Canada has not made any or authorized any payments to any officers, former officers, directors, former directors, shareholders, former shareholders, employees or former employees of iQ Canada or to any person not dealing at arm's length with any of the foregoing, except for management fees, salaries and other employment compensation payable to employees or managers of iQ Canada in the ordinary course of the routine daily affairs of its business and at the regular rates payable to them; 1.21 Tax Filings, Employee Deductions 1.21.1 iQ Canada has filed with the appropriate governmental agencies all tax returns and there are no unpaid assessments nor proposed assessments of income taxes pending against iQ Canada and all liability for taxes shown on tax returns filed have been paid or the liability therefor has been provided for in the iQ Canada Financial Statements, and all income taxes, employee withholding taxes or deductions, or other taxes for periods subsequent to the period covered by such tax returns have been paid or adequately accrued in the books and records of iQ Canada; 1.21.2 adequate provision has been made for taxes payable by iQ Canada for which tax returns are not yet required to be filed and there are no agreements, waivers or other arrangements providing for an extension of time with respect to the filing of any tax return by or payment of any tax, governmental charge or deficiency by iQ Canada, and to the knowledge of iQ Canada, there are no contingent tax liabilities or any grounds which would prompt a re-assessment; 1.22 Agreements, Plans, Arrangements, Etc. iq canada is not a party to, nor is iq canada or any of the properties and assets of iq canada bound or affected by, any oral or written agreement of any sort, including without limitation: a. lease agreements (whether as lessor or lessee) relating to real or personal property except as disclosed to iQ Canada and summarized in the iQ Canada Financial Statements; b. license agreements, assignments or other contracts (whether as licensor or licensee, assignor or assignee) relating to trademarks, trade names, patents, copyrights (or applications therefor), unpatented designs or styles, know-how or technical assistance; c. employment or consulting agreements, other than a management agreement with Mayon Management Corp.; d. agreements for the purchase or sale of goods, materials, supplies, machinery, capital assets or services; e. agreements with any labour union; f. agreements with any supplier, distributor, franchisor, dealer, sales agent or representative; g. agreements with any manufacturer, supplier or customer with respect to discounts or allowances; h. joint venture or partnership agreements with any other person; i. agreements for the borrowing or lending of money or guaranteeing, indemnifying or otherwise becoming liable for the obligations or liabilities of another; j. agreements with any bank, factor, financing company or similar organization regarding the financing of accounts receivable or other extensions or credit; k. agreements granting any lien, security interest or mortgage on any property or asset of iQ Canada including, without limitation, any factoring agreement for the assignment of accounts receivable; l. agreements for the construction or modification of any building or structure or for the incurrence of any other capital expenditure; m. advertising agreements of any kind; n. agreements which restrict it from doing business anywhere in the world; o. agreements, statutes or regulations giving any party the right to re-negotiate or require a reduction in prices or the repayment of any amount previously paid; p. any agreements to defend, indemnify or hold harmless any person; q. agreements, pension plans, profit sharing plans, bonus plans, undertakings or arrangements, whether oral, written or implied, with the employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers or directors or others which cannot be terminated on not more than one month's notice; or r. agreements to pay severance pay for separation allowances, except for any requirement which may be applicable at law; 1.23 Guarantees and Indemnities iQ Canada is not a party to or bound by any agreement of guarantee, indemnification, assumption or endorsement or any other like commitment of the obligations, liabilities (contingent or otherwise) or indebtedness of any persons; 1.24 Litigation there is no claim, action, suit, proceeding, arbitration, investigation or inquiry pending or threatened against, relating to or affecting iQ Canada or any of the assets, properties or businesses of iQ Canada or the transactions contemplated by this Agreement, nor is there any basis for any such claim, action, suit, proceeding, arbitration, investigation or inquiry which may have any adverse effect upon the assets, properties or business of iQ Canada or the transactions contemplated by this Agreement; none of iQ Canada or any officer, director, partner, agent or employee of iQ Canada have been enjoined or barred by order, judgment or decree of any court or other tribunal or any agency or self-regulatory body from engaging in or continuing any conduct or practice in connection with its business; and there is not in existence at the date hereof any order, judgment or decree of any court or other tribunal or any agency or self-regulatory body to which iQ Canada or the business, properties or assets of iQ Canada are subject or by which they are bound; 1.25 Books and Records the minute books of iQ Canada contain complete and accurate records of all meetings and accurately reflect all other corporate action of iQ Canada and the directors (and committees thereof) of iQ Canada as of the date hereof and all material transactions are properly recorded and filed; 1.26 Insurance iQ Canada currently maintains no insurance policies; 1.27 Terms of Employment iQ Canada is not a party to any collective agreement relating to its business with any labour union or other association of employees; iQ Canada is not aware of any attempt to organize any labour union or other association of employees in connection with its business; no part of its business has been certified as a unit appropriate for collective bargaining; and, additionally, every employee may be dismissed on one month's notice or less, without further liability; 1.28 Employment Information iQ Canada has no employees; 1.29 Employment Benefits iQ Canada has no accrued employment benefits; 1.30 Subsidiaries and Other Interests prior to the closing of the Share Exchange Agreement, iQ Canada has no subsidiaries and does own any securities issued by, or any equity or ownership interest in, any other person. After the closing of the Share Exchange Agreement, iQ Germany shall be a wholly-owned subsidiary of iQ Canada. iQ Canada is not subject to any obligation to make any investment in or to provide funds by way of loan, capital contribution or otherwise to any person; 1.31 Material Facts this Agreement does not contain any untrue statement by iQ Canada of a material fact nor has iQ Canada omitted to state in this Agreement a material fact necessary in order to make the statements contained herein not misleading; 1.32 Schedule Information all information concerning iQ Canada set out in the Schedules to this Agreement is accurate and correct in every material respect; 1.33 No Defaults except as otherwise expressly disclosed herein or in any Schedule hereto there has not been any default in any obligation to be performed under any material contract to which iQ Canada is party, each of which is in good standing and in full force and effect, unamended; and 1.34 Finder's Fee except in relation to the Finder's Fee, there is no firm, corporation, agency or other person that is entitled to a consultant's or finder's fee or any type of brokerage commission in relation to or in connection with the transactions contemplated by this Agreement as a result of any agreement with iQ Canada. EX-6.3 10 POOLING AGREEMENT NO. 1 Exhibit 6.3 POOLING AGREEMENT THIS AGREEMENT dated for reference the 25th day of August, 1998. AMONG: iQ Power Technology Inc. (hereinafter called the "Issuer") OF THE FIRST PART AND: MONTREAL TRUST COMPANY OF CANADA (hereinafter called the "Pooling Agent") OF THE SECOND PART AND: The undersigned shareholders of iQ Power Technology Inc. (hereinafter called the "Shareholders") OF THE THIRD PART WHEREAS: A. The Shareholders are the holders of, have subscribed for, or have agreed to purchase shares (the "Shares") of iQ Power Technology Inc. (the "Issuer") as described in Schedule "A" hereto; B. The Shareholders have agreed to place the Shares in pool with the Pooling Agent on the terms and conditions herein contained. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of TEN DOLLARS ($10.00) now paid by the parties hereto, each to the other (the receipt whereof is hereby acknowledged) and in further consideration of the mutual covenants and conditions hereinafter contained, the parties hereto agree as follows: 1. In this Agreement, "Effective Date" shall mean the day all of the issued and outstanding shares of iQ Battery Research and Development GmbH are acquired by the Issuer. 2. The Shareholders hereby agrees with the Issuer and the Pooling Agent that they will respectively deliver or cause to be delivered to the Pooling Agent certificates for their Shares in the Issuer as set out in Schedule "A" hereto to be held by the Pooling Agent and released, subject as hereinafter provided, as provided in Schedule "A". 3. The Shareholders shall be entitled to a letter or receipt from the Pooling Agent stating the number of Shares represented by certificates held for them by the Pooling Agent subject to the terms of this Agreement, but such letter or receipt shall not be assignable. 4. The Shareholders shall not sell, deal in, assign, transfer in any manner whatsoever or agree to sell, deal in, assign or transfer in any manner whatsoever any of the said Shares or beneficial ownership of or any interest in them; and the Pooling Agent shall not accept or acknowledge any transfer, assignment, declaration of trust or any other document evidencing a change in legal or beneficial ownership of or interest in the said Shares, except as may be required by reason of the death or bankruptcy of any one or more of the Shareholders, in which case the Pooling Agent shall hold the said certificates for Shares subject to this Agreement for whatever person or persons, firm or corporation that may thus become legally entitled thereto. 5. The Parties agree that the Shares are being pooled in the best interests of the Issuer and its shareholders and have not been pooled due to duress or undue influence. 6. This Agreement shall enure to the benefit of and be binding upon the parties hereto, their and each of their heirs, executors, administrators, successors and permitted assigns. Pooling Agreement Page 2 7. This Agreement may be executed in several parts in the same form and such parts so executed shall together constitute one original Agreement and such parts, if more than one, shall be read together and construed as if all the signing parties hereto had executed one copy of this Agreement. 8. Each of the signatories hereby agree that new shareholders of the Issuer may agree to be bound as parties to this Agreement from time to time and pool their shareholdings in the Issuer from time to time by amendments hereto which need only be signed by the Issuer, the Pooling Agent and the shareholders joining the Agreement from time to time. 9. The parties hereto agree that in consideration of the Pooling Agent agreeing to act as Pooling Agent as aforesaid, the Issuer and the Shareholders do hereby covenant and agree from time to time and at all times hereafter, well and truly to save, defend and keep harmless and fully indemnify the Pooling Agent, its successors and assigns, from and against all loss, costs, charges, damages and expenses which the said Pooling Agent, its successors and assigns may at any time or times hereafter bear, sustain, suffer or be put to for or by reason or on account of its acting as Pooling Agent pursuant to this Agreement. 10. It is further agreed by and between the parties hereto and, without restricting the foregoing indemnity, that in case proceedings should hereafter be taken in any Court respecting the Shares hereby pooled, the Pooling Agent shall not be obliged to defend any such action or submit its rights to the Court until it shall have been indemnified by other good and sufficient security in addition to the indemnity hereinbefore given against its costs of such proceedings. IN WITNESS WHEREOF the Issuer, the Pooling Agent, and the Shareholders, have executed these presents as of the day and year first above written. SIGNED, SEALED AND DELIVERED ) iQ Power Technology Inc. by the Issuer in the presence of: ) Name of Issuer ) ____________________________________ ) Per:______________________________ Witness ) signature ___________________________________ ) Suite 708, 1111 West Hastings Street Address ) Vancouver, British Columbia, Canada ___________________________________ ) V6E 2J3 City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Montreal Trust Company of Canada by the Pooling Agent in the ) Name of Pooling Agent presence of: ) ) ____________________________________ ) Per:______________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service Pooling Agreement Page 3 SIGNED, SEALED AND DELIVERED ) Mercator Profits Limited by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Helmut Krack by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Mayon Management Corp. by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Horst Dieter Braun by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Dr. Gunther Bauer by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service Pooling Agreement Page 4 SIGNED, SEALED AND DELIVERED ) Karin Wittkewitz by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Rainer Welke by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Peter E. Braun by a Shareholder in the presence of: ) Name of Shareholder ) ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SCHEDULE "A" The Shares shall be released as to: a. 1/4 of the Shares on April 1, 2000 (the "First Release Date"); b. 1/4 of the Shares three months following the First Release Date; c. 1/4 of the Shares six months following the First Release Date; and d. 1/4 of the Shares nine months following the First Release Date except that where the number of pooled shares of any Shareholder as at a Release Date are less than or equal to 50,000, then all such shares of that Shareholder shall be released. - ---------------------------------------- -------------------------------------- Shareholder Shares Pooled - ---------------------------------------- -------------------------------------- Mayon Management Corp. 236,213 Mercator Profits Limited 1,014,742 Helmut Krack 963,889 Horst Dieter Braun 1,750,000 Dr. Gunther Bauer 2,500,000 Peter E. Braun 2,100,000 Karin Wittkewitz 1,150,000 Rainer Welke 1,000,000 - ---------------------------------------- -------------------------------------- EX-6.4 11 FORM OF POOLING AMENDMENT AGREEMENT Exhibit 6.4 FORM OF POOLING AMENDMENT AGREEMENT THIS AGREEMENT dated for reference the _____ day of ____________________, 199___. AMONG: iQ Power Technology Inc. (hereinafter called the "Issuer") OF THE FIRST PART AND: MONTREAL TRUST COMPANY OF CANADA (hereinafter called the "Pooling Agent") OF THE SECOND PART AND: The undersigned shareholders of iQ Power Technology Inc. (hereinafter called the "Shareholders") OF THE THIRD PART WHEREAS: A. The Shareholder is a former atypical shareholder of iQ Battery Research and Development GmbH, who is the holder of, has subscribed for, or has agreed to purchase _________ shares (the "Shares") of the Issuer; B. The Issuer together with the Pooling Agent have entered into a Pooling Agreement dated August 25, 1998, with certain shareholders of the Issuer (the "Pooling Agreement") providing for the pooling of the shares of the Issuer owned by those shareholders and their subsequent release in accordance with the following release provisions: a. 1/4 of the Shares on April 1, 2000 (the "First Release Date"); b. 1/4 of the Shares three months following the First Release Date; c. 1/4 of the Shares six months following the First Release Date; and d. 1/4 of the Shares nine months following the First Release Date except that where the number of pooled shares of any Shareholder as at a Release Date are less than or equal to 50,000, then all such shares of that Shareholder shall be released; and C. The Shareholder desires to place the Shares in pool with the Pooling Agent on the terms and conditions of Pooling Agreement which provides that new shareholders of the Issuer may agree to be bound as parties to the Pooling Agreement from time to time and pool their shareholdings in the Issuer from time to time by amendments to the Pooling Agreement which need only be signed by the Issuer, the Pooling Agent and the shareholders joining the Pooling Agreement from time to time; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of TEN DOLLARS ($10.00) now paid by the parties hereto, each to the other (the receipt whereof is hereby acknowledged) and in further consideration of the mutual covenants and conditions hereinafter contained, the parties hereto agree as follows: 1. The Shareholder hereby agrees with the Issuer and the Pooling Agent to be bound as a party to the Pooling Agreement and to pool the Shares thereunder and for this purpose to deliver or cause to be delivered to the Pooling Agent certificates for his or her Shares in the Issuer to be held by the Pooling Agent and released as provided in the Pooling Agreement. 2. This Agreement shall enure to the benefit of and be binding upon the parties hereto, their and each of their heirs, executors, administrators, successors and permitted assigns. 3. This Agreement may be executed in several parts in the same form and such parts so executed shall together constitute one original Agreement and such parts, if more than one, shall be read together and construed as if all the signing parties hereto had executed one copy of this Agreement. 4. The parties hereto agree that in consideration of the Pooling Agent agreeing to act as Pooling Agent as aforesaid, the Issuer and the Shareholder do hereby covenant and agree from time to time and at all times hereafter, well and truly Pooling Amendment Agreement Page 2 to save, defend and keep harmless and fully indemnify the Pooling Agent, its successors and assigns, from and against all loss, costs, charges, damages and expenses which the said Pooling Agent, its successors and assigns may at any time or times hereafter bear, sustain, suffer or be put to for or by reason or on account of its acting as Pooling Agent pursuant to this Agreement and the Pooling Agreement. IN WITNESS WHEREOF the Issuer, the Pooling Agent, and the Shareholder, have executed these presents as of the day and year first above written. SIGNED, SEALED AND DELIVERED ) iQ Power Technology Inc. by the Issuer in the presence of: ) Name of Issuer ) ____________________________________ ) Per:______________________________ Witness ) signature ___________________________________ ) Suite 708, 1111 West Hastings Street Address ) Vancouver, British Columbia, Canada ___________________________________ ) V6E 2J3 City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) Montreal Trust Company of Canada by the Pooling Agent in the ) Name of Pooling Agent presence of: ) ) ____________________________________ ) Per:______________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service SIGNED, SEALED AND DELIVERED ) ___________________________________ by a Shareholder in the presence of: ) Name of Shareholder ) ____________________________________ ) __________________________________ Witness ) signature ___________________________________ ) ___________________________________ Address ) ___________________________________ ___________________________________ ) ___________________________________ City and Postal Code ) Address for service EX-6.5 12 MANAGEMENT AGREEMENT DATED 1/1/97 Exhibit 6.5 MANAGEMENT AGREEMENT THIS AGREEMENT made effective January 1, 1997. BETWEEN: 3099458 CANADA INC., a body corporate, duly incorporated under the Canada Business Corporations Act, having its head office situate at 304 - 850 Burrard Street, Vancouver, British Columbia, V6Z 2J1; (hereinafter called the "Corporation") OF THE FIRST PART AND: MAYON MANAGEMENT CORP., a body corporate, duly incorporated under the laws of the Province of British Columbia, having its head office Suite 304, 850 Burrard Street, Vancouver, British Columbia, V6Z 2J1; (hereinafter called the "Manager") OF THE SECOND PART WHEREAS: A. The Corporation is engaged in the natural resource industry and requires the services of a manager to fulfill the day-to-day responsibilities imposed on the Corporation; and B. The Manager has agreed to act as Manager of the Corporation; NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the premises, the mutual covenants and agreements herein contained the parties hereto hereby agree as follows: 1. The Corporation hereby agrees to retain the services of the Manager. 2. The retention of the Manager shall be for a period of one (1) year commencing January 1, 1997, and continuing thereafter from year to year unless and until terminated as hereinafter provided. 3. The Manager shall serve the Corporation and any subsidiaries from time to time owned by the Corporation in such capacity or capacities and shall perform such duties and exercise such powers as may from time to time be determined by Resolution of the Board of Directors of Corporation. Page 2 4. Notwithstanding the control vested in the Board of Directors with respect to the activities of the Manager, the Manager shall have from the date of commencement of this Agreement, the authority and responsibility to deal with the following subject matters: a. maintaining the services of professionals for the purpose of reviewing all prospects introduced to the Corporation for investment or participation; b. selecting on the basis of evaluations provided by professionals after consideration of the risk factors involved, suitable properties for acquisition and participation; c. negotiating contracts with potential participants in ventures to be participated in by the Corporation; d. negotiating for and obtaining the services of operators for the Corporation's prospects, or if the Corporation is the operator, negotiating for and obtaining the services of drilling contractors; e. conducting on-site inspections of all projects undertaken by the Corporation; f. arranging for an securing financings for the Corporation as may be permitted by regulatory bodies; g. arranging for timely disclosure of all material facts in the affairs of the Corporation; h. arranging for the collection of all receivables and production revenue to be obtained by the Corporation; i. negotiating for and concluding all oil and gas or other natural resource products sales contracts; j. establishing and maintaining suitable banking relations; k. ensuring the maintenance of proper accounting records and compiling monthly statements of the source and application of funds; l. arranging for payment of all payables of the Corporation and/or any subsidiaries; m. perusing and replying to all corporate inquiries and correspondence; n. securing and obtaining for the benefit of the Corporation competent tax advice, legal advice and services and accounting services; and o. and all such other duties as may be imposed upon the Manager from time to time due to the nature of the Corporation's business. 5. The remuneration of the Manager for his services hereunder shall be at the rate of SIXTY THOUSAND DOLLARS ($60,000) DOLLARS per year (together with any such increments thereto as the Board of Directors of the Corporation may from time to time) payable in equal Page 3 monthly installments in advance on the first business day of each calendar month, the first such installment to be payable on the first day of January, 1997. 6. The Manager shall be reimbursed for all traveling and out-of-pocket expenses actually and properly incurred by it in connection with its duties hereunder. In respect of expenses, the Manager shall provide statements and vouchers to the Corporation as and when required by it. 7. The terms "subsidiary" and "subsidiaries" as used herein mean any corporation or Corporation of which more than 50% of the outstanding shares carrying voting rights at all times are for the time being owned by or held for the benefit of the Corporation and any other corporation or company in like relation to the Corporation and include any corporation or company in like relation to a subsidiary. 8. Any notice required or permitted to be given hereunder to the Manager or to the Corporation shall be given by registered mail, postage prepaid, addressed to the Manager or the Corporation at their respective registered offices from time to time in existence. Any notice mailed as aforesaid shall be deemed to have been received by the Addressee on the second business day following the date of mailing. 9. This Agreement may be terminated: a. by the Manager on ninety (90) days written notice to the Corporation; or b. by the Corporation on thirty (30) days written notice to the Manager. 10. The provisions of this Agreement shall be governed by and interpreted in accordance with the laws of the Province of British Columbia. IN WITNESS WHEREOF, the parties hereto have hereunto caused these presents to be executed, as of the day and year first above written. THE CORPORATE SEAL of ) 3099458 CANADA INC. ) was hereunto affixed in the ) presence of: ) ) (c/s) __________________________________ ) ) __________________________________ ) THE CORPORATE SEAL of ) MAYON MANAGEMENT CORP. ) was hereunto affixed in the ) presence of: ) ) ) (c/s) __________________________________ ) ) __________________________________ ) EX-6.6 13 CONSULTING AGREEMENT DATED 8/25/98 Exhibit 6.6 CONSULTING AGREEMENT Date: 8/25/98 From: iQ Power Technology Inc. (the "Company") At: Suite 708, 1111 West Hastings Street Vancouver, BC, Canada V6E 2J3 To: MAYON MANAGEMENT CORP. (the "Consultant") At: Suite 304, 850 Burrard Street Vancouver, British Columbia, V6Z 2J1 IN CONSIDERATION for the mutual promises and covenants and the terms and conditions set out in Sections 1 through 9 attached, the Company hereby offers and the Consultant hereby accepts engagement with the Company upon the terms and conditions set forth herein: Position: Manager Responsibilities: Those described in Schedule A. Term of Agreement: This Agreement shall have a term of 3 years commencing immediately. Compensation: The Company shall pay the Consultant US$6,000 per month as consideration for the services of the Consultant hereunder, payable on the first business day of each month during the term of this Agreement. Governing Jurisdiction: British Columbia. Executed and delivered by and on behalf of the Company at ________________, effective the date and year first above written. iQ Power Technology Inc. Per:_________________________________ =============================================================================== Accepted, and signed, sealed and delivered by the Consultant at _____________________________________________, effective the date and year first above written. MAYON MANAGEMENT CORP. Per:_________________________________ Consulting Agreement Page 2 IN CONSIDERATION for the mutual promises and covenants and the terms and conditions contained in this Agreement, the Company hereby offers and the Consultant hereby accepts engagement with the Company upon the terms and conditions set forth herein. 1.00 Position - -------------- 1.01 The Consultant shall hold the position indicated in on the first page hereof and in such capacity, shall carry out the duties and responsibilities commensurate with that position as such duties are more specifically defined from time to time during the term of this Agreement by the Board of Directors of the Company. The Consultant shall provide the services of Russell French as an employee and, at the election of the Board of Directors of the Company, an officer of the Company. For the purpose of this Agreement, any reference to the Consultant shall include reference to Russell French. 2.00 Terms; Termination of Consulting - -------------------------------------- 2.01 The term of engagement pursuant to this Agreement shall be for the term stated on the first page hereof and thereafter engagement shall continue on an annual basis until terminated by the Company or the Consultant. Either party may terminate the Consultant's engagement as follows: a. the Consultant may terminate his services at any time and for any reason upon thirty days' written notice to the Company; b. the Company may terminate the Consultant's services at will. If the Company terminates the Consultant's engagement without cause, the Consultant's salary and benefits shall continue for at least the current term of this Agreement; c. the Company may terminate the Consultant's services for cause after reasonable notice of any non-performance has been given by the Company to the Consultant and a reasonable opportunity has been afforded to the Consultant to remedy any instance of non-performance. For purposes of the preceding sentence, "cause" shall include: i. fraud, ii. conviction or confession of an indictable offense, iii. destruction or theft of the Company's property, iv. misconduct materially injurious to the Company, or v. any breach or threatened breach of this Agreement; and d. the Company may terminate the Consultant's services should the Consultant no longer provide the services of Russ French as provided for in this agreement, and the Consultant's salary and benefits will be terminated on the date of such termination. 2.02 If the Consultant's engagement is terminated, he shall continue to be bound by the terms of Sections 5.00 and 6.00 of this Agreement. 3.00 Compensation - ------------------ 3.01 During the term of this Agreement, the Consultant shall be paid in accordance with the payment provisions on the first page hereof. The Company shall remit to all government and regulatory authorities all engagement, workers' compensation, and other statutory deductions as may be required by the law of the Governing Jurisdiction. The compensation may be increased from time to time subject to the approval of the Board of Directors of the Company. 4.00 Benefits - -------------- 4.01 The Consultant shall be entitled to on approval by the Board of Directors of the Company participate fully in all other benefits provided by the Company to employees in his category of engagement. Consulting Agreement Page 3 4.02 For the duration of Consultant's engagement hereunder, Consultant will be provided such holidays, sick leave and vacation as Company makes available to its management level employees generally or as specifically stated on the first page hereof. Company will reimburse Consultant in accordance with company policies and procedures for reasonable expenses necessarily incurred in the performance of duties hereunder against appropriate receipts and vouchers indicating the specific business purpose for each such expenditure. 5.00 Covenant Not to Compete - ----------------------------- 5.01 In consideration for the engagement granted to him under this Agreement, the Consultant agrees that he will not directly or indirectly compete with the Company during the term of his engagement with the Company and for a period of two years from the date on which his engagement with the Company terminates. The said covenant not to compete shall include all geographical areas in which the Company is actively marketing or developing products or operates directly or indirectly through a subsidiary or associated company having common control or ownership during the term of engagement or as of the engagement termination date and shall prohibit the following activities: a. the design, development, manufacture, production, sale, marketing, solicitation or acceptance of orders with regard to any product, concept, or business line which is directly competitive with any aspect of the business of the Company as conducted as of the termination date, whether or not using any confidential information; and b. having anywhere in the world where the Company is actively marketing products or services as of the date of termination of engagement, any business dealings or contacts except those which demonstrably do not relate to or compete with the business or interest of the Company; and c. being an employee, employer, Consultant, officer, director, partner, consultant, trustee or shareholder of more than five percent of the outstanding common stock of any person or entity that does any of the activities referred to in the preceding paragraphs (a) and (b). For the purpose of this section, the business of the Company includes, but is not limited to, the design, development, manufacture and distribution of lead-acid batteries and related technologies and products. 6.00 Ownership of Technology; Confidentiality - ---------------------------------------------- 6.01 Confidential Information The Consultant recognizes and acknowledges that during the course of his engagement, he will have access to certain information not generally known to the public, relating to the products, sales or business of the Company which may include, without limitation, software, literature, data, programs, customer contact lists, sources of supply, prospects or projections, manufacturing techniques, processes, formulas, research or experimental work, work in process, trade secrets or any other proprietary or confidential matter (collectively, the "Confidential Information"). The Consultant recognizes and acknowledges that this Confidential Information constitutes a valuable, special and unique asset of the Company, access to and knowledge of which are essential to the performance of the Consultant's duties. The Consultant acknowledges and agrees that all such Confidential Information, including without limitation that which the Consultant conceives or develops, either alone or with others, at any time during his engagement by the Company, is and shall remain the exclusive property of the Company. The Consultant further recognizes, acknowledges and agrees that, to enable the Company to perform services for its customers or its clients, such customers or clients may furnish to the Company or the Consultant Confidential Information concerning their business affairs, property, methods of operation or other data, that the goodwill afforded to the Company depends on the Company and its employees preserving the confidentiality of such information, and that such information shall be treated as Confidential Information of the Company for all purposes under this Agreement. 6.02 Non-Disclosure The Consultant agrees that, except as directed by the Company, the Consultant will not at any time, whether during or after his engagement with the Company, use or disclose to any person for any purpose other than for the benefit of the Company any Confidential Information, or permit any person to use, examine and/or make copies of any documents, files, data or other information sources which contain or are derived from Confidential Information, whether prepared by Consulting Agreement Page 4 the Consultant or otherwise coming into the Company's possession or control without the prior written permission of the Company. Consultant's obligations under subsections 6.01 and 6.02 are indefinite in term and shall survive the termination of this Agreement. 6.03 Work Product and Copyrights. Consultant agrees that all right, title and interest in and to the materials resulting from the performance of Consultant's duties at Company and all copies thereof, including works in progress, in whatever media, (the "Work"), will be and remain in Company upon their creation. Consultant will mark all Work with Company's copyright or other proprietary notice as directed by Company. Consultant further agrees: a. To the extent that any portion of the Work constitutes a work protectable under the copyright laws of the United States, Canada or the Federal Republic of Germany (the "Copyright Law"), that all such Work will be considered a "work made for hire" as such term is used and defined in the Copyright Law and that Company will be considered the "author" of such portion of the Work and the sole and exclusive owner throughout the world of copyright therein; and b. If any portion of the Work does not qualify as a "work made for hire" as such term is used and defined in the Copyright Law, that Consultant hereby assigns and agrees to assign to Company, without further consideration, all right, title and interest in and to such Work or in any such portion thereof and any copyright therein and further agrees to execute and deliver to Company, upon request, appropriate assignments of such Work and copyright therein and such other documents and instruments as Company may request to fully and completely assign such Work and copyright therein to Company, its successors or nominees, and that Consultant hereby appoints Company as attorney-in-fact to execute and deliver any such documents on Consultant's behalf in the event Consultant should fail or refuse to do so within a reasonable period following Company's request. 6.04 Inventions and Patents For purposes of this Agreement, "Inventions" includes, without limitation, information, inventions, contributions, improvements, ideas, or discoveries, whether patentable or not, and whether or not conceived or made during work hours. Consultant agrees that all Inventions conceived or made by Consultant during the period of engagement with Company belong to Company, provided they grow out of Consultant's work with Company or are related in some manner to the Company's business, including, without limitation, research and product development, and projected business of Company or its affiliated companies. Accordingly, Consultant will: a. Make adequate written records of such Inventions, which records will be Company's property; b. Assign to Company, at its request, any rights Consultant may have to such Inventions for the Federal Republic of Germany, the U.S., Canada, and all other countries; c. Waive and agree not to assert any moral rights Consultant may have or acquire in any Inventions and agree to provide written waivers from time to time as requested by Company; and d. Assist Company (at Company's expense) in obtaining and maintaining patents or copyright registrations with respect to such Inventions. Consultant understands and agrees that Company or its designee will determine, in its sole and absolute discretion, whether an application for patent will be filed on any Invention that is the exclusive property of Company, as set forth above, and whether such an application will be abandoned prior to issuance of a patent. Company will pay to Consultant, either during or after the term of this Agreement, the following amounts if Consultant is sole inventor, or Consultant's proportionate share if Consultant is joint inventor: $750 upon filing of the initial application for patent on such Invention; and $1,500 upon issuance of a patent resulting from such initial patent application, provided Consultant is named as an inventor in the patent. Consultant further agrees that Consultant will promptly disclose in writing to Company during the term of Consultant's engagement and for one (1) year thereafter, all Inventions whether developed during the time of such engagement or thereafter (whether or not Company has rights in such Consulting Agreement Page 5 Inventions) so that Consultant's rights and Company's rights in such Inventions can be determined. Consultant represents and warrants that Consultant has no Inventions, software, writings or other works of authorship useful to Company in the normal course of the Company's business, which were conceived, made or written prior to the date of this Agreement and which are excluded from the operation of this Agreement 6.05 Possession The Consultant agrees that upon request by the Company and in any event upon termination of engagement, the Consultant shall turn over to the Company all Confidential Information in the Consultant's possession or under his control which was created pursuant to, is connected with or derived from the Consultant's services to the Company, or which is related in any manner to the Company's business activities or research and development efforts, whether or not such materials are in the Consultant's possession as of the date of this Agreement. 7.00 Saving Provision - ---------------------- 7.01 The Company and the Consultant agree and stipulate that the agreements and covenants contained in the preceding Sections 5.00 and 6.00, including the scope of the restricted activities described therein and the duration and geographic extent of such restrictions, are fair and reasonably necessary for the protection of Confidential Information, goodwill and other protectable interests, in light of all of the facts and circumstances of the relationship between the Consultant and the Company. In the event a court of competent jurisdiction should decline to enforce any provision of the preceding paragraphs, such paragraphs shall be deemed to be modified to restrict the Consultant's competition with the Company to the maximum extent, in both time and geography, which the court shall find enforceable. 8.00 Injunctive Relief - ----------------------- 8.01 The Consultant acknowledges that disclosure of any Confidential Information or breach or threatened breach of any of the non-competition and non-disclosure covenants or other agreements contained herein would give rise to irreparable injury to the Company or clients of the Company which injury would be inadequately compensable in money damages. Accordingly, the Company or where appropriate, a client of the Company, may seek and obtain an injunctive relief from the breach or threatened breach of any provision, requirement or covenant of this Agreement, in addition to and not in limitation of any other legal remedies which may be available. The Consultant further acknowledges, agrees and stipulates that, in the event of the termination of engagement with the Company, the Consultant's experience and capabilities are such that the Consultant can obtain engagement in business activities which are of a different and non-competing nature with his activities as an Consultant of the Company and that the enforcement of a remedy hereunder by way of injunction shall not prevent the Consultant from earning a reasonable livelihood. The Consultant further acknowledges and agrees that the covenants contained herein are necessary for the protection of the Company's legitimate business interests and are reasonable in scope and content. 9.00 General - ------------- 9.01 This Agreement is made under and subject to the laws of the Governing Jurisdiction stated on the first page hereof. 9.02 Consultant authorizes Company, at its election, to reveal the terms of this Agreement to any future employer or potential employer of Consultant or as may otherwise be required under any disclosure laws applicable to the Company. 9.03 Consultant represents and warrants to Company that Consultant is free to enter into this Agreement and has no commitment, arrangement or understanding to or with any party that restrains or is in conflict with Consultant's performance of the covenants, services and duties provided for in this Agreement. 9.04 During Consultant's engagement, this Agreement may not be assigned by either party without the written consent of the other; provided, however, that Company may assign its rights and obligations under this Agreement without Consultant's consent to a successor by sale, merger or liquidation, if such successor carries on the business of the Company substantially in the form in which it is being conducted by the Company at the time of the sale, merger or liquidation. Consulting Agreement Page 6 9.05 This Agreement is binding upon Consultant, Consultant's heirs, personal representatives and permitted assigns and on Company, its successors and assigns. 9.06 Any notice required or permitted to be given hereunder are sufficient if in writing and delivered by hand, by facsimile or by registered or certified mail, to a party at its address noted on the first page hereof 9.07 If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void, shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the fullest extent permitted by law. If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties. 9.08 No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construe as a waiver of any subsequent breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law. 9.09 This instrument contains the entire agreement of the parties with respect to the relationship between Consultant and Company and supersedes all prior agreements and understandings, and there are no other representations or agreements other than as stated in this Agreement related to the terms and conditions of Consultant's engagement. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 9.10 In the event it becomes necessary to enforce this Agreement through legal action, whether or not a suit is actually commenced, the party which obtains substantial success in a legal action shall be entitled to his or actual reasonable solicitor's fees and disbursements. 9.11 Any reference in this Agreement in the masculine gender shall include the feminine and neuter genders, and vice versa, as appropriate. Any reference in this Agreement in the singular shall mean the plural and vice versa, as appropriate. 9.12 All references to money in this Agreement are or shall be to money in lawful money of the Governing Jurisdiction stated on the first page hereof. SCHEDULE A Duties shall include: a. retaining the services of professionals for the purpose of reviewing all prospects introduced to the Corporation for investment or participation; b. selecting on the basis of evaluations provided by professionals, after consideration of the risk factors involved, suitable business opportunities for acquisition and participation; c. negotiating contracts with potential participants in ventures to be participated in by the Corporation; d. negotiating for and obtaining the services of operators for the Corporation's prospects, or if the Corporation is the operator or manager, negotiating for and obtaining the services of independent contractors; e. conducting on-site inspections of all projects undertaken by the Corporation; f. arranging for and securing financings for the Corporation as may be permitted by regulatory bodies; g. arranging for timely disclosure of all material facts in the affairs of the Corporation; h. arranging for the collection of all receivables to be obtained by the Corporation; i. negotiating for and concluding all sales and other contracts; j. establishing and maintaining suitable banking relations; k. ensuring the maintenance of proper accounting records and compiling monthly statements of source and application of funds; l. arranging for payment of all payables of the Corporation and/or any subsidiaries; m. perusing and replying to all corporate enquiries and correspondence; n. securing and obtaining for the benefit of the Corporation competent tax advice, legal advice and services and accounting services; and o. and all such other duties as may be imposed upon the Manager from time to time due to the nature of the Corporation's business. All duties shall be performed in cooperation with the President of the Company. For greater certainty, the Consultant may not enter into any contracts on the Company's behalf without the prior written consent of the Company's Board of Directors. EX-6.7 14 EMPLOYMENT AGREEMENT WITH DR. GUNTHER C. BAUER Exhibit 6.7 EMPLOYMENT AGREEMENT Date: August 31, 1998 From: iQ Power Technology Inc. (the "Employer") At: Suite 708, 1111 West Hastings Street Vancouver, BC, Canada V6E 2J3 To: Dr. Gunther C. Bauer (the "Employee") At: Oderweg, No. 7 Ottobrunn, Germany 85521 IN CONSIDERATION for the mutual promises and covenants and the terms and conditions set out in Sections 1 through 9 attached, the Employer hereby offers and the Employee hereby accepts employment with the Employer upon the terms and conditions set forth herein: Position: Vice-President, Research & Development and Technical Advisor Responsibilities: Those described in Schedule A. Term of Agreement: This Agreement shall have a term of five (5) years commencing immediately. Compensation: The Employer shall pay the Employee US$8,000 per month as consideration for the services of the Employee hereunder, payable on the first business day of each month during the term of this Agreement. Governing Jurisdiction: Germany Jurisdiction: The Court at the domicile of the Employee is exclusively competent to hear any disputes resulting from or in the context of this contract. Executed and delivered by and on behalf of the Employer at Vancouver, - --------------------- BC effective the date and year first above written. iQ POWER TECHNOLOGY INC. /s/ Russ French - ---------------------------------------- =============================================================================== =============================================================================== Accepted, and signed, sealed and delivered by the Employee at August 31, - ------------------- 1998 effective the date and year first above written. /s/ Gunther Bauer - --------------------------------- DR. GUNTHER C. BAUER SCHEDULE A Duties shall include: a. responsibility for overall management of research and development, including day to day planning, organizing, and allocation of resources; b. conceiving and developing commercially viable products; and c. negotiating joint venture and other development agreements. IN CONSIDERATION for the mutual promises and covenants and the terms and conditions contained in this Agreement, the Employer hereby offers and the Employee hereby accepts employment with the Employer upon the terms and conditions set forth herein. 1.00 Position - ----------------- 1.01 The Employee shall hold the position indicated in on the first page hereof and in such capacity, shall carry out the duties and responsibilities commensurate with that position as such duties are more specifically defined from time to time during the term of this Agreement by the Board of Directors of the Employer. 2.00 Terms; Termination of Employment - ----------------------------------------- 2.01 The term of employment pursuant to this Agreement shall be for the term stated on the first page hereof. The employment shall continue on an annual basis until terminated by the Employer or the Employee. This termination is to be made latest six months before the end of the relevant year. The Employee may terminate his services at any time and for any reason upon 30 days written notice to the Employer. The Employer may terminate the Employee's services for any legitimate reasons in accordance with the German Labour Law and in accordance with the proceedings intended for such termination by the German Labour Law. 2.02 If the Employee's employment is terminated, he shall continue to be bound by the terms of Sections 5.00 and 6.00 of this Agreement. 3.00 Compensation - --------------------- 3.01 During the term of this Agreement, the Employee shall be paid in accordance with the payment provisions on the first page hereof. The Employer shall remit to all government and regulatory authorities all employment, workers' compensation, and other statutory deductions as may be required by the law of the Governing Jurisdiction. The compensation may be increased from time to time subject to the approval of the Board of Directors of the Employer. 4.00 Benefits - ----------------- 4.01 The Employee shall be entitled to on approval by the Board of Directors of the Employer participate fully in all other benefits provided by the Employer to employees in his category of employment. 4.02 For the duration of Employee's employment hereunder, Employee will be provided such holidays, sick leave and vacation as Employer makes available to its management level employees generally or as specifically stated on the first page hereof. Employer will reimburse Employee in accordance with company policies and procedures for reasonable expenses necessarily incurred in the performance of duties hereunder against appropriate receipts and vouchers indicating the specific business purpose for each such expenditure. 4.03 Upon execution of this Agreement, Employer will grant to Employee and employee will accept incentive stock options to purchase the number of shares of the Employer's Common Stock at the purchase price per share described on the first page hereof, if any, subject to the Employer's 1998 Stock Option Plan ("the Plan"). 5.00 Covenant Not to Compete - -------------------------------- 5.01 In consideration for the employment granted to him under this Agreement, the Employee agrees that he will not directly or indirectly compete with the Employer during the term of his employment with the Employer and for a period of two years from the date on which his employment with the Employer terminates. The said covenant not to compete shall include all geographical areas in which the Employer is actively marketing or developing products or operates directly or indirectly through a subsidiary or associated company having common control or ownership during the term of employment or as of the employment termination date and shall prohibit the following activities: a. the design, development, manufacture, production, sale, marketing, solicitation or acceptance of orders with regard to any product, concept, or business line which is directly competitive with any aspect of the business of the Employer as conducted as of the termination date, whether or not using any confidential information; and b. having anywhere in the world where the Employer is actively marketing products or services as of the date of termination of employment, any business dealings or contacts except those which demonstrably do not relate to or compete with the business or interest of the Employer; and c. being an employee, employer, Employee, officer, director, partner, consultant, trustee or shareholder of more than five percent of the outstanding common stock of any person or entity that does any of the activities referred to in the preceding paragraphs (a) and (b). For the purpose of this section, the business of the Employer includes, but is not limited to, the design, development, manufacture and distribution of lead-acid batteries and related technologies and products. 6.00 Ownership of Technology; Confidentiality - ------------------------------------------------- 6.01 Confidential Information The Employee recognizes and acknowledges that during the course of his employment, he will have access to certain information not generally known to the public, relating to the products, sales or business of the Employer which may include, without limitation, software, literature, data, programs, customer contact lists, sources of supply, prospects or projections, manufacturing techniques, processes, formulas, research or experimental work, work in process, trade secrets or any other proprietary or confidential matter (collectively, the "Confidential Information"). The Employee recognizes and acknowledges that this Confidential Information constitutes a valuable, special and unique asset of the Employer, access to and knowledge of which are essential to the performance of the Employee's duties. The Employee acknowledges and agrees that all such Confidential Information, including without limitation that which the Employee conceives or develops, either alone or with others, at any time during his employment by the Employer, is and shall remain the exclusive property of the Employer. The Employee further recognizes, acknowledges and agrees that, to enable the Employer to perform services for its customers or its clients, such customers or clients may furnish to the Employer or the Employee Confidential Information concerning their business affairs, property, methods of operation or other data, that the goodwill afforded to the Employer depends on the Employer and its employees preserving the confidentiality of such information, and that such information shall be treated as Confidential Information of the Employer for all purposes under this Agreement. 6.02 Non-Disclosure The Employee agrees that, except as directed by the Employer, the Employee will not at any time, whether during or after his employment with the Employer, use or disclose to any person for any purpose other than for the benefit of the Employer any Confidential Information, or permit any person to use, examine and/or make copies of any documents, files, data or other information sources which contain or are derived from Confidential Information, whether prepared by the Employee or otherwise coming into the Employer's possession or control without the prior written permission of the Employer. Employee's obligations under subsections 6.01 and 6.02 are indefinite in term and shall survive the termination of this Agreement. 6.03 Work Product and Copyrights Employee agrees that all right, title and interest in and to the materials resulting from the performance of Employee's duties at Employer and all copies thereof, including works in progress, in whatever media, (the "Work"), will be and remain in Employer upon their creation. Employee will mark all Work with Employer's copyright or other proprietary notice as directed by Employer. Employee further agrees: a. To the extent that any portion of the Work constitutes a work protectable under the copyright laws of the United States, Canada or the Federal Republic of Germany (the "Copyright Law"), that all such Work will be considered a "work made for hire" as such term is used and defined in the Copyright Law and that Employer will be considered the "author" of such portion of the Work and the sole and exclusive owner throughout the world of copyright therein; and b. If any portion of the Work does not qualify as a "work made for hire" as such term is used and defined in the Copyright Law, that Employee hereby assigns and agrees to assign to Employer, without further consideration, all right, title and interest in and to such Work or in any such portion thereof and any copyright therein and further agrees to execute and deliver to Employer, upon request, appropriate assignments of such Work and copyright therein and such other documents and instruments as Employer may request to fully and completely assign such Work and copyright therein to Employer, its successors or nominees, and that Employee hereby appoints Employer as attorney-in-fact to execute and deliver any such documents on Employee's behalf in the event Employee should fail or refuse to do so within a reasonable period following Employer's request. 6.04 Inventions and Patents For purposes of this Agreement, "Inventions" includes, without limitation, information, inventions, contributions, improvements, ideas, or discoveries, whether patentable or not, and whether or not conceived or made during work hours. Employee agrees that all Inventions conceived or made by Employee during the period of employment with Employer belong to Employer, provided they grow out of Employee's work with Employer or are related in some manner to the Employer's business, including, without limitation, research and product development, and projected business of Employer or its affiliated companies. Accordingly, Employee will: a. Make adequate written records of such Inventions, which records will be Employer's property; b. Assign to Employer, at its request, any rights Employee may have to such Inventions for the Federal Republic of Germany, the U.S., Canada, and all other countries; c. Waive and agree not to assert any moral rights Employee may have or acquire in any Inventions and agree to provide written waivers from time to time as requested by Employer; and d. Assist Employer (at Employer's expense) in obtaining and maintaining patents or copyright registrations with respect to such Inventions. Employee understands and agrees that Employer or its designee will determine, in its sole and absolute discretion, whether an application for patent will be filed on any Invention that is the exclusive property of Employer, as set forth above, and whether such an application will be abandoned prior to issuance of a patent. Employer will pay to Employee, either during or after the term of this Agreement, the following amounts if Employee is sole inventor, or Employee's proportionate share if Employee is joint inventor: $750 upon filing of the initial application for patent on such Invention; and $1,500 upon issuance of a patent resulting from such initial patent application, provided Employee is named as an inventor in the patent. Employee further agrees that Employee will promptly disclose in writing to Employer during the term of Employee's employment and for one (1) year thereafter, all Inventions whether developed during the time of such employment or thereafter (whether or not Employer has rights in such Inventions) so that Employee's rights and Employer's rights in such Inventions can be determined. Employee represents and warrants that Employee has no Inventions, software, writings or other works of authorship useful to Employer in the normal course of the Employer's business, which were conceived, made or written prior to the date of this Agreement and which are excluded from the operation of this Agreement. Notwithstanding the foregoing, where the subject matter of this subsection 6.04 is subject to German Labour Law, Inventions, patents and other inventions, suggestions for technical improvement and other made by the Employee are to be governed in accordance with the regulations of the German Gesetz uber Arbeitnehmererfindungen (Law on inventions made by employees) in its version in force. 6.05 Possession The Employee agrees that upon request by the Employer and in any event upon termination of employment, the Employee shall turn over to the Employer all Confidential Information in the Employee's possession or under his control which was created pursuant to, is connected with or derived from the Employee's services to the Employer, or which is related in any manner to the Employer's business activities or research and development efforts, whether or not such materials are in the Employee's possession as of the date of this Agreement. 7.00 Saving Provision - ------------------------- 7.01 The Employer and the Employee agree and stipulate that the agreements and covenants contained in the preceding Sections 5.00 and 6.00, including the scope of the restricted activities described therein and the duration and geographic extent of such restrictions, are fair and reasonably necessary for the protection of Confidential Information, goodwill and other protectable interests, in light of all of the facts and circumstances of the relationship between the Employee and the Employer. In the event a court of competent jurisdiction should decline to enforce any provision of the preceding paragraphs, such paragraphs shall be deemed to be modified to restrict the Employee's competition with the Employer to the maximum extent, in both time and geography, which the court shall find enforceable. 8.00 Injunctive Relief - -------------------------- 8.01 The Employee acknowledges that disclosure of any Confidential Information or breach or threatened breach of any of the non-competition and non-disclosure covenants or other agreements contained herein would give rise to irreparable injury to the Employer or clients of the Employer which injury would be inadequately compensable in money damages. Accordingly, the Employer or where appropriate, a client of the Employer, may seek and obtain an injunctive relief from the breach or threatened breach of any provision, requirement or covenant of this Agreement, in addition to and not in limitation of any other legal remedies which may be available. The Employee further acknowledges, agrees and stipulates that, in the event of the termination of employment with the Employer, the Employee's experience and capabilities are such that the Employee can obtain employment in business activities which are of a different and non-competing nature with his activities as an Employee of the Employer and that the enforcement of a remedy hereunder by way of injunction shall not prevent the Employee from earning a reasonable livelihood. The Employee further acknowledges and agrees that the covenants contained herein are necessary for the protection of the Employer's legitimate business interests and are reasonable in scope and content. 9.00 General - ---------------- 9.01 This Agreement is made under and subject to the laws of the Governing Jurisdiction stated on the first page hereof. 9.02 The Employee authorizes the Employer to reveal the terms of this Agreement if it is required so under any governmental laws applicable to the Employer. 9.03 Employee represents and warrants to Employer that Employee is free to enter into this Agreement and has no commitment, arrangement or understanding to or with any party that restrains or is in conflict with Employee's performance of the covenants, services and duties provided for in this Agreement. 9.04 During the Employee's employment or the duration of mutual duties between the Employee and the Employer under this Agreement, this Agreement and the mutual duties between the Employee and the Employer under this Agreement may not be assigned by either party without the written consent of the other. 613 a Burgerliches Gesetzbuch (Civil Code) is applicable. 9.05 This Agreement is binding upon the Employee and permitted assigns and on Employer, its successors and assigns. 9.06 Any notice required or permitted to be given hereunder are sufficient if in writing and delivered by hand, by facsimile or by registered or certified mail, to a party at its address noted on the first page hereof 9.07 If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void, shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the fullest extent permitted by law. If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties. 9.08 No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construe as a waiver of any subsequent breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law. 9.09 This instrument contains the entire agreement of the parties with respect to the relationship between Employee and Employer and supersedes all prior agreements and understandings, and there are no other representations or agreements other than as stated in this Agreement related to the terms and conditions of Employee's employment. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 9.10 In the event it becomes necessary to enforce this Agreement through legal action, whether or not a suit is actually commenced, the party which obtains substantial success in a legal action shall be entitled to his or actual reasonable solicitor's fees and disbursements. 9.11 Any reference in this Agreement in the masculine gender shall include the feminine and neuter genders, and vice versa, as appropriate. Any reference in this Agreement in the singular shall mean the plural and vice versa, as appropriate. 9.12 All references to money in this Agreement are or shall be to money in lawful money of the Governing Jurisdiction stated on the first page hereof. EX-6.8 15 EMPLOYMENT AGREEMENT WITH PETER E. BRAUN Exhibit 6.8 EMPLOYMENT AGREEMENT Date: August 31, 1998 From: iQ Power Technology Inc. (the "Employer") At: Suite 708, 1111 West Hastings Street Vancouver, BC, Canada V6E 2J3 To: Peter E. Braun (the "Employee") At: Schopenhauer Street, No. 23 Neubiberg, Germany 85579 IN CONSIDERATION for the mutual promises and covenants and the terms and conditions set out in Sections 1 through 9 attached, the Employer hereby offers and the Employee hereby accepts employment with the Employer upon the terms and conditions set forth herein: Position: President and Chief Executive Officer Responsibilities: Those described in Schedule A. Term of Agreement: This Agreement shall have a term of five (5) years commencing immediately. Compensation: The Employer shall pay the Employee US$8,500 per month as consideration for the services of the Employee hereunder, payable on the first business day of each month during the term of this Agreement. Governing Jurisdiction: Germany Jurisdiction: The Court at the domicile of the Employee is exclusively competent to hear any disputes resulting from or in the context of this contract. Executed and delivered by and on behalf of the Employer at Vancouver, - ---------------- BC effective the date and year first above written. iQ power technology inc. /s/ Russ French - ----------------------- ================================================================================ ================================================================================ Accepted, and signed, sealed and delivered by the Employee at August 31, 1998, effective the date and year first above written. /s/ Peter E. Braun - ----------------------------- PETER E. BRAUN SCHEDULE A Duties shall include: a. responsibility for overall management of the Employer, including day to day planning, organizing, and allocation of resources; b. negotiating sales and marketing agreements; c. negotiating financing for product development; and d. negotiating joint venture and other development agreements. IN CONSIDERATION for the mutual promises and covenants and the terms and conditions contained in this Agreement, the Employer hereby offers and the Employee hereby accepts employment with the Employer upon the terms and conditions set forth herein. 1.00 Position - ----------------- 1.01 The Employee shall hold the position indicated in on the first page hereof and in such capacity, shall carry out the duties and responsibilities commensurate with that position as such duties are more specifically defined from time to time during the term of this Agreement by the Board of Directors of the Employer. 2.00 Terms; Termination of Employment - ----------------------------------------- 2.01 The term of employment pursuant to this Agreement shall be for the term stated on the first page hereof. The employment shall continue on an annual basis until terminated by the Employer or the Employee. This termination is to be made latest six months before the end of the relevant year. The Employee may terminate his services at any time and for any reason upon 30 days written notice to the Employer. The Employer may terminate the Employee's services for any legitimate reasons in accordance with the German Labour Law and in accordance with the proceedings intended for such termination by the German Labour Law. 2.02 If the Employee's employment is terminated, he shall continue to be bound by the terms of Sections 5.00 and 6.00 of this Agreement. 3.00 Compensation - --------------------- 3.01 During the term of this Agreement, the Employee shall be paid in accordance with the payment provisions on the first page hereof. The Employer shall remit to all government and regulatory authorities all employment, workers' compensation, and other statutory deductions as may be required by the law of the Governing Jurisdiction. The compensation may be increased from time to time subject to the approval of the Board of Directors of the Employer. 4.00 Benefits - ----------------- 4.01 The Employee shall be entitled to on approval by the Board of Directors of the Employer participate fully in all other benefits provided by the Employer to employees in his category of employment. 4.02 For the duration of Employee's employment hereunder, Employee will be provided such holidays, sick leave and vacation as Employer makes available to its management level employees generally or as specifically stated on the first page hereof. Employer will reimburse Employee in accordance with company policies and procedures for reasonable expenses necessarily incurred in the performance of duties hereunder against appropriate receipts and vouchers indicating the specific business purpose for each such expenditure. 4.03 Upon execution of this Agreement, Employer will grant to Employee and employee will accept incentive stock options to purchase the number of shares of the Employer's Common Stock at the purchase price per share described on the first page hereof, if any, subject to the Employer's 1998 Stock Option Plan ("the Plan"). 5.00 Covenant Not to Compete - -------------------------------- 5.01 In consideration for the employment granted to him under this Agreement, the Employee agrees that he will not directly or indirectly compete with the Employer during the term of his employment with the Employer and for a period of two years from the date on which his employment with the Employer terminates. The said covenant not to compete shall include all geographical areas in which the Employer is actively marketing or developing products or operates directly or indirectly through a subsidiary or associated company having common control or ownership during the term of employment or as of the employment termination date and shall prohibit the following activities: a. the design, development, manufacture, production, sale, marketing, solicitation or acceptance of orders with regard to any product, concept, or business line which is directly competitive with any aspect of the business of the Employer as conducted as of the termination date, whether or not using any confidential information; and b. having anywhere in the world where the Employer is actively marketing products or services as of the date of termination of employment, any business dealings or contacts except those which demonstrably do not relate to or compete with the business or interest of the Employer; and c. being an employee, employer, Employee, officer, director, partner, consultant, trustee or shareholder of more than five percent of the outstanding common stock of any person or entity that does any of the activities referred to in the preceding paragraphs (a) and (b). For the purpose of this section, the business of the Employer includes, but is not limited to, the design, development, manufacture and distribution of lead-acid batteries and related technologies and products. 6.00 Ownership of Technology; Confidentiality - ------------------------------------------------- 6.01 Confidential Information The Employee recognizes and acknowledges that during the course of his employment, he will have access to certain information not generally known to the public, relating to the products, sales or business of the Employer which may include, without limitation, software, literature, data, programs, customer contact lists, sources of supply, prospects or projections, manufacturing techniques, processes, formulas, research or experimental work, work in process, trade secrets or any other proprietary or confidential matter (collectively, the "Confidential Information"). The Employee recognizes and acknowledges that this Confidential Information constitutes a valuable, special and unique asset of the Employer, access to and knowledge of which are essential to the performance of the Employee's duties. The Employee acknowledges and agrees that all such Confidential Information, including without limitation that which the Employee conceives or develops, either alone or with others, at any time during his employment by the Employer, is and shall remain the exclusive property of the Employer. The Employee further recognizes, acknowledges and agrees that, to enable the Employer to perform services for its customers or its clients, such customers or clients may furnish to the Employer or the Employee Confidential Information concerning their business affairs, property, methods of operation or other data, that the goodwill afforded to the Employer depends on the Employer and its employees preserving the confidentiality of such information, and that such information shall be treated as Confidential Information of the Employer for all purposes under this Agreement. 6.02 Non-Disclosure The Employee agrees that, except as directed by the Employer, the Employee will not at any time, whether during or after his employment with the Employer, use or disclose to any person for any purpose other than for the benefit of the Employer any Confidential Information, or permit any person to use, examine and/or make copies of any documents, files, data or other information sources which contain or are derived from Confidential Information, whether prepared by the Employee or otherwise coming into the Employer's possession or control without the prior written permission of the Employer. Employee's obligations under subsections 6.01 and 6.02 are indefinite in term and shall survive the termination of this Agreement. 6.03 Work Product and Copyrights Employee agrees that all right, title and interest in and to the materials resulting from the performance of Employee's duties at Employer and all copies thereof, including works in progress, in whatever media, (the "Work"), will be and remain in Employer upon their creation. Employee will mark all Work with Employer's copyright or other proprietary notice as directed by Employer. Employee further agrees: a. To the extent that any portion of the Work constitutes a work protectable under the copyright laws of the United States, Canada or the Federal Republic of Germany (the "Copyright Law"), that all such Work will be considered a "work made for hire" as such term is used and defined in the Copyright Law and that Employer will be considered the "author" of such portion of the Work and the sole and exclusive owner throughout the world of copyright therein; and b. If any portion of the Work does not qualify as a "work made for hire" as such term is used and defined in the Copyright Law, that Employee hereby assigns and agrees to assign to Employer, without further consideration, all right, title and interest in and to such Work or in any such portion thereof and any copyright therein and further agrees to execute and deliver to Employer, upon request, appropriate assignments of such Work and copyright therein and such other documents and instruments as Employer may request to fully and completely assign such Work and copyright therein to Employer, its successors or nominees, and that Employee hereby appoints Employer as attorney-in-fact to execute and deliver any such documents on Employee's behalf in the event Employee should fail or refuse to do so within a reasonable period following Employer's request. 6.04 Inventions and Patents For purposes of this Agreement, "Inventions" includes, without limitation, information, inventions, contributions, improvements, ideas, or discoveries, whether patentable or not, and whether or not conceived or made during work hours. Employee agrees that all Inventions conceived or made by Employee during the period of employment with Employer belong to Employer, provided they grow out of Employee's work with Employer or are related in some manner to the Employer's business, including, without limitation, research and product development, and projected business of Employer or its affiliated companies. Accordingly, Employee will: a. Make adequate written records of such Inventions, which records will be Employer's property; b. Assign to Employer, at its request, any rights Employee may have to such Inventions for the Federal Republic of Germany, the U.S., Canada, and all other countries; c. Waive and agree not to assert any moral rights Employee may have or acquire in any Inventions and agree to provide written waivers from time to time as requested by Employer; and d. Assist Employer (at Employer's expense) in obtaining and maintaining patents or copyright registrations with respect to such Inventions. Employee understands and agrees that Employer or its designee will determine, in its sole and absolute discretion, whether an application for patent will be filed on any Invention that is the exclusive property of Employer, as set forth above, and whether such an application will be abandoned prior to issuance of a patent. Employer will pay to Employee, either during or after the term of this Agreement, the following amounts if Employee is sole inventor, or Employee's proportionate share if Employee is joint inventor: $750 upon filing of the initial application for patent on such Invention; and $1,500 upon issuance of a patent resulting from such initial patent application, provided Employee is named as an inventor in the patent. Employee further agrees that Employee will promptly disclose in writing to Employer during the term of Employee's employment and for one (1) year thereafter, all Inventions whether developed during the time of such employment or thereafter (whether or not Employer has rights in such Inventions) so that Employee's rights and Employer's rights in such Inventions can be determined. Employee represents and warrants that Employee has no Inventions, software, writings or other works of authorship useful to Employer in the normal course of the Employer's business, which were conceived, made or written prior to the date of this Agreement and which are excluded from the operation of this Agreement. Notwithstanding the foregoing, where the subject matter of this subsection 6.04 is subject to German Labour Law, Inventions, patents and other inventions, suggestions for technical improvement and other made by the Employee are to be governed in accordance with the regulations of the German Gesetz uber Arbeitnehmererfindungen (Law on inventions made by employees) in its version in force. 6.05 Possession The Employee agrees that upon request by the Employer and in any event upon termination of employment, the Employee shall turn over to the Employer all Confidential Information in the Employee's possession or under his control which was created pursuant to, is connected with or derived from the Employee's services to the Employer, or which is related in any manner to the Employer's business activities or research and development efforts, whether or not such materials are in the Employee's possession as of the date of this Agreement. 7.00 Saving Provision 7.01 The Employer and the Employee agree and stipulate that the agreements and covenants contained in the preceding Sections 5.00 and 6.00, including the scope of the restricted activities described therein and the duration and geographic extent of such restrictions, are fair and reasonably necessary for the protection of Confidential Information, goodwill and other protectable interests, in light of all of the facts and circumstances of the relationship between the Employee and the Employer. In the event a court of competent jurisdiction should decline to enforce any provision of the preceding paragraphs, such paragraphs shall be deemed to be modified to restrict the Employee's competition with the Employer to the maximum extent, in both time and geography, which the court shall find enforceable. 8.00 Injunctive Relief - -------------------------- 8.01 The Employee acknowledges that disclosure of any Confidential Information or breach or threatened breach of any of the non-competition and non-disclosure covenants or other agreements contained herein would give rise to irreparable injury to the Employer or clients of the Employer which injury would be inadequately compensable in money damages. Accordingly, the Employer or where appropriate, a client of the Employer, may seek and obtain an injunctive relief from the breach or threatened breach of any provision, requirement or covenant of this Agreement, in addition to and not in limitation of any other legal remedies which may be available. The Employee further acknowledges, agrees and stipulates that, in the event of the termination of employment with the Employer, the Employee's experience and capabilities are such that the Employee can obtain employment in business activities which are of a different and non-competing nature with his activities as an Employee of the Employer and that the enforcement of a remedy hereunder by way of injunction shall not prevent the Employee from earning a reasonable livelihood. The Employee further acknowledges and agrees that the covenants contained herein are necessary for the protection of the Employer's legitimate business interests and are reasonable in scope and content. 9.00 General - ---------------- 9.01 This Agreement is made under and subject to the laws of the Governing Jurisdiction stated on the first page hereof. 9.02 The Employee authorizes the Employer to reveal the terms of this Agreement if it is required so under any governmental laws applicable to the Employer. 9.03 Employee represents and warrants to Employer that Employee is free to enter into this Agreement and has no commitment, arrangement or understanding to or with any party that restrains or is in conflict with Employee's performance of the covenants, services and duties provided for in this Agreement. 9.04 During the Employee's employment or the duration of mutual duties between the Employee and the Employer under this Agreement, this Agreement and the mutual duties between the Employee and the Employer under this Agreement may not be assigned by either party without the written consent of the other. 613 a Burgerliches Gesetzbuch (Civil Code) is applicable. 9.05 This Agreement is binding upon the Employee and permitted assigns and on Employer, its successors and assigns. 9.06 Any notice required or permitted to be given hereunder are sufficient if in writing and delivered by hand, by facsimile or by registered or certified mail, to a party at its address noted on the first page hereof 9.07 If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void, shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the fullest extent permitted by law. If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties. 9.08 No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construe as a waiver of any subsequent breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law. 9.09 This instrument contains the entire agreement of the parties with respect to the relationship between Employee and Employer and supersedes all prior agreements and understandings, and there are no other representations or agreements other than as stated in this Agreement related to the terms and conditions of Employee's employment. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 9.10 In the event it becomes necessary to enforce this Agreement through legal action, whether or not a suit is actually commenced, the party which obtains substantial success in a legal action shall be entitled to his or actual reasonable solicitor's fees and disbursements. 9.11 Any reference in this Agreement in the masculine gender shall include the feminine and neuter genders, and vice versa, as appropriate. Any reference in this Agreement in the singular shall mean the plural and vice versa, as appropriate. 9.12 All references to money in this Agreement are or shall be to money in lawful money of the Governing Jurisdiction stated on the first page hereof. EX-6.9 16 EMPLOYMENT AGREEMENT WITH GERHARD K. TRENZ Exhibit 6.9 EMPLOYMENT AGREEMENT Date: September 1, 1998 From: iQ Power Technology Inc. (the "Employer") At: Suite 708, 1111 West Hastings Street Vancouver, BC, Canada V6E 2J3 To: Gerhard K. Trenz (the "Employee") At: Heimstettener Street, No. 56 Kirchheim bei Munchen, Germany IN CONSIDERATION for the mutual promises and covenants and the terms and conditions set out in Sections 1 through 9 attached, the Employer hereby offers and the Employee hereby accepts employment with the Employer upon the terms and conditions set forth herein: Position: Vice-President, Finance Responsibilities: Those described in Schedule A. Term of Agreement: This Agreement shall have a term of three (3) years commencing immediately. Compensation: The Employer shall pay the Employee US$7,000 per month as consideration for the services of the Employee hereunder, payable on the first business day of each month during the term of this Agreement. Governing Jurisdiction: Germany Jurisdiction: The Court at the domicile of the Employee is exclusively competent to hear any disputes resulting from or in the context of this contract. Stock Options: to purchaser 100,000 shares of the Empoyer at US$1 each, Vesting as to 1/3 in each of the first 3 years of this Agreement Executed and delivered on _______________________________________ by and on behalf of the Employer at _______________________________________________, but effective the date and year first above written. iQ POWER TECHNOLOGY INC. /s/ Peter Braun - --------------------------------- President ================================================================================ ================================================================================ Accepted, and signed, sealed and delivered on ____________________ by the Employee at _________________________________________, but effective the date and year first above written. /s/ Gerhard K. Trenz - --------------------------------- GERHARD K. TRENZ SCHEDULE A Duties shall include: a. responsibility for overall financial management of the Employer, and its subsidiaries, including day to day planning, organizing, and allocation of resources; b. negotiating financing for product development; and c. negotiating joint venture and other development agreements. IN CONSIDERATION for the mutual promises and covenants and the terms and conditions contained in this Agreement, the Employer hereby offers and the Employee hereby accepts employment with the Employer upon the terms and conditions set forth herein. 1.00 Position 1.01 The Employee shall hold the position indicated in on the first page hereof and in such capacity, shall carry out the duties and responsibilities commensurate with that position as such duties are more specifically defined from time to time during the term of this Agreement by the Board of Directors of the Employer. 2.00 Terms; Termination of Employment 2.01 The term of employment pursuant to this Agreement shall be for the term stated on the first page hereof. The employment shall continue on an annual basis until terminated by the Employer or the Employee. The Employee or the Employer may terminate the services of the Employee at any time and for any reason upon 30 days written notice to the other. The Employer may terminate the Employee's services for any legitimate reasons in accordance with the German Labour Law and in accordance with the proceedings intended for such termination by the German Labour Law. 2.02 If the Employee's employment is terminated, he shall continue to be bound by the terms of Sections 5.00 and 6.00 of this Agreement. 3.00 Compensation 3.01 During the term of this Agreement, the Employee shall be paid in accordance with the payment provisions on the first page hereof. The Employer shall remit to all government and regulatory authorities all employment, workers' compensation, and other statutory deductions as may be required by the law of the Governing Jurisdiction. The compensation may be increased from time to time subject to the approval of the Board of Directors of the Employer. 4.00 Benefits 4.01 The Employee shall be entitled to on approval by the Board of Directors of the Employer participate fully in all other benefits provided by the Employer to employees in his category of employment. 4.02 For the duration of Employee's employment hereunder, Employee will be provided such holidays, sick leave and vacation as Employer makes available to its management level employees generally or as specifically stated on the first page hereof. Employer will reimburse Employee in accordance with company policies and procedures for reasonable expenses necessarily incurred in the performance of duties hereunder against appropriate receipts and vouchers indicating the specific business purpose for each such expenditure. 4.03 Upon execution of this Agreement, Employer will grant to Employee and employee will accept incentive stock options to purchase the number of shares of the Employer's Common Stock at the purchase price per share described on the first page hereof, if any, subject to the Employer's 1998 Stock Option Plan ("the Plan"). 5.00 Covenant Not to Compete 5.01 In consideration for the employment granted to him under this Agreement, the Employee agrees that he will not directly or indirectly compete with the Employer during the term of his employment with the Employer and for a period of two years from the date on which his employment with the Employer terminates. The said covenant not to compete shall include all geographical areas in which the Employer is actively marketing or developing products or operates directly or indirectly through a subsidiary or associated company having common control or ownership during the term of employment or as of the employment termination date and shall prohibit the following activities: a. the design, development, manufacture, production, sale, marketing, solicitation or acceptance of orders with regard to any product, concept, or business line which is directly competitive with any aspect of the business of the Employer as conducted as of the termination date, whether or not using any confidential information; and b. having anywhere in the world where the Employer is actively marketing products or services as of the date of termination of employment, any business dealings or contacts except those which demonstrably do not relate to or compete with the business or interest of the Employer; and c. being an employee, employer, Employee, officer, director, partner, consultant, trustee or shareholder of more than five percent of the outstanding common stock of any person or entity that does any of the activities referred to in the preceding paragraphs (a) and (b). For the purpose of this section, the business of the Employer includes, but is not limited to, the design, development, manufacture and distribution of lead-acid batteries and related technologies and products. 6.00 Ownership of Technology; Confidentiality 6.01 Confidential Information The Employee recognizes and acknowledges that during the course of his employment, he will have access to certain information not generally known to the public, relating to the products, sales or business of the Employer which may include, without limitation, software, literature, data, programs, customer contact lists, sources of supply, prospects or projections, manufacturing techniques, processes, formulas, research or experimental work, work in process, trade secrets or any other proprietary or confidential matter (collectively, the "Confidential Information"). The Employee recognizes and acknowledges that this Confidential Information constitutes a valuable, special and unique asset of the Employer, access to and knowledge of which are essential to the performance of the Employee's duties. The Employee acknowledges and agrees that all such Confidential Information, including without limitation that which the Employee conceives or develops, either alone or with others, at any time during his employment by the Employer, is and shall remain the exclusive property of the Employer. The Employee further recognizes, acknowledges and agrees that, to enable the Employer to perform services for its customers or its clients, such customers or clients may furnish to the Employer or the Employee Confidential Information concerning their business affairs, property, methods of operation or other data, that the goodwill afforded to the Employer depends on the Employer and its employees preserving the confidentiality of such information, and that such information shall be treated as Confidential Information of the Employer for all purposes under this Agreement. 6.02 Non-Disclosure The Employee agrees that, except as directed by the Employer, the Employee will not at any time, whether during or after his employment with the Employer, use or disclose to any person for any purpose other than for the benefit of the Employer any Confidential Information, or permit any person to use, examine and/or make copies of any documents, files, data or other information sources which contain or are derived from Confidential Information, whether prepared by the Employee or otherwise coming into the Employer's possession or control without the prior written permission of the Employer. Employee's obligations under subsections 6.01 and 6.02 are indefinite in term and shall survive the termination of this Agreement. 6.03 Work Product and Copyrights Employee agrees that all right, title and interest in and to the materials resulting from the performance of Employee's duties at Employer and all copies thereof, including works in progress, in whatever media, (the "Work"), will be and remain in Employer upon their creation. Employee will mark all Work with Employer's copyright or other proprietary notice as directed by Employer. Employee further agrees: a. To the extent that any portion of the Work constitutes a work protectable under the copyright laws of the United States, Canada or the Federal Republic of Germany (the "Copyright Law"), that all such Work will be considered a "work made for hire" as such term is used and defined in the Copyright Law and that Employer will be considered the "author" of such portion of the Work and the sole and exclusive owner throughout the world of copyright therein; and b. If any portion of the Work does not qualify as a "work made for hire" as such term is used and defined in the Copyright Law, that Employee hereby assigns and agrees to assign to Employer, without further consideration, all right, title and interest in and to such Work or in any such portion thereof and any copyright therein and further agrees to execute and deliver to Employer, upon request, appropriate assignments of such Work and copyright therein and such other documents and instruments as Employer may request to fully and completely assign such Work and copyright therein to Employer, its successors or nominees, and that Employee hereby appoints Employer as attorney-in-fact to execute and deliver any such documents on Employee's behalf in the event Employee should fail or refuse to do so within a reasonable period following Employer's request. 6.04 Inventions and Patents For purposes of this Agreement, "Inventions" includes, without limitation, information, inventions, contributions, improvements, ideas, or discoveries, whether patentable or not, and whether or not conceived or made during work hours. Employee agrees that all Inventions conceived or made by Employee during the period of employment with Employer belong to Employer, provided they grow out of Employee's work with Employer or are related in some manner to the Employer's business, including, without limitation, research and product development, and projected business of Employer or its affiliated companies. Accordingly, Employee will: a. Make adequate written records of such Inventions, which records will be Employer's property; b. Assign to Employer, at its request, any rights Employee may have to such Inventions for the Federal Republic of Germany, the U.S., Canada, and all other countries; c. Waive and agree not to assert any moral rights Employee may have or acquire in any Inventions and agree to provide written waivers from time to time as requested by Employer; and d. Assist Employer (at Employer's expense) in obtaining and maintaining patents or copyright registrations with respect to such Inventions. Employee understands and agrees that Employer or its designee will determine, in its sole and absolute discretion, whether an application for patent will be filed on any Invention that is the exclusive property of Employer, as set forth above, and whether such an application will be abandoned prior to issuance of a patent. Employer will pay to Employee, either during or after the term of this Agreement, the following amounts if Employee is sole inventor, or Employee's proportionate share if Employee is joint inventor: $750 upon filing of the initial application for patent on such Invention; and $1,500 upon issuance of a patent resulting from such initial patent application, provided Employee is named as an inventor in the patent. Employee further agrees that Employee will promptly disclose in writing to Employer during the term of Employee's employment and for one (1) year thereafter, all Inventions whether developed during the time of such employment or thereafter (whether or not Employer has rights in such Inventions) so that Employee's rights and Employer's rights in such Inventions can be determined. Employee represents and warrants that Employee has no Inventions, software, writings or other works of authorship useful to Employer in the normal course of the Employer's business, which were conceived, made or written prior to the date of this Agreement and which are excluded from the operation of this Agreement. Notwithstanding the foregoing, where the subject matter of this subsection 6.04 is subject to German Labour Law, Inventions, patents and other inventions, suggestions for technical improvement and other made by the Employee are to be governed in accordance with the regulations of the German Gesetz uber Arbeitnehmererfindungen (Law on inventions made by employees) in its version in force. 6.05 Possession The Employee agrees that upon request by the Employer and in any event upon termination of employment, the Employee shall turn over to the Employer all Confidential Information in the Employee's possession or under his control which was created pursuant to, is connected with or derived from the Employee's services to the Employer, or which is related in any manner to the Employer's business activities or research and development efforts, whether or not such materials are in the Employee's possession as of the date of this Agreement. 7.00 Saving Provision 7.01 The Employer and the Employee agree and stipulate that the agreements and covenants contained in the preceding Sections 5.00 and 6.00, including the scope of the restricted activities described therein and the duration and geographic extent of such restrictions, are fair and reasonably necessary for the protection of Confidential Information, goodwill and other protectable interests, in light of all of the facts and circumstances of the relationship between the Employee and the Employer. In the event a court of competent jurisdiction should decline to enforce any provision of the preceding paragraphs, such paragraphs shall be deemed to be modified to restrict the Employee's competition with the Employer to the maximum extent, in both time and geography, which the court shall find enforceable. 8.00 Injunctive Relief 8.01 The Employee acknowledges that disclosure of any Confidential Information or breach or threatened breach of any of the non-competition and non-disclosure covenants or other agreements contained herein would give rise to irreparable injury to the Employer or clients of the Employer which injury would be inadequately compensable in money damages. Accordingly, the Employer or where appropriate, a client of the Employer, may seek and obtain an injunctive relief from the breach or threatened breach of any provision, requirement or covenant of this Agreement, in addition to and not in limitation of any other legal remedies which may be available. The Employee further acknowledges, agrees and stipulates that, in the event of the termination of employment with the Employer, the Employee's experience and capabilities are such that the Employee can obtain employment in business activities which are of a different and non-competing nature with his activities as an Employee of the Employer and that the enforcement of a remedy hereunder by way of injunction shall not prevent the Employee from earning a reasonable livelihood. The Employee further acknowledges and agrees that the covenants contained herein are necessary for the protection of the Employer's legitimate business interests and are reasonable in scope and content. 9.00 General 9.01 This Agreement is made under and subject to the laws of the Governing Jurisdiction stated on the first page hereof. 9.02 The Employee authorizes the Employer to reveal the terms of this Agreement if it is required so under any governmental laws applicable to the Employer. 9.03 Employee represents and warrants to Employer that Employee is free to enter into this Agreement and has no commitment, arrangement or understanding to or with any party that restrains or is in conflict with Employee's performance of the covenants, services and duties provided for in this Agreement. 9.04 During the Employee's employment or the duration of mutual duties between the Employee and the Employer under this Agreement, this Agreement and the mutual duties between the Employee and the Employer under this Agreement may not be assigned by either party without the written consent of the other. 613 a Burgerliches Gesetzbuch (Civil Code) is applicable. 9.05 This Agreement is binding upon the Employee and permitted assigns and on Employer, its successors and assigns. 9.06 Any notice required or permitted to be given hereunder are sufficient if in writing and delivered by hand, by facsimile or by registered or certified mail, to a party at its address noted on the first page hereof 9.07 If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void, shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the fullest extent permitted by law. If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties. 9.08 No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construe as a waiver of any subsequent breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law. 9.09 This instrument contains the entire agreement of the parties with respect to the relationship between Employee and Employer and supersedes all prior agreements and understandings, and there are no other representations or agreements other than as stated in this Agreement related to the terms and conditions of Employee's employment. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 9.10 In the event it becomes necessary to enforce this Agreement through legal action, whether or not a suit is actually commenced, the party which obtains substantial success in a legal action shall be entitled to his or actual reasonable solicitor's fees and disbursements. 9.11 Any reference in this Agreement in the masculine gender shall include the feminine and neuter genders, and vice versa, as appropriate. Any reference in this Agreement in the singular shall mean the plural and vice versa, as appropriate. 9.12 All references to money in this Agreement are or shall be to money in lawful money of the Governing Jurisdiction stated on the first page hereof. EX-6.10 17 FORM OF CONFIDENTIALITY AGREEMENT Exhibit 6.10 FORM OF CONFIDENTIALITY AGREEMENT To: iQ Power Technology Inc. ("iQ Canada") ("iQ") Dear Sirs: Re: Confidential Information - ----------------------------- WHEREAS: A. The Undersigned is privy to the Confidential Information (as defined herein) and has knowledge about the Confidential Information; B. The Undersigned has acquired shares of iQ Canada (the "Shares") pursuant to a share exchange agreement dated August 25, 1998 (the "Share Exchange Agreement") between the Undersigned, iQ Canada, iQ Battery Research and Development GmbH ("iQ Germany") (collectively, iQ Canada and iQ Germany are defined herein as "iQ") and other shareholders of iQ Germany pursuant to which iQ Canada obtained ownership of the Confidential Information; and C. The Undersigned has agreed with iQ Canada to enter into an agreement to protect the confidentiality of the Confidential Information; NOW THEREFORE in consideration of the Shares and the payment of $1 by iQ Canada to the Undersigned, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1.00 COVENANT NOT TO COMPETE - ----------------------------- 1.01 For the purpose of this agreement, "iQ's Business" shall mean the design, development, manufacture, distribution and marketing of batteries and related technologies and products in connection with the transportation industry. 1.02 In consideration for the Shares issued to him under the Share Exchange Agreement, the Undersigned agrees that he will not directly or indirectly compete with iQ for a period of five (5) years from the date hereof. The said covenant not to compete shall include all geographical areas in which iQ is actively marketing or developing products or operates directly or indirectly through a subsidiary or associated company having common control or ownership during the term of this Agreement and shall prohibit the following activities: a. the design, development, manufacture, production, sale, marketing, solicitation or acceptance of orders with regard to any product, concept, or business line which is directly competitive with any aspect of iQ's Business as conducted as of the termination date, whether or not using any confidential information; and Page 2 b. having anywhere in the world where iQ is actively marketing products or services during the term of this agreement, any business dealings or contacts except those which demonstrably do not relate to or compete with the business or interest of iQ; and c. being an employee, employer, officer, director, partner, consultant, trustee or shareholder of more than five percent of the outstanding common stock of any person or entity that does any of the activities referred to in the preceding paragraphs (a) and (b). The Undersigned may, on a case-by-case basis, provide iQ with a written proposal for an Invention which the Undersigned desires to develop and potentially commercialize in contravention of this Section. In each instance, upon receiving the Undersigned's written proposal, iQ shall have no more than 180 days to evaluate and decide whether it desires to grant or deny the Undersigned an exception to the non-compete contained herein. Any failure by iQ to respond in writing to the Undersigned's proposal within such 180-day period shall be deemed to be a consent to allow the Undersigned to proceed to develop and/or commercialize the Invention described in such proposal without the involvement of iQ. Otherwise, iQ shall indicate in writing to the Undersigned within such 180-day period whether it shall consent to such proposal, such consent not to be unreasonably withheld. Should iQ withhold its consent, it may elect at its sole discretion to enter into negotiations with the Undersigned with respect to the development and/or potential commercialization of the subject Invention. Such negotiations shall be in good faith but are not subject to being completed during the 180-day evaluation period. Any failure by the parties to complete such good faith negotiations shall be deemed a withholding of iQ's consent hereunder. The Undersigned shall submit a copy of all proposals hereunder to a patent attorney designated by iQ. 2.00 OWNERSHIP OF TECHNOLOGY; CONFIDENTIALITY - ---------------------------------------------- 2.01 Confidential Information - ------------------------------ The Undersigned recognizes and acknowledges that prior to or during the term of this agreement, he might have or have had access to certain information not generally known to the public, relating to the products, sales or business of iQ which may include, without limitation, software, literature, data, programs, customer contact lists, sources of supply, prospects or projections, manufacturing techniques, processes, formulas, research or experimental work, work in process, trade secrets or any other proprietary or confidential matter (collectively, the "Confidential Information"). The Undersigned recognizes and acknowledges that this Confidential Information constitutes a valuable, special and unique asset of iQ. The Undersigned acknowledges and agrees that all such Confidential Information is and shall remain the exclusive property of iQ. The Undersigned further recognizes, acknowledges and agrees that, to enable iQ to perform services for its customers or its clients, such customers or clients may furnish or have furnished to iQ Confidential Information concerning their business affairs, property, methods of operation or other data, that the goodwill afforded to iQ depends on the iQ and its employees preserving the Page 3 confidentiality of such information, and that such information shall be treated as Confidential Information of iQ for all purposes under this Agreement. 2.02 Non-Disclosure - -------------------- The Undersigned agrees that, except with the prior consent of iQ, the Undersigned will not at any time during the term of this agreement, use or disclose to any person for any purpose any Confidential Information, or permit any person to use, examine and/or make copies of any documents, files, data or other information sources which contain or are derived from Confidential Information, whether prepared by the Undersigned or otherwise coming into the Undersigned's possession or control without the prior written permission of iQ. The Undersigned's obligations under subsections 2.01 and 2.02 are indefinite in term and shall survive the termination of this Agreement. 2.03 Work Product and Copyrights - --------------------------------- The Undersigned agrees that all right, title and interest in and to the materials resulting from past, current or future work performed for iQ and all copies thereof, including works in progress, in whatever media, (the "Work"), will be and remain in iQ upon their creation. The Undersigned will mark all Work with iQ's copyright or other proprietary notice as directed by iQ. The Undersigned further agrees: a. To the extent that any portion of the Work constitutes a work protectable under the copyright laws of the United States, Canada or the Federal Republic of Germany (the "Copyright Law"), that all such Work will be considered a "work made for hire" as such term is used and defined in the Copyright Law and that iQ will be considered the "author" of such portion of the Work and the sole and exclusive owner throughout the world of copyright therein; and b. If any portion of the Work does not qualify as a "work made for hire" as such term is used and defined in the Copyright Law, that the Undersigned hereby assigns and agrees to assign to iQ, without further consideration, all right, title and interest in and to such Work or in any such portion thereof and any copyright therein and further agrees to execute and deliver to iQ, upon request, appropriate assignments of such Work and copyright therein and such other documents and instruments as iQ may request to fully and completely assign such Work and copyright therein to iQ, its successors or nominees, and that the Undersigned hereby appoints iQ as attorney-in-fact to execute and deliver any such documents on the Undersigned's behalf in the event the Undersigned should fail or refuse to do so within a reasonable period following iQ's request. 2.04 Inventions and Patents - ---------------------------- For purposes of this Agreement, "Inventions" includes, without limitation, information, inventions, contributions, improvements, ideas,discoveries, or works, whether patentable or not, and whether or not conceived or made during work hours. The Undersigned agrees that all Inventions conceived or made by the Undersigned belong to iQ, provided they grow out of the Undersigned's work with iQ or are related in some manner to iQ's Business, including, without Page 4 limitation, research and product development, and projected business of iQ or its affiliated companies. Accordingly, the Undersigned will: a. Make adequate written records of such Inventions, which records will be iQ's property; b. Assign to iQ, at its request, any rights the Undersigned may have to such Inventions for the Federal Republic of Germany, the U.S., Canada, and all other countries; c. Waive and agree not to assert any moral rights the Undersigned may have or acquire in any Inventions and agree to provide written waivers from time to time as requested by iQ; and d. Assist iQ (at iQ's expense) in obtaining and maintaining patents or copyright registrations with respect to such Inventions. The Undersigned understands and agrees that iQ or its designee will determine, in its sole and absolute discretion, whether an application for patent will be filed on any Invention that is the exclusive property of iQ, as set forth above, and whether such an application will be abandoned prior to issuance of a patent. The Undersigned further agrees that the Undersigned will promptly disclose in writing to iQ during the term of this agreement and for one (1) year thereafter, all Inventions whether developed during the term of this agreement or thereafter (whether or not iQ has rights in such Inventions) so that the Undersigned's rights and iQ's rights in such Inventions can be determined. The Undersigned represents and warrants that the Undersigned has no Inventions, software, writings or other works of authorship useful to iQ in the normal course of iQ's Business, which were conceived, made or written prior to the date of this Agreement and which are excluded from the operation of this Agreement. 2.05 Possession - ---------------- The Undersigned agrees that upon request by iQ, the Undersigned shall turn over to iQ all Confidential Information in the Undersigned's possession or under his control, or which is related in any manner to the iQ's Business activities or research and development efforts, whether or not such materials are in the Undersigned's possession as of the date of this Agreement. 3.00 SAVING PROVISION - ---------------------- 3.01 iQ and the Undersigned agree and stipulate that the agreements and covenants contained in the preceding Sections 1.00 and 2.00, including the scope of the restricted activities described therein and the duration and geographic extent of such restrictions, are fair and reasonably necessary for the protection of Confidential Information, goodwill and other protectable interests, in light of all of the facts and circumstances of the relationship between the Undersigned and iQ. In the event a court of competent jurisdiction should decline to enforce any provision of the preceding paragraphs, such Page 5 paragraphs shall be deemed to be modified to restrict the Undersigned's competition with the iQ to the maximum extent, in both time and geography, which the court shall find enforceable. 4.00 INJUNCTIVE RELIEF - ----------------------- 4.01 The Undersigned acknowledges that disclosure of any Confidential Information or breach or threatened breach of any of the non-competition and non-disclosure covenants or other agreements contained herein would give rise to irreparable injury to iQ or clients of iQ which injury would be inadequately compensable in money damages. Accordingly, iQ or where appropriate, a client of iQ, may seek and obtain an injunctive relief from the breach or threatened breach of any provision, requirement or covenant of this Agreement, in addition to and not in limitation of any other legal remedies which may be available. The Undersigned further acknowledges, agrees and stipulates that the Undersigned's experience and capabilities are such that the Undersigned can obtain employment in business activities which are of a different and non-competing nature with the business activities of iQ and that the enforcement of a remedy hereunder by way of injunction shall not prevent the Undersigned from earning a reasonable livelihood. The Undersigned further acknowledges and agrees that the covenants contained herein are necessary for the protection of iQ's legitimate business interests and are reasonable in scope and content. 5.00 GENERAL - ------------- 5.01 This Agreement and all matters arising hereunder will be governed by and construed in accordance with the laws of the Province of British Columbia, and the laws of Canada applicable therein, and all disputes and claims, whether for specific performance, injunction, declaration or otherwise howsoever both at law and in equity, arising out of or in any way connected with this Agreement will be referred to the courts of the Province of British Columbia exclusively, and to the Supreme Court of Canada if need be, and, by execution and delivery of this Agreement, each party hereby irrevocably submits and attorns to such jurisdiction. 5.02 The Undersigned authorizes iQ to reveal the terms of this Agreement if it is required so under any governmental laws applicable to iQ. 5.03 The Undersigned represents and warrants to iQ that the Undersigned is free to enter into this Agreement and has no commitment, arrangement or understanding to or with any party that restrains or is in conflict with the Undersigned's performance of the covenants, services and duties provided for in this Agreement. 5.04 During the term of this Agreement, this Agreement and the mutual duties between the Undersigned and iQ under this Agreement may not be assigned by either party without the written consent of the other. 5.05 This Agreement is binding upon the Undersigned and permitted assigns and on iQ, its successors and assigns. Page 6 5.06 Any notice required or permitted to be given hereunder are sufficient if in writing and delivered by hand, by facsimile or by registered or certified mail, to a party. 5.07 If any provision of this Agreement or compliance by any of the parties with any provision of this Agreement constitutes a violation of any law, or is or becomes unenforceable or void, then such provision, to the extent only that it is in violation of law, unenforceable or void, shall be deemed modified to the extent necessary so that it is no longer in violation of law, unenforceable or void, and such provision will be enforced to the fullest extent permitted by law. If such modification is not possible, said provision, to the extent that it is in violation of law, unenforceable or void, shall be deemed severable from the remaining provisions of this Agreement, which provisions will remain binding on the parties. 5.08 No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder will operate as a waiver thereof; nor will any single or partial waiver of a breach of any provision of this Agreement operate or be construe as a waiver of any subsequent breach; nor will any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by law. 5.09 This instrument contains the entire agreement of the parties hereto and supersedes all prior agreements, representations, warranties, statements, promises, information, arrangements and understandings, whether oral or written, express or implied, with respect to the subject matter hereof. This Agreement may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 5.10 In the event it becomes necessary to enforce this Agreement through legal action, whether or not a suit is actually commenced, the party which obtains substantial success in a legal action shall be entitled to his actual reasonable solicitor's fees and disbursements. 5.11 Any reference in this Agreement in the masculine gender shall include the feminine and neuter genders, and vice versa, as appropriate. Any reference in this Agreement in the singular shall mean the plural and vice versa, as appropriate. Page 7 5.12 All references to money in this Agreement shall be to money in lawful money of the United States of America. Dated effective August 25, 1998. Yours truly, Undersigned: ____________________________________ HORST DIETER BRAUN The above-noted terms and conditions are hereto agreed to by iQ effective August 25, 1998. iQ POWER TECHNOLOGY INC. Per: ____________________________________ EX-6.11 18 OFFICE RENTAL AGREEMENT Translation from the German into the English Language Lease Agreement: Spima/IQ Battery Exhibit 6.11 Page 1 of 6 Lease Agreement Between Spima Spitzenmanufaktur GmbH, represented by the business manager Heike Gunthe, Henrich-Heine-Strasse 5, 09557 Floha hereafter referred to as "Lessor" - and the firm IQ BATTERY Research & Development GmbH, represented by the business manager Peter E. Braun, Heinrich-Heine-Strasse 5, 09557 Floha hereafter referred to as "Lessee" - Sec. 1 Subject of Lease (1) The Lessor leases to the Lessee the Subject of Lease, as described in the Sec. (2). (2) Subject of the Lease is an office space located at Heinrich-Heine-Strasse 5, 09557 Floha of 60 sq.m. and the laboratory space of 105 sq.m. on the 3 floor, which are color marked on the orientation sketch in the attached Enclosure 1. Sec.2 Use of the Subject of Lease (1) Subject of the lease is leased to the Lessee as Office and Laboratory. Any changes in use need prior written consent of the Lessor. (2) Sublease needs a prior written consent from the Lessor. (3) The Lessee has official risk permits with regard to their persons and the nature of business; and fulfills technical and other requirements as to capitalization, which are based on the laws and other official regulations, in order to fulfill its financial obligations. Page 2 of 6 Sec. 3 Time of Lease The leasing relation begins, upon expiry of Main Lease Agreement between Lessor and FZM Mittelsachsert GmbH on December 31, 1997, i.e. on January 01, 1998. Legal terms of termination are in force. Sec. 4 Rent (1) The monthly rent for the subject of lease as described in Sec.1 p.2 is for office space of 60 sq.m. x 7.00 DM/sq.m. = DM 420.00 laboratory space of 105 sq.m. x 4.50 DM/sq.m. = DM 472.50 ------------ DM 892.50 plus 15% value added tax DM 113.88 ------------ DM 1,026.38 (verbally: one thousand and twenty six Deutsch Mark 38/100). Statutory sales tax is added on. (2) The rent is always due by the third of each month and it is to be paid to the account of the Lessor at the Savings Bank Plauen, No. 3 180 007 (BLZ 870 580 00) at no operational charges. Sec. 5 Working Costs and Extra Expenses. The Lessee is responsible for taking over of extra fixed expenses, as outlined in the Enclosure 2 to this Agreement. Method of payment is specified in the Enclosure 2, a the part of this Agreement. In addition the Lessee is liable for all operational costs resulting from the use of the Subject to Lease. Sec. 6 Delivery of the Subject of Lease (1) The Lessor shall deliver to the Lessee and the Lessee shall accept the Subject of Lease as described in Sec. 1 Sec.2, as well as all belonging keys by January 01, 1998. (2) The Lessee is acquainted with the subject to lease, as per previous lease agreement with FZM GmbH Mittelsachsen. The Lessee shall take over as is, according to the agreement and with exception for specific given warranty, shall accept also hidden deficiencies, as far as such exception is legally acceptable. Page 3 of 6 Sec. 7 Insurances (1) The Lessor has taken land- and fire-insurance policies. The resulting insurance premiums shall be included proportionately in the bill to the Lessee as per Enclosure 2. (2) The Lessee must pay at own cost premiums for liability insurance as well as any other insurance specific to the nature of their business with a sufficient coverage. The Lessor is entitled to inquire about existence of such insurance. Sec. 8 Liability of the Lessee (1) The Lessee is liable to the Lessor for damages caused by negligence in any of the necessary duties. Furthermore the Lessee is liable to the Lesser for all damages caused by employees, suppliers, clients, visitors etc. Onus of proof is on the Lessee. (2) The Lessee shall promptly take care to compensate for damages. Should this obligation not be fulfilled upon a written notice and within a prescribed term, the Lessor reserves right to undertake necessary works at the expense of the Lessee. In case of emergency it is not necessary to issue a written notice with a set term. Sec. 9 Upkeep, Changes in the Subject to Lease (1) During the period of the lease, the Lessee is obligated at their expense to provide professional repairs and to maintain the premises in visually good condition. In particular such repairs shall be wallpapering, painting or whitening walls and ceilings, painting of floors, heating elements including pipes, interior doors, as well as windows and exterior doors from the inside. (2) The Lessee is entitled, at own cost, to install equipment in the subject to lease, providing all official regulations and legal specifications are met. (3) Any structural changes of the subject to lease require prior written permission of the Lessor. The permission can be denied only for important reasons. In each case the Lessee carries the associated construction and legal risks. Page 4 of 6 (4) At the end of the Leasing Term, the Lessor is entitled to demand from the Lessee to have the subject to lease returned in the original condition, as it was on the day of leasing out, as if there were no changes in original condition made by the Lessor, unless with express permission of the Lessor. (5) By the end of the lease, the Lessor is not obligated to reimburse the Lessee for structural changes or equipment installed in the subject to lease, unless the Lessor will undertake such obligation in writing. (6) The Lessee is entitled, and obligated on request of the Lessor, to remove from the subject to lease as defined in Sec. 1 p.2, any installed equipment which is their property. The Lessor can exercise rights of removal by payment of measurable compensation, if the Lessee has no legal interest in removal. Sec. 10 Exterior Advertising The Lessee is entitled to erect an advertising board on the subject to lease, within limits of legal acceptability. Necessary official restrictions are to be obeyed by the Lessee. Sec. 11 Changes to Account, Discounts The Lessee can make claims against the Lessor in respect of rent or any other counterclaims and resulting from this contract regarding changes or refunds, when such demand was acknowledged by the Lesser, or when the Lessee is able to present a legal judgement. Sec. 12 Entry to the Subject to Lease The Lessor can visit the subject to lease during the normal business hours, upon providing legal notice in advance, in order to inspect the condition of the subject to lease. Sec. 13 Termination for Important Reason (1) The Lessor may terminate the Leasing Agreement prematurely, Page 5 of 6 a.) when the Lessee, despite of a written warning, remains in arrears with rent for more than two months (extra expenses are calculated as monthly rent), b.) when the Lessee suspends payments, or if there is an insolvency, total inability to pay, or a settlement process against their property was commenced or such commencement indicates their total inability to pay, or if their industry ceases to exist, c.) when the Lessee, despite of a written warning, undertakes use of the subject to lease contrary to the agreement. (2) The right to termination on other important grounds remains unaffected. (3) In case of an early conclusion of the lease agreement through termination on important grounds, the other party to the contract responsible for the termination is liable for any incurred losses. (4) Each termination must be communicated by registered mail. For the protection of terms the communication must be made by the opposing party. Sec. 14 Ending of the Lease Agreement (1) At the end of the lease agreement the Lessee is obligated to return the subject to lease in orderly condition. At the time of return a surrender report will be prepared, where all visible deficiencies and complaints will be noted. (2) The deficiencies recorded in the surrender report are to be promptly settled by the Lessee at their expense. Upon written notice and with setting an appropriate term, the Lessor may proceed with repairs of deficiencies at the Lessee's expense. Sec. 15 End Definitions (1) There are no other agreements other than this agreement. Changes and/or supplements to this agreement require a written form. This is also valid for the written form itself. (2) Should any of clauses of this contract be ineffective, or should this contract contain omissions, the effectiveness of the remaining clauses remains in force. In place of ineffective clauses effective clauses will be valid, such which are equivalent both in sense and purpose to the ineffective clause. In case of omissions, a such relevant clause is valid, which is reasonable in sense and purpose of this contract, should that clause had been agreed upon, when thought of at the time of opportunity arisen. Page 6 of 6 Floha, December 09, 1997 Floha, December 09, 1997 Jorg Peter Strassburger Lawyer Monckbergerstrasse 11 20095 Hamburg Tel. 040 32 55 77-0 Fax 040 32 55 77-99 - ---------------------------------------- --------------------------------- /s/ Peter E. Braun /s/ Heike Gunthel IQ BATTERY Research & Development Spima Spitzenmanufacur GmbH GmbH, by Peter E. Braun, Business Manager by Heike Gunthel, Business Manager /Enclosures EX-6.12 19 COMMERCIAL LEASE AGREEMENT Exhibit 6.12 Commercial Lease Agreement between Josef Landthaler GmbH [Handwritten: changed as per June'98 (see att.1)] Wolfgang-Wagner-Str. 9d 85625 Glonn - in the following referred to as lessor- and IQ Battery RESEARCH & DEVELOPMENT GmbH. Heinrich-Heine-Stra(beta)e 5 09557 Flohe bei Chemnitz - in the following referred to as lessee- the following, two-part lease agreement is concluded: Part 1 Sec. 1 Leased property (1) The following commercial space located in the property Erlenhof Park Unterhaching, Inselkammerstra(beta)e 4, 82008 Unterhaching, construction part H II, attic is leased: a) attic H II, size approximately 228.16 m(2) b) 3 Underground parking spaces a DM 100.00 Rooms of an approximate total size of 228.16 m(2) are heatable. (3) The lessee is entitled and obliged to utilize the leased property for the following purposes: office for regular business operations. (4) Any major change in utilization is admissible only upon prior receipt of the lessor's written approval. Sec. 2 Lease period (1) The lease commences on 01.03.1996 and is effective until 28.02.2001. (2) The lessee has the right to prolong the lease period once for another four years at the agreed conditions. This (these) prolongation(s) are effective if the lessee is submitting a written statement at least 12 months prior to the expiry of the respective lease period. - 1 - (3) Upon expiry of the lease period pursuant to paragraph (2) , the lease period is prolonged implicitly for another two years, unless it is terminated by one of the contract partners 12 months prior to its expiry. (4) For the termination of the leases Secs. 20 and 21 are applicable. (5) The lessee can only be released from this contract, if the lessor or a broker to be briefed by the lessee finds a suitable substitute lessee who guarantees to comply with all parts of the lease agreement. In case of a substitute lessee, the lessor has the right to inquire his market opportunities. The lessor is not obliged to accept the substitute lessee. If the lessor is required to draw up a new lease agreement or take other actions because of the substitute lessee suggested by the original lessee, all incurring costs are to be carried by the lessee. (6) The exact delivery date is announced in writing at least 14 days prior to the commencement of the lease period. (7) The lease payment is due with completion date and delivery, earliest on 01.03.1996. [handwritten: prolongation and termination clauses] Sec.3 Lease payment and ancillary costs (1) The monthly lease for the leased space amounts to for Sec. 1, sect.(1) a): DM 4,563.20 (In words: Four Thousand Five Hundred and Sixty Three = DM 20.00/m(2)) for Sec. 1, sect.1(1)b) DM: 300.00 (in words: Three Hundred = DM 100.00/parking space) Total: DM 4,863.20 (in words: Four Thousand Eight Hundred and Sixty Three) (2) The operating costs for the property are not included in the lease payment (description and handling of operating costs, see Secs. 7 to 9) and have to be paid separately per month as follows: heating and warm water supply and operating costs prepayment DM 3.00/m(2) DM 664.48 (3) lease payment - Sec. 3(1) DM 4,863.20 operating costs - Sec. 3(2) DM 664.48 - 2 - extra charges pursuant Sec. 5, sect.3 DM 725.00 Total DM 6,272.68 Added value tax, presently 15% DM 940.90 ----------- Monthly payment, total DM 7,213.58 (4) At the closing date, the lessee is required to deposit a security in the amount of DM 20,000.00 (in words: DM Twenty Thousand) for the obligations arising from the lease agreement, and if a cash deposit has been arranged, to transfer the amount to the account identified in Sec. 4, section (1) (see Sec. 11). The deposit does not bear interest. It may be guaranteed jointly and severally by an accredited credit institute of the Federal Republic of Germany or through the assignment or attachment of bank balances at the above credit institutes. If the deposit is utilized during the lease period, the lessee is obliged, including in case of repetition, to immediately rebuild the deposit to the agreed amount. The guarantee has to be unlimited. Depositing of the secured amount is to be excluded. Sec.4 Special agreements (1) Transfers from the lessee to the lessor with discharging effect can only be made to the following account: a) account holder: Josef Landthaler GmbH.[Handwritten: changed as per June'98 (see att.1)] b) bank: Kreissparkasse Unterhaching c) account no. and International Banking Route: 9094244 (IBR 702 501 50) (2) Transfers from the lessor to the lessee can be made with discharging effect to the following account: a) account holder: IQ Battery b) bank: Commerzbank AG, branch Ottobrunn c) account no. and International Banking Route: 56 13 001 IBR (700 400 41) - 3 - (3) The lessee confirms to have received the integral part 2 of this lease agreement, including Secs. 6 to 25 and to have read it prior to signing. (4) The lessor will collect the due payment including ancillary costs and surcharges as well as other payments from this contract by direct debiting. If no other banking account for the direct debiting is or has been identified, payments are to be collected from the account indicated in section (2). (5) All assets brought in by the lessee are subject to the lessor's lien (comp. Sec. 12) pursuant to Sec. 559 ff, BGB. Sec. 5 Additional agreements (1) In the remainder the special agreements resulting from part II are valid for the lease. Hereby the lessee explicitly confirms that all points of the special agreement were discussed and negotiated. (2) The calculation of the leased area is based on standard layout plans 1:100.In case of changes prior to the completion, the completed areas become an integral part of the lease agreement. In this case, the lease agreement is to be changed. (3) The lessor takes over the costs incurred through special construction of the leased space. These costs are apportioned to the leased space and spread over the term of the lease. The apportionment of costs is calculated as follows: - basic figures: costs pursuant to special preference offer dated 19.01.1996: DM 36,223.00, term (illegible) months, interest (illegible) per year. Costs: 36,223.00 Interest: 7,244.00 Total: 43,467.00 apportionment to monthly payment: 43,467.00/(illegible)=(illegible) If lease option pursuant to Sec. 2, section 2 is chosen, the extra charge is not applicable. (4) If the lessees' special preferences result in smaller or larger spaces due to changed separation walls, the area determined in the contract shall serve as basis for the calculation of lease payments and ancillary costs. In the remainder, the resulting space divergences do not entitle the contract partners to any mutual claims whatsoever. (5) For the fixtures of the leased space, the given specifications and layouts shall be valid. (6) The lessee needs the lessor's permission if he prefers any other fixtures than those given in the specifications, respectively the layout. The room organization determined according to the lessee's preferences is part of this agreement. If the lessee's special preferences cause a delay in completion, this has no influence on the date of delivery and the contractual commencement of lease payments. - 4 - (7) The lessee agrees to offer and distribute or to have offered and distributed through a third person, exclusively beer and soft drinks manufactured and/or distributed by brewery Aying, Franz Inselkammer OHG, 85653 Aying, and to purchase or purchase through a third person, above products during the lease term permanently from the brewery Aying, Franz Inselkammer OHG, 85653 Aying, or from a third person determined by it. The deliveries are to be based on the respectively current conditions and prices of brewery Aying, Franz Inselkammer OHG, 85653 Aying on the day of delivery. Glonn, 9.5.96 ---------------------------- ------------------------------- (Place and date) (Place and date) ---------------------------- ------------------------------- (Signature) (Lessee) Josef Landthaler GmbH. (Signature and stamp illegible) - 5 - (Illegible) IQ Battery RESEARCH & DEVELOPMENT GmbH. Inselkammerstra(beta)e 4 82008 Unterhaching 18.06.98 Lease regarding property Inselkammerstra(beta)e, Unterhaching Dear Madam, dear Sir: According to lease contract of 09.05.1996, you have leased the space located in property Inselkammerstra(beta)e 4, Unterhaching from J. Landthaler GmbH. Inselkammer Grundstucksbebauungs-und VerwaltungsOHG (=Property construction and management OHG) 85653 Aying, is the owner of this property and has leased this entire property with lease contract dated 06.03.91 to the J. Landthaler GmbH., Glonn, now: "An der Waldstra(beta)e-Vermietungs GmbH", Wolfgang-Wagner-Stra(beta)e 9d, 85625 Glonn for the purpose of commercial sub-lease. Pursuant to Sec. 4, section 7 of this lease contract, J. Landthaler GmbH (by now, as mentioned above, "An der Waldstra(beta)e-Vermietungs GmbH") has assigned its claims arising from the above mentioned lease contract towards its own lessees, e.g. also towards your home, to the Inselkammer OHG. I am enclosing a copy of an excerpt of the lease contract dated 06.03.1991. We hereby are disclosing this assignment, because considerable arrears in lease-payments have accrued and are asking you to forthwith refrain from any more payments (especially lease, ancillary costs/operating costs, deposit), which your lessor can demand from you pursuant to above mentioned lease contract, to the An der Waldstra(beta)e-Vermietungs GmbH", Glonn, but instead to make your payments exclusively to Fa. Inselkammer Grundstucksbebauungs-und VerwaltungsOHG , account no. 9379108, Kreissparkasse Munchen, IBR 70250150. We are informing you that with receipt of this letter, payments with discharging effect to the "An der Waldstra(beta)e-Vermietungs GmbH" (previously J. Landthaler GmbH.) can no longer be processed by us. Should you have any questions in this matter, do not hesitate to contact Mr. Maier, Tel.08095/8827. We appreciate your understanding. With kind regards, INSELKAMMER OHG (signature illegible) Enclosure. - 6 - EX-6.13 20 FORM OF CONFIDENTIALITY AGREEMENT Exhibit 6.13 Form of Confidentiality Agreement between ................................................................................ ................................................................................ (N.N.) and iQ Battery Research & Development GmbH, Inselkammerstr. 4, D-82008 Unterhaching, Munchen, Germany (iQ) N.N. and iQ agree upon the following conditions for the transfer and the secrecy of CONFIDENTIAL INFORMATION: 1. This agreement is entering into force on ........... 1998. 2. CONFIDENTIAL INFORMATION will be transferred by both parties (OWNER) in the framework of this agreement. 3. The parties name their following employees being coordinators for the transfer and the receive of CONFIDENTIAL INFORMATION: for N.N.: ............................................ for iQ: ............................................ 4. The confidential informations that will be transferred in the framework of this contract (CONFIDENTIAL INFORMATION) are described as followed: N.N.: ........................................................................... iQ: ........................................................................... 5. This agreement is valid only for information, that will be transferred between the inforcement of this agreement and the ........... 6. The party, that is receiving CONFIDENTIAL INFORMATION in accordance with this agreement (RECEIVER), is allowed to use this information only for the following purposes: ........................................................................... 7. The obligation of secrecy of CONFIDENTIAL INFORMATION expires three years after the expiry of the term named in no. 3 for the transfer of this information. 8. The RECEIVER will deal with the CONFIDENTIAL INFORMATION with the same care he is using for his own trade and business secrets, but at least with the common care, to keep the information secret and to prevent any use of this CONFIDENTIAL INFORMATION not agreed by this agreement, any transmission to third parties and/or employees of the RECEIVER that does not need the CONFIDENTIAL INFORMATION for the fulfilling of their tasks, and the publication of the CONFIDENTIAL INFORMATION. 9. The secrecy is only related to information, that are transferred by the OWNER in written form and that were marked by the handing over with a secrecy remark (e.g. "Confidential," "Secret," Intern data") or that were transfered by the owner in another way, marked confidential at the transmission and, in addition, within 30 (thirty) days were summarized in a written form and, marked with a secrecy remark, are forwarded to the coordinator of the RECEIVER. 10. The obligation to secrecy is invalid, if the CONFIDENTIAL INFORMATION o were known already without the obligation to secrecy by the RECEIVER before receiving them from the OWNER; o without fault of the RECEIVER are or become known in common; o were developed by the RECEIVER independently before the inforcement of this agreement; in this case the RECEIVER will have the full burden of proof, that the CONFIDENTIAL INFORMATION were developed by him independently before the inforcement of this agreement; o are transferred by the RECEIVER with the prior consent of the OWNER. In case of the demand of a public authority or a court to transfer CONFIDENTIAL INFORMATION to them, the RECEIVER is obliged to inform the OWNER about it to enable him to proceed against this demand wih the relevant means of legal redress. The RECEIVER is obliged to proceed himself against this demand wih the relevant means of legal redress, if he is asked to do so by the OWNER, the OWNER has got a legitimate interest to do so, the OWNER (especially for the lack of entitlement to take legal action) is hindered from proceeding against this demand wih the relevant means of legal redress on his own, and the OWNER exempts the RECEIVER from the possible expenses of this proceeding in advance. 11. The OWNER confirms expressivly that he is entitled to transfer the CONFIDENTIAL INFORMATION. 12. Except of the right of the RECEIVER to use the CONFIDENTIAL INFORMATION in accordance with no. 6 of this agreement, all rights connected with the CONFIDENTIAL INFORMATION stay with the OWNER. 13. This agreement is not commiting parties neither to the purchase nor to the offer of goods or services that contain or use the CONFIDENTIAL INFORMATION. 14. In acceptance of the American and the German regulations on export controlls, the RECEIVER commits himself, that he will not knowingly export or reexport o CONFIDENTIAL INFORMATION, technical data (in accordance with the definition of the US Export Administration Regulations resp. the German "AuBenwirtschaftsgesetz") and/or software, he has got from the OWNER; and/or o any products, procedures or performances, that do result indirectly from the use of the CONFIDENTIAL INFORMATION, the technical data or the software, to a receiver, to whom the export or the reexport is limited or forbidden by American or German laws, without obtaining first the layed down approval by the relevant authority. 15. With this agreement, no legal relation between the parties exceeding the content of this confidentiality agreement is created. 16. This agreement is not transferable. It contains all the agreements between the parties related to the secrecy of CONFIDENTIAL INFORMATION and replaces eventually existing prior agreements upon the same purpose. Changes and amendments need to be in written form and signed by both parties for their effectiveness. This agreement shall be governed by the law of Germany. The court of jurisdiction of lawsuites about this agreement is Munich I, Germany ..................................... ........................................ (place, date) (N.N.) ..................................... ........................................ (place, date) (iQ) EX-6.14 21 FORM OF CONFIDENTIALITY AND NONDISCLOSURE AGMT Exhibit 6.14 Form of Confidentiality and Nondisclosure Agreement In order to protect certain proprietary and confidential information described in Section 3 below, - hereafter referred to as Confidential information- - hereafter referred to as ___________ and iQ Battery Research & Development GmbH, Inselkammerstr.4, D-82008 Unterhaching, Germany - hereafter referred to as iQ agree that: Section 1 Disclosing Parties Both parties are disclosing Confidential Information. Section 2 Primary Representative Each party's representative for coordinating disclosure or receipt of Confidential Information is: ................ iQ: Dr.-Ing. Gunther Bauer, Vice President Engineering Section 3 Description of Confidential Information The Confidential Information disclosed under this agreement is described as: iQ: Development of a new starter battery and its system environment Section 4 Use of Confidential Information The party receiving Confidential Information - hereafter referred to as Recipient shall use Confidential Information only for the following purpose(s): iQ: Development of the above mentioned starter battery (Section 3) The Recipient shall disclose Confidential Information received under this agreement only to persons within its organization who have a "need to know" it and hove been advised of the obligations of confidentiality and agree to be bound. Section 5 Confidentiality Period This agreement and the Recipient's duty to hold Confidential Information in confidence expire on: Section 6 Disclosure Period This Agreement pertains to Confidential Information that is disclosed between the effective date and: Section 7 Standard of Care The parties shall use the some degree of care to avoid unauthorized use and unauthorized disclosure of Confidential Information as it employs with its own confidential and proprietary information of a like nature, but not less than a reasonable degree of care. Section 8 Marking Recipient's obligations shall only extend to Confidential Information that is described in Section 3 and that - - comprises specific materials listed in Section 3, - - is marked as "Confidential" at the time of disclosure, or - - is unmarked (e.g. orally or visually disclosed) but treated as confidential at the time of disclosure, and is designated as "Confidential Information" in writing sent to the Recipient's primary representative within 30 days of disclosure, summarizing the Confidential Information sufficiently for identification. Section 9 Exclusions This Agreement imposes no obligation upon the Recipient with respect to information that - - was in the Recipient's possession before receipt from the discloser, - - is or becomes a matter of public knowledge through no fault of the Recipient, - - is disclosed by the discloser to a third party without a duty of confidentiality on the third party and is rightfully received by the Recipient from this third party (or another party that rightfully received that information from this third party without a duty of confidentiality), - - was independently developed by Recipient, provided that Recipient does not use any of discloser's Confidential Information, - - is disclosed by the Recipient with the discloser's prior written consent. Section 10 Warranty Each discloser warrants that it has the right to make the disclosures under this agreement. No other warranties are made by either party under this agreement. Any information disclosed under this agreement is provided "as is". Section 11 Rights In Confidential Information Each discloser retains title to all Confidential Information disclosed by it under this agreement. Neither party acquires any intellectual property rights or licenses under this agreement except the limited rights necessary to carry out the purposes set forth in Section 4. The Recipient shall, upon the earlier of the discloser's request or the expiration of this agreement, promptly return to the discloser all Confidential Information delivered to the Recipient under this agreement, and all copies and reproductions thereof. Section 12 Miscellaneous Provisions This agreement imposes no obligation on either party to purchase, sell, license, transfer or otherwise dispose of any technology, services or products. This agreement does not create any agency or partnership relationship between the parties. Both parties shall adhere to all applicable laws, regulations and rules relating to the export of technical data, and shall not export or reexport any technical data any products received from the discloser or the direct product of such technical data to any proscribed country listed in such applicable laws, rules and regulations unless properly authorized. This agreement is made under and shall be construed according to the laws of Germany. This agreement including attachments is the entire agreement between MCHP and iQ regarding the subject matter hereof and supersedes and replaces all prior or contemporaneous agreements, written or oral, pertaining therefore. All additions or modifications to this agreement must be made in writing and be signed by both MCHP and iQ. This is valid for this provision, too. If a provision of this agreement is or becomes inoperative or impracticable or if this agreement includes holes, the operativeness of the other provisions of this agreement are not touched. Instead of the inoperative or impracticable provision a provision is regarded as agreed, that is getting closest to the spirit and purpose of the inoperative or impracticable provision in a legally authorized way. In the case of holes of this contract a provision is regarded as agreed, that fulfills in what would has been agreed corresponding to the spirit and purpose of this agreement, if that matter would have been considered from the start. Effective date: ------------------------------- Peter. Braun (Managing Director) EX-6.15 22 COOPERATION AGREEMENT Exhibit 6.15 Cooperation Agreement between BASF Aktiengesellschaft Specialty Foams KSB/NM - Neopolen Marketing and Technical Support 67056 Ludwigshafen hereinafter "BASF" and iQ BATTERY Research & Development GmbH 82008 Unterhaching hereinafter "iQ" Preamble Neopolen P is a material developed by BASF for a broad range of applications and with the intention of firmly establishing its strategical positioning as an energy absorbent and heat-insulating foam. The application as an insulating casing for starter batteries with iQ technology appears to be an ideal way of achieving this objective. iQ has identified Neopolen P as a material which has the best properties for this application and is interested in using it in the mass production of iQ battery insulating casings, its further development and also a joint defense against possible patent infringements by unlicensed casing manufacturers. BASF and iQ resolve to continue and intensify existing cooperative work and specify the following provisions in this respect: 1. Public relations BASF and iQ shall be represented jointly in the media and at press conferences, trade fairs and exhibitions. Actual events shall be planned and staged by the marketing and PR representatives of the two companies in close cooperation. Appropriate resources shall be made available by both parties to carry out these intentions. Individual activities by one company which mention the other company shall require prior consent. 2. Support in product development The two parties shall support each other in the further development of their respective products and the carrying out of corresponding tests. The following areas may be mentioned by way of example for Neopolen P: - surface design coloration - thermal conductivity - gas tightness - acid resistance - mechanical strength - crash safety tests - support for processors - support for mold making The rights to existing know-how from joint development and from any patents as well as exploitation thereof shall be covered in a know-how agreement. 3. Sales support iQ shall stipulate to its licensees the specification for the battery insulating casings based on Neopolen P in conformity with the BASF standard and shall recommend exclusively the use of Neopolen P for this application to ensure the technical properties of the iQ battery. For every kilogram of Neopolen P that is used by the licensees for the application "insulating casing for starter batteries with iQ technology", iQ shall receive support, as specified in the supplementary sheet, for sales promotion measures. The amount of the payment will be determined annually after completion of the third quarter by taking into account the data from iQ and BASF. BASF undertakes in return to draw attention to any patent infringements or attempts at evasion as they become known and to support iQ in asserting its rights by making known the information which is available to BASF. 4. Communication The two parties shall maintain a regular exchange of information and keep one another informed about their technical and commercial developments outside joint activities. In particular, iQ shall notify BASF immediately of the name of every licensee and shall endeavor to involve BASF at an early time as a partner in any additional development tasks and as a supplier of Neopolen P. 5. Ending of the cooperation The resolution to work together is for five years. It shall be extended automatically for one further year unless written notification to terminate is sent to the other party with a period of notice of six months. The cooperation can be discontinued at any time by mutual consent. The obligation to maintain absolute confidentiality with respect to third parties concerning information which has been exchanged as part of the cooperative venture according to the confidentiality agreement of June 30, 1997, signed by both parties, shall apply beyond the end of the cooperative work for a period of a further five years. 6. Miscellaneous At the time when this agreement is concluded, it is not possible to foresee and make exhaustive provisions for all possibilities that may arise from future technical and commercial development and from any changes there may be to statutory regulations. The parties to the agreement are agreed that the principles of commercial loyalty must apply in their cooperative work, and assure one another that they shall meet the contractual agreements in this spirit and take account analogously of any future changes there may be in their mutual relations. Changes and additions to these agreements shall be legally valid only if they can be made in writing. Ludwiqshafen, (date) Unterhaching, (date) EX-6.16 23 CONFIDENTIALITY AGREEMENT DATED 7/29/97 Translation from the German into the English Language BMW and IQ Battery Confidentiality Agreement Exhibit 6.16 Page 1 of 3 Confidentiality Agreement between Bayerische Motoren Werke Aktiengesselschaft D - 80788 Munchen hereafter referred to as "BMW" and IQ-Battery R&D GmbH Inselkammerstr. 4 D 82008 Unterhaching hereafter referred to as "Partner" In consideration that the Parties - - intend to exchange confidential information - - wish to avoid misuse of that information the Parties agree as per following: Page 2 of 3 1. BMW and the Partner intend to exchange confidential information in regard of the following project: Battery with integrated, intelligent heating function ----------------------------------------------------- 2. The Parties undertake hereby the obligation to handle all the information obtained directly or indirectly from other Parties within the scope of the Project in a confidential manner and use it only in relation to the project as described in paragraph No.1. In particular an assurance is mutually undertaken that this information shall not be not conveyed to a third Party, nor be in any written form made available to a third Party, and all preventable measures and provisions shall be undertaken that any access by a third Party to this information be avoided. Privies (in meaning of ss. 15 AktG) are not considered the third Party. 3. In particular the Information as per understanding of the previous paragraph No.2 is: - know-how as well as results, which in the scope of the Project were achieved or applied, - description of the Projects, - prospective time schedules, goals and ideas for developing of the project, - other, not frequently available information, which the Parties obtain within the scope of the Project. 4. According to this agreement, the duties of non-disclosure are extended to all the workers and the agents of the Parties, regardless of the nature and arrangements of their co-operation. The Parties are obligated to execute necessary non-disclosure agreements from the circle of persons involved, if this has not already has been done. 5. According to this contract, the duties of non-disclosure remain in force after completion of the Project as descibed in the paragraph No.1. 6. According to this contract, the duties of non-disclosure cease to exist when it can be demonstrated that the concerned information - is generally known, or Page 3 of 3 - became generally known at no fault of the Parties obligated to maintain confidentiality, or - has been obtained legally from the third Party, or - already existed in the knowledge of the receiving Party. 7. It is known to the Parties that - dissemination of industrial and business secrets is punishable under ss.ss. 17, 18 UWG, and may be punishable with imprisonment up to five years, and - one who disseminates industrial and business secrets is liable for is obligated to provide compensation for resulting losses, according with ss. 19 UWG. 8. All legal disputes arising from this agreement are to be dealt with by the Courts in Munich. All disputes resulting from- or in context of this agreement are subject to Law of the Federal Republic of Germany. Munich, 29.07.97 Bayerische Motoren Werke Aktiengesellschaft EE Dr. Thoma EM-2 Lindner Unterhaching, the day of . . . IQ Battery Peter E. Braun EX-6.17 24 MUTUAL CONFIDENTIALITY AGREEMENT Translation from the German into the English Language Confidentiality Agreement between MOLL/IQ and AUDI Exhibit 6.17 Manufacturer of Batteries Moll GmbH + Co. KG Postfach 1120 D-96225 Stafelstein Telefon (09573) 9622-0 Mutual Confidentiality Agreement between Akkumulatorenfabrik MOLL GmbH + Co. KG, Angerstrasse 50, 96231 Staffelstein and IQ Battery GmbH, Munich hereafter referred to as MOLL/IQ and AUDI AG, 85045 Ingolstadt hereafter referred to as: AUDI MOLL/IQ and AUDI have expressed mutual interest concerning cooperation on development of a new, modified starter battery. For the purpose of this cooperation a reciprocal confidence is agreed upon. Both Partners obligate themselves to utilize all conveyed information (verbal, written) according to principle "need to know" exclusively for agreed Projects. Publicly accessible and available information is released from that confidentiality. If the information must be forwarded on any occasion outside of the Project, a specific agreement is required. Staffelstein, 30.04.1998 . . . . . . . . . . . . . . (MOLL) Ingolstadt, 26.05.1998 . . . . . . . . . . . . . . . (AUDI) EX-6.18 25 CONFIDENTIALITY AGREEMENT DATED 3/21/97 Translation from the German into the English Language Confidentiality Agreement: Mercedes Benz and IQ Battery Exhibit 6.18 Page 1 of 2 Confidentiality Agreement Mercedes Benz Aktiengessellschaft Mercedesstrasse 136, 70322 Stuttgart Department EP/VEG HPC T723 and IQ-Battery R & D GmbH Inselkammer Str. 4 82008 Unterhaching enter the obligation as per the following: all technical and commercial information, in particular intentions, experience, knowledge and designs which were for the purpose of the project and during the period of this agreement made accessible or were received by or from the partner to this contract, and until expiry of five years after the end of the period of the contract, to treat confidentially, not to make accessible to third parties, as well as not to use for industrial purposes, as long as the partners to this contract did not agree otherwise in writing. This obligation of confidentiality is not valid for information and documentation which: a.) was evidently known to the receiving contract partner right from the beginning when the cooperation begun; b.) the receiving partner to the contract evidently obtained legally from third parties; c.) it is known publicly, or, without breaking obligations contained in this contract, was known publicly; Page 2 of 2 d.) the receiving partner evidently developed within the scope of its own and independent development work The partners to this contract are under obligation to impose the same obligations on their employees to whom such information, technical and economical knowledge and experience will be conveyed, just as they were themselves partners to this contract, as far it is possible legally, and also for the term after separation. The partners to this contract shall apply the same caution, as by handling their own confidential information. In case of sharing anticipated discoveries, the partners reserve right with regard to eventual possible later patent protection. This agreement becomes enforceable immediately, and shall have duration until 31.12.97 Stuttgart, 21.03.97 Mercedes-Benz Aktiengesselschaft1 EX-6.19 26 LETTER AGREEMENT Translation from the German into the English Language ----------------------------------------------------- Business Letter from Akkumultorenfabrik Moll GmbH to IQ R&D GmbH Exhibit 6.19 Page 1 MOLL Business Management Rubber stamp: RECEIVED 04 Aug. 1998 IQ Battery Research & 03.08.98 Development GmbH gmoe/fu Erlenhoff Park Inselkammer Str. 4 D - 82008 Unterhaching Dear Mr. Braun, Dear Dr. Bauer, We had first contacts at our offices since October 1996, and I will take an opportunity to discuss status of our cooperation at out next meeting on 11.08, as well as to discuss possible perspectives. Therefore I would like to make a contribution and present thoughts re. our discussion. That is why I propose that we arrive at a more systematic cooperation within the range of development, production, marketing and distribution. The cooperation should also be summarized in written agreements. The mutually undertaken so far steps should be conveyed into a firmly agreed to cooperation. Sincerely, MANUFACTURER OF BATTERIES MOLL Ltd. + Limited Partnership Co. G. Moll-Mohrstedt Translation from the German into the English Language ----------------------------------------------------- Letter from Akkumulatorenfabrik Moll GmbH to IQ Battery R&D GmbH Page 1 MOLL Business Management IQ-Battery Research & 13.08.98 Development GmbH gmoe/fu Erlenhoff Park Inselkammer Strasse 4 82008 Unterhaching Dear Mr. Braun, Dear Dr. Bauer, In reference to our conversation in our offices on 11.08.98, I would like to sketch briefly results, in the interest of clarity and results for both sides. We had an opportunity to convey to you our thoughts on the topics of development, production, distribution and marketing in a sketchy form, the basis of the discussion for that conference were as from our standpoint. Regarding the topic Development, we propose that the following paragraphs be actualized or established: (1) product requirements, (2) product description, and (3) development plan. Regarding the topic Production, we have made to you proposals in respect of formation of a common basic Company. Your concepts are still outstanding. The areas of distribution and marketing has no priority in the time schedule until establishing joint-market-concepts for components of respective parts. Also here we are awaiting your proposals. The goal for the next meeting should be basic unification in cooperation and in production of parts, and that further the people be identified, who are to be working, and finally, the scientific basis to be established in the relation of IQ GmbH and basic production company, so that assumptions would be given to develop contracts. Briefly regarding timelines, we can approach your proposals in detail after KW 37. Lastly, we thank you for your visit and the information regarding further development of the company and the endeavoured projects. Translation from the German into the English Language ----------------------------------------------------- Letter from Akkumulatorenfabrik Moll GmbH to IQ Battery R&D GmbH Page 2 Sincerely, MANUFACTURER OF BATTERIES MOLL Ltd. + Ltd. Partnership Co. Translation from the German into the English Language Development Diagram Page 1 Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL P.O. Box 1120 D-96225 Stafelstein Tel. (09673) 98 22-0 Moll Development iQ Responsible for 1. Product requirements responsible for (parts must be decribed as per parts from outside battery "housing" procura and changed battery) for parts Development control M + IQ if not OK OK 2. Product description Moll V for batteries for parts ViQ for Moll V integrated battery Adjustments to product description for integrated batteries with OE (East European?) clients i.e. Audi/Porsche if not OK OK mutual conclusion of M + iQ 3. Timelines for development plan expenditures, expenses, division of tasks etc. for all 3 products Development according to the above plan Test OK release for O-series, parts of independent Translation from the German into the English Language Development Diagram Page 2 completing series product, quality etc. viable for testing Translation from the German into the English Language Moll Batterien - Development Page 1 19745 v1 Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL P.O. Box 1120 D-96225 Stafelstein Tel. (09673) 98 22-0 DEVELOPMENT We will issue our opinion, after the development point, where the idea of product in the decisive phase of conversion can go into the product. For the three different parts, the respective products must be for both sides dismissed as binding product description, which flow into product description. It going about - - parts from iQ - - the redesigned battery from Moll, and - - the definite product, the integrated battery. To conduct the processes there should be established a group of employees from iQ and Moll operating under a description Development Management (2+2). iQ has responsibility for setting the requirements for the parts, and Moll is responsible for batteries and end-products, certainly alternately within the veto right given by Development Management. The final description of product will be agreed with OEM and serves the creation of the development plans. The development plan encloses likewise 3 parts for 3 products and contains - - planing of timing - - regulating tasks - - expenditures and expenses. Divisions of costs of the development follows the responsibilities. The development process runs according to the plan and is accompanied by the Development Management. Update of practical work will be presented i.e. 1x month, either in writing or at a meeting, any deviations are to be reported without delay. Translation from the German into the English Language Moll Batterien - Development Page 2 The test phase, jointly with OEM is decisive for release to beginning of 0-series. It is important that the parts developed by iQ have a specific test profile and therefore are viable for testing. That is very briefly part referring to development. Translation from the German into the English Language Moll Batterien GmbH: Distribution + Marketing Diagram Page 1 Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL P.O. Box 1120 D-96225 Stafelstein Tel. (09673) 98 22-0 Moll Distribution + Marketing iQ Moll V Establishing Joint Marketing Concepts ViQ for Parts independent from A, B, C Moll V distribution of parts ViQ in support of A, B, C Moll V Distribution and Marketing of the integrated batteries Translation from the German into the English Language Moll Batterien GmbH - Distribution and Marketing Page 1 Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL P.O. Box 1120 D-96225 Stafelstein Tel. (09673) 98 22-0 DISTRIBUTION and MARKETING The next range of our cooperation encompasses DISTRIBUTION and MARKETING. Obviously, the distribution is dependent on the form of cooperation (A, B or C). The business management teams of iQ and Moll will establish a marketing concept, independently of A, B and C. That marketing concept should have a uniform language, first of all establishing of pricing against third manufacturers of batteries. As already said, this concept is valid for all forms of cooperation. In contrast, the actual distribution of parts in context of concept of A, B or C, is still to be seen. This is self explanatory, without closer description. To emphasize once again, distribution and marketing is intended here, distribution and marketing of parts. Distribution and marketing of integrated batteries is responsibility of Moll. It is self explanatory, that iQ is here involved in concept, but the approach depends on East European Markets (OEM), and the after-market is the ground part of our task. It is also important to point out that Moll offers to each company involved in production of parts all the expertise gained and related to integration of parts into the batteries. All expenditures exceeding specific documentation will be billed to the manufacturing company. Translation from the German into the English Language Moll Batterien GmbH: Production Diagram Page 1 Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL P.O. Box 1120 D-96225 Stafelstein Tel. (09673) 98 22-0 Moll Production iQ Moll V Production of parts ViQ 1) Business plan Supply to Moll and third parties Moll V Production of batteries 1) Setting up of a joint company, i.e. A) 50 : 50 B) Moll Europe 100 % Remaining iQ 100 % C) Own demand and selected (German) clients of Moll 100 % Translation from the German into the English Language Moll Batterien GmbH: Production Page 1 Manufacturer of Batteries Moll Ltd. + Ltd. Partnership Co. BATTERIES MOLL P.O. Box 1120 D-96225 Stafelstein Tel. (09673) 98 22-0 PRODUCTION ---------- Two assumptions outline the beginning of the production: 1. Product ready for volume manufacturing speaking of the integrated batteries, at least a volume accepted by OEM, where a minimum volume assured. 2. A clear agreement between iQ and Moll about the economical conditions of the cooperation in form of a contract. The commencing point for all decisions consists of minimum amounts, business plan, information provided about investment requirement, current expenses etc. That business plan will be prepared jointly and this is the task assigned to the business management. The plan should consider alternatives, i.e. A) Production of parts will be conducted at a joint manufacturing firm with participaction 50 : 50. B) For Europe exclusively Moll will carry out production of parts, the rest of the world is responsibility of iQ. C) Moll exclusively carries out production of parts for own demand and selected (German) clients. We exclude that iQ appears as competing supplier of parts, even under special conditions. In all cases A, B and C it is responsibility of each of the manufacturing company to iQ to provide sufficiently each of the production companies, i.e. licensees, with know-how, Translation from the German into the English Language Moll Batterien GmbH: Production Page 2 technical information etc., and iQ, as the developing company, will be remunerated with a usual market licensing fee. It must be presented that the setting of market price, where development costs incurred up to date are taken into consideration, or saying more precisely, the access to large volumes depends 50 % on quality of the product, and still better said, it depends on improvement and 50 % on setting the price. The formula is: lower input, higher volumes, more licenses. My position obviously is such, that the patent situation is so far unequivocal, as far iQ will arrange for all patents rights and obligations (i.e. commencement of actions when patents infringed). Moll will set a business plan for production of the integrated battery and inform iQ about it. The information includes also market access considerations including sale price on the East European Markets (OEM). Moll is ready anytime to manufacture parts (A, B and C) under a company name, and also create other assumptions, where Moll will not be recognized on the market as manufacturer. EX-6.20 27 MUTUAL CONFIDENTIALITY AGREEMENT DATED 9/8/97 Translation from the German into the English Language Confidentiality Agreement: BMW and IQ Battery Exhibit 6.20 Page 1 of 1 Mutual Confidentiality Agreement between Manufacturer of Batteries Moll, Angerstrasse 50, 96231 Staffelstein hereafter referred to as MOLL and IQ-Battery Research & Development GmbH, Inselkammerstrasse 4, 82008 Unterhaching referred to as: IQ MOLL and IQ have expressed mutual interest in working on IQ's existing invention in starter batteries. For the purpose of this cooperation a reciprocal confidence is agreed upon. Both Partners obligate themselves to utilize all conveyed information (verbal, written) according to principle "need to know" exclusively for agreed Projects. Publicly accessible and available information is released from that confidentiality. If the information must be forwarded on any occasion outside of the Project, a specific agreement is required. Staffelstein, 8/9/97 . . . . . . . . . . . . . . (MOLL) Unterhaching 08/Sept.97 . . . . . . . . . . . . . . . (IQ) EX-6.21 28 LOAN CONTRACT DATED 12/28/96 Translation from the German into the English Language Exhibit 6.21 Page 1 of 2 Loan Contract Mrs. Karin Witkewitz Schreckenweg 1 85658 Egmating hereafter referred as the Lender and the iQ BATTERY Research & Development GmbH Inselkamerstr. 4 82008 Unterhaching hereafter referred to as the Borrower Sec. 1 Loan The Lender has extended to the Borrower a loan in amount of DM 60,000.00 on 27.12.1996 from sale of business shares of nominal value DM 6,000.00. Sec. 2 Interest The loan carries annual interest of 3% above the existing bank rate of the German Bundesbank. The interest is to be payable annually by January 31 of the following year for the past calendar year. Sec. 3 Termination The loan may be terminated within six months after quarter of a calendar year, however not earlier than December 31, 1998. The Lender has right for termination only when in the relations between the Borrower and the Lender disadvantageous circumstances were created, which upon assessment of general business conditions justify termination. The termination requires a written notice. Page 2 of 2 Sec. 5 Premature Repayment The Borrower is entitled to premature repayment of the loan at any time. Munich, 28.12.96 . . . . . . . . . . . . . . . . . . . . . . . . . Place, date Signature Karin Witkewitz Munich, 28.12.96 . . . . . . . . . . . . . . . . . . . . . . . . . Place, date Signature iQ BATTERY EX-6.22 29 CONTRACT OF INDUSTRIAL PROPERTY RIGHTS & KNOW-HOW Translation from the German into the English Language Exhibit 6.22 Page 1 of 9 Contract concerning Industrial Property Rights and Know-How between 1. Mr. Dieter Braun Schrenkweg 1 85658 Egmating 2. Mr. Peter Braun Schopenhauer Strasse 23 85579 Neubiberg hereafter referred to as the "Transferor" and the iQ BATTERY Research & Development GmbH, offices in Floha, HRB 11067 AG Chemnitz hereafter referred to as the "Company" 1. The Transferors own German Patent, Patent Specification No. 4142 628 C1, as well as the international patent application PCT/EP 92/02930 dated December 17, 1994 (hereafter referred to as "Property Rights"), regarding know-how for starter batteries and other batteries, and regarding registered national trade mark "iQ", registration number 206, 1981. The deed for the German Patent, the international Patent registration, the know-how, as well as the deed for the registration of the previously named Trade Marks, are set forth in this Contract as Enclosure 1 of the attached compilation, which is the essential component of this Contract (in the following referred to as "Rights Subject to the Contract"). 2. The Transferors intend to transfer these Property Rights, that know-how and that Trade Mark together with all rights resulting from- or related to the Rights Subject to the Contract, onto the Company. Page 2of 9 Sec. 1 Transfer of the Rights Subject to Contract 1. The Transferors transfer hereby all the Rights Subject to Contract to the Company and relinquish all resulting from- or all related to- rights. Simultaneously they transfer, at the time of finalizing of the contract, all belonging documents concerning the Rights Subject to Contract, the Subject to Contract Know-How, and the Subject to Contract Trade Mark, onto the Company. The Transferors relinquish further all resulting claims with regard to documents concerning the International Patent Registration, which are held by their patent solicitor. The Transferors assure that, except as per conditions of ss. 3, there are no other documents incorporating the Property Rights or the Know-How. 2. The Company receives the transfer and the relinquishment. 3. The Transferors obligate themselves to undertake all explanations and procedures necessary to transfer registration of Patent, Trade Mark ownership and Patent Protection, and provide support to the Company in all possible ways in the process of transfer. 4. The Transferors grant Power of Attorney irrevocably to the Company, to undertake all the necessary procedures and explanations in respect of transfer. Sec. 2 Remuneration 1. As remuneration for conveyance to the Company of the Subject to Contract Rights, according to ss. 1, the Company shall pay to the Transferors a) one time an amount of DM 400,000 (German Mark: four hundred thousand) plus applicable value added tax, due by the first exploitation by the Company of the Subject to Contract Rights. Page 3 of 9 b.) 40% of the revenue from license fees not originating from sales, as well as fees for guarantees of options to close the license agreements, as well as c.) 20 % of the entire annual and not originating from license sales gross income of the Company from license contracts of the Rights Subject to the Contract until year 2000. The Parties agree that the amounts for b.) and c.) respectively will be payable three months after the closing of the previous calendar half-year, and they are subject to paying and additional and obligatory value added tax, as long as the Company shows a positive business results, otherwise the amounts will be postponed until a positive result will be brought forward. 2. The Transferors put the demands outlined in par. 1 irrevocably, and behind all demands of present and future third party creditors of the Company, as long as the Company is in debt. 3. The purchase price is limited in all to 4 mil. 4. The expenses of conveyance of industrial property rights to the Company shall be borne by the Company. Sec. 3 Warranties 1. The Transferors hold liable the Company that the Rights Subject to the Contract, except for information as contained in the Enclosure 2, are free of third party rights, and they can access these freely. There are no legal encumbrances on the Right to the Contract, or any relevant legal disputes known to the Transferors. The Transferors assure therefore that besides of Property Rights, as per Enclosure 1, there is no further ownership of Property Rights. 2. The Transferors assure that there are not known to them any essential negative facts in reference to existing extend of the Rights Subject to the Contract, or to execution of this contract, in particular any rights of prior users, or dependencies on Property Rights by third parties, or any other rights of third parties. Excluded from here are such supporting documents, as attached in the Enclosure 3 of this contract. Page 4 of 9 3. The Transferors decline any responsibility, nor provide any guarantees for industrial usefulness of the Rights Subject to Contract. 4. It is known to the Company that the Know-How subject to the Contract was made known to the third party during utilization conferences, as per Enclosure 4 named enterprise, but never in its entirety. Sec. 4 Protection of the Rights Subject to the Contract 1. The Company is obligated to do all to maintain protection of the Rights Subject to the Contract. 2. The Transferors obligate themselves to support the Company in that, in particular to provide the Company with the required and not yet available documentation. 3. The Transferors and the Company obligate themselves mutually not to disclose or convey the Rights Subject to the Contract to the third parties. Sec. 5 Other Considerations 1. This contract is exclusively subject to German Law. 2. Place of legal dispute, as far as permissible, Munich (District Court Munich II). 3. To become effective, any changes and additions to this contract, as well as one side explanations of the parties to this Contract, are to be made in written. This is valid also for written form clauses. Page 5 of 9 4. Should certain provisions of this contract become ineffective, or should be ineffective, or not executable, or in case if this contract contains omissions, the effectiveness of the remaining provisions will be not affected. In place of an ineffective or unexecutable provision, such an executable agreement becomes part of the agreement, which in its industrial sense and purpose is legally possibly closest to its purpose. In case of omissions, such relevant provision becomes valid which is reasonable in sense and purpose, should that provision had had been agreed upon, when had been thought of from the beginning. Munich, March 15, 1995 (Dieter Braun) (iQ BATTERY Research & Development GmbH) (Peter Braun) Enclosure 1: List of the Rights Subject to the Contract Enclosure 2: Evidence of the Rights Subject to the Contract Enclosure 3: Patent Protection Rights of third parties or other rights of third parties Enclosure 4: Utilization conferences / Confidentiality Agreements Page 6 of 9 Enclosure 1 List of the Rights Subject to the Contract: - ------------------------------------------- - - German Patent, Registration Number DE 4142628 C1 - - International Patent Application, file number PCT/EP 92/02930 - - Know-How for starter batteries and other batteries - - National Trade Mark including registration number 206 1981 Page 7 of 9 Enclosure 2 Evidence of the Rights Subject to the Contract: - ----------------------------------------------- - - Company Agreement with Mr. Engelhorn, dated May 19, 1993 - - Utilization Agreement Fluhrer dated February 7, 1994 - - Patent Utilization Contract with InPROma, dated April 21, 1994 - - Extension of the Patent Utilization Contract with InPROma, dated November 29, 1994 - - Pledge according with Agreement dated March __ , 1995 Page 8 of 9 Enclosure 3 Patent Protection Rights of third parties or other rights of third parties: - --------------------------------------------------------------------------- Page 9 of 9 Enclosure 4 Utilization conferences / Confidentiality Agreements - ---------------------------------------------------- - - Global & Yuasa Battery Co., dated September 27, 1994 - - Fraunhofer-Company patronage of undertaken research, dated January 28, 1995 - - GNB, dated July 1, 1994 - - GALT, dated May 11, 1994 EX-6.23 30 SUPP CONTRACT TO CONTRACT OF INDUSTRIAL PROPERTY Translation from the German into the English Language Exhibit 6.23 Page 1 of 3 Supplementary Contract to Contract Concerning Commercial Protection Rights and Know-How dated 15.03.1995, between Mr. H. Dieter Braun, Schrenckweg 1, 85658 Egmating, and Mr. Peter E. Braun, Schopenhauerstr. 33, 85579 Neubiberg, on one part, and the iQ Battery Research & Development GmbH, Inselkammerstr. 4, 82008 Unterhaching, on the other part 1. Sec. 1 1.2 of the above mentioned Contract, according to which Messrs. H. Dieter and Peter E. Braun by the closing of the above mentioned Contract should convey all relevant documents pertaining to Protection Rights Subject to Contract, Know-How Subject to Contract and the Trade Mark Subject to Contract, and in their possession, should that surrender obligation not have been fulfilled yet by the time of closing of the above mentioned Contract and for the future, as superimposed by ss. 4 2. of the above mentioned Contract, according to which Messrs. H. Dieter and Peter E. Braun obligate themselves to present to iQ Battery Research and Development GmbH not yet forwarded documents. 2. In the Sec. 1 3. of the above mentioned Contract Messrs. H. Dieter and Peter E. Braun have obligated themselves to undertake all the required explanations and actions for immediate conveyance of Patent- and Trade Mark proprietorship as well as registration of Protection Rights as required, as well as to support in each possible way all the actions leading to conveyance to iQ Battery Research & Development GmbH. The iQ Battery Research & Development GmbH explains that since closing of the above mentioned Contract and further on, carrying out of explanations and actions is renunciated and has been renunciated, until the evidence of costs for that transfer will be presented, or until the transfer from the owners will require at least in 75% of their business shares. 3. Page 2 of 3 In Sec. 3 1 . 2 of the above mentioned Contract Messrs. H. Dieter and Peter E. Braun declared that there are not known to them any rights disputes in respect of the Rights Subject to the Contract. Messrs. H. Dieter and Peter E. Braun and the iQ Battery Research & Development GmbH understood that at the time of closing the above mentioned Contract and in understanding of these explanations, that the civil right dispute as per District Court Berlin (Case No. 3 O 40/94), resting since 15.04.1994, is not to be understood as pending process in sense of Sec. 3 1.2 of the above mentioned Agreement. . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . (place) (H. Dieter Braun) . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) for the iQ Battery Research & Development: . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . (place) (H. Dieter Braun) . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) as former Shareholders of iQ Battery Research & Development GmbH in mutual acceptance of the above: . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . (place) (H. Dieter Braun) . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) as Shareholders of iQ Battery Research & Development GmbH in mutual acceptance of the above: . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . (place) (Dr. Gunther Bauer) Page 3 of 3 . . . . . . day of 16.8.1996 . . . . . . . . . . . . . . . . . . (place) (Heinz Braun) . . . . . . day of 31.07.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) . . . . . . day of 16.8.1996 . . . . . . . . . . . . . . . . . . (place) (Ursula Braun) . . . . . . day of 16.8.1996 . . . . . . . . . . . . . . . . . . . (place) (Karin Wittkewitz) EX-6.24 31 EXTENSION CONTRACT OF INDUSTRIAL PROPERTY RIGHTS Translation from the German into the English Language Extension of the Contract Exhibit 6.24 Page 1 of 2 Extension of the Contract to Contract Regarding Industrial Protection Rights and Know-How dated 15.03.1995 between Mr. H. Dieter Braun, Schrenckweg 1, 85658 Egmating, Mr. Peter E. Braun, Schopenhauerstr. 33, 85579 Neubiberg, and the iQ Battery Research & Development GmbH, Inselkammerstr. 4, 82008 Unterhaching. 1. Messrs. H. Dieter and Peter E. Braun agree that the amount of DM 400,000.00 (Sec. 2 1. as of the above named Contract) is divided in the following proportion: to Mr. H. Dieter Braun DM 300,000.00 and to Mr. Peter E. Braun DM 100,000.00. 2. Messrs. H. Dieter and Peter E. Braun and iQ Battery Research & Development GmbH agree that payments made by iQ Battery Research & Development GmbH on the existing, at the time of concluding the above named Contract, loan a. to Mr. H. Dieter Braun aa. at the Dresdner Bank Berlin (original loan amount approx. DM 170,000.00) bb. at the Deutsche Bank Berlin (original loan amount approx. DM 90,000.00) cc. at the BCI Munich (original loan amount approx. DM 15,000.00) b. to Mr. Peter E. Braun aa. at the Dresdner Bank Dresden (original loan amount approx. DM 50,000.00) bb. at the Deutsche Bank Berlin (original loan amount approx. DM 20,000.00) cc. at the Deutsche Bank Fulda (original loan amount approx. DM 50,000.00) will reduce the above named demand of Messrs. H. Dieter and Peter E. Braun against iQ Battery Research & Development GmbH (ss. 2 1. of the above named Contract). Page 2 of 2 for the iQ Battery Research & Development: . . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . . (place) (H. Dieter Braun) . . . . . . . . day of 01.7.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) as former Shareholders of iQ Battery Research & Development GmbH in mutual acceptance of the above: . . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . . (place) (H. Dieter Braun) . . . . . . . . day of 31.7.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) as Shareholders of iQ Battery Research & Development GmbH in mutual acceptance of the above: . . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . . (place) (Dr. Gunther Bauer) . . . . . . . . day of 18.9.1996 . . . . . . . . . . . . . . . . . . . (place) (Heinz Braun) . . . . . . . . day of 31.07.1996 . . . . . . . . . . . . . . . . . . . (place) (Peter E. Braun) . . . . . . . . day of 18.9.1996 . . . . . . . . . . . . . . . . . . . (place) (Ursula Braun) . . . . . . . . day of 20.9.1996 . . . . . . . . . . . . . . . . . . . (place) (Karin Wittkewitz) EX-6.25 32 CONSULTING CONTRACT Translation from the German into the English Language Exhibit 6.25 Page 1 of 2 Consulting Contract Between the Company iQ Battery Research & Development GmbH, Heinrich-Heine-Str. 5, 09557 Floha (hereafter referred to as the Firm) and Mr. Peter Braun, Kreuzberg 6, 85658 Egmating (hereafter referred to as the Consultant) the following is being agreed to: Sec. 1. Subject of the Contract The Consultant will advise the Firm on all commercial, technical and marketing problems comprehensively. In particular to his duties belongs the overtaking of the business management activity. Sec. 2. Place and Time of the Activities 1. The Consultant sets his own place of work. However he must be at disposal at the offices of the Firm, when it is necessary. 2. The Consultant organizes his time of work dutifully at his discretion. Sec. 3 Remuneration 1. The Consultant receives a fee in amount of DM 73,200. - - annually plus statutory sales tax. The fee is payable in monthly payments each of DM (illegible - translator's note) beginning of September 1994. Page 2 of 2 Sec. 4 Expenses The Firm is obligated to reimburse, upon presenting receipts, all necessary expenses incurred on business of providing advisory activity. Sec. 5 Discretion 1. The Consultant obligates himself to maintain strict confidentiality in respect of all known previously or to be known to him business and industrial affairs, also after ceasing of this Contract. 2. The Consultant will safeguard all conveyed to him business and industrial documentation, as well as maintain confidentiality in respect of third parties, and return these documents on request after the contract ended. Sec. 6 Non-Competition 1. The Consultant obligates himself, during term of this Agreement not to be active with any enterprise which competes with the Firm. He obligates himself not to attend any a such enterprise on business, not to close any advisor's contracts, obtain any remuneration directly or indirectly. Furthermore, he is forbidden to form a competitive enterprise. 2. The Consultant will indicate undertaking of any activity, where doubts may exist if such is in competition with advisory activity. Sec. 7 Termination of the Contractual Relation 1. This consulting contract is subject to termination by either party on a three months notice, effective end of the month, the earliest though on December 31, 1996. The right to termination under special circumstances is retained. 2. Termination requires a written form. The regular termination of the contract does not require any substantiation. Sec. 8 Format Changes in clauses or additions to this Contract will be only recognized, when submitted in writing or arranged in writing by both parties. Floha, dated this August 28.1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iQ Research & Development GmbH) (Peter Braun) EX-6.26 33 CONSULTING CONTRACT DATED 10/30/96 Translation from the German into the English Language Exhibit 6.26 Page 1 of 2 Consulting Contract Between the Company iQ Battery Research & Development GmbH, Heinrich-Heine-Str. 5, 09557 Floha (hereafter referred to as the Firm) and Dr. Gunther Bauer, Oderweg 7, 85521 Ottobrun (hereafter referred to as the Consultant) agree to the following: Sec. 1. Subject of the Contract The Consultant will advise the Firm on all commercial, technical and marketing problems comprehensively. In particular his duties will also encompass overtaking of the technical management of the development. Sec. 2. Place and Time of the Activities 1. The Consultant sets his own place of work. However he must be at disposal at the offices of the Firm, when it is necessary. 2. The Consultant organizes his time of work dutifully at his discretion. Sec. 3 Remuneration 1. The Consultant receives a fee in amount of DM 21,000. - - gross, flat rate for the services in 1996. Beginnning 01.01.1997 the fee due will be payable in amount of DM 6,100. - - plus statutory sales tax. Sec. 4 Expenses The Firm is obligated to reimburse, upon presenting receipts, all necessary expenses incurred on business of providing consulting activity. Sec. 5 Discretion 1. The Consultant obligates himself to maintain strict confidentiality in respect of all known previously or to be known to him business and industrial affairs, also after ceasing of this Contract. Page 2 of 2 2. The Consultant will safeguard all conveyed to him business and industrial documentation, as well as maintain confidentiality in respect of third parties, and return these documents on request after the contract ended. Sec. 6 Non-Competition 1. The Consultant obligates himself, during term of this Agreement not to be active with any enterprise which competes with the Firm. He obligates himself not to attend any a such enterprise on business, not to close any advisor's contracts, obtain any remuneration directly or indirectly. Furthermore, he is forbidden to form a competitive enterprise. 2. The Consultant will indicate undertaking of any activity, where doubts may exist if such is in competition with advisory activity. Sec. 7 Termination of the Contractual Relation 1. This consulting contract is subject to termination by either party on a three months notice, effective end of the month, the earliest though on December 31, 1997. The right to termination under special circumstances is retained. 2. Termination requires a written form. The regular termination of the contract does not require any substantiation. Sec. 8 Format Changes in clauses or additions to this Contract will be only recognized, when submitted in writing or arranged in writing by both parties. Floha, dated this 30.10.1996 . . . . . . . . . . . . . . . . . . . . . . . (iQ Research & Development GmbH) . . . . . . . . . . . . . . . . . . . . . . . (Dr. Gunther Bauer) EX-6.27 34 AGREEMENT ON DEBT SETTLEMENT DATED 12/27/96 Translation from the German into the English Language Exhibit 6.27 Page 1 of 1 Agreement between iQ BATTERY Research & Development GmbH, - - hereafter referred to as the "Debtor" - and Mr. Dieter Braun and Mr. Peter Braun - - hereafter referred to as the "Creditors" - As based on Contract from March 15, 1995, the iQ BATTERY Research & Development GmbH owes to Messrs. Dieter and Peter Braun for relinquishing of the patents and know-how for starter batteries amount of DM 400,000.00. The Creditor declares in respect of his claim against the Debtor, that he places his claim in order of other present and future Creditors of the Debtor, whereby it is agreed with the Debtor that redemption of the interest will be depending solely on the identifiable redemption ability of the Debtor, or on the future liquidation surplus. Consequently, the Creditor obligates himself particularly not to raise his claim against the Debtor for such a time period, as per partial or complete release of these claims as based on calculations of the indebtedness of the Debtor as in sense of ss. 63, s. 1 GmbH. Unterhaching, December 27, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iQ BATTERY Research & (Dieter Braun) (Peter Braun) Development GmbH) EX-6.28 35 WAIVER AGREEMENT Exhibit 6.28 Translation from the German into the English Language Agreement between iQ BATTERY Research & Development GmbH, - hereafter referred to as the "Debtor" and Dr. Gunther Bauer - - hereafter referred to as the "Creditor" - As based on Project Contract from July 15, 1994, the iQ BATTERY Research & Development GmbH owes to Dr. Gunther Bauer DM 95,000.- -. The Creditor declares in respect of his claim against the Debtor, that he places his claim in order of other present and future Creditors of the Debtor, whereby it is agreed with the Debtor that redemption of the interest will be depending solely on the identifiable redemption ability of the Debtor, or on the future liquidation surplus. Consequently, the Creditor obligates himself particularly not to raise his claim against the Debtor for such a time period, as per partial or complete release of these claims as based on calculations of the indebtedness of the Debtor as in sense of Sec. 63, Sec. 1 GmbH. Unterhaching, December 27, 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (iQ BATTERY Research & Development GmbH) Dr. Gunther Bauer EX-6.29 36 DECLARATION OF WAIVER OF INTEREST DATED 12/19/97 Translation from the German into the English Language Exhibit 6.29 Page 1 of 1 Waiver Messrs. Dr. Gunther Bauer Oderweg 7 85521 Ottobrun Horst Dieter Braun Schrenckweg 1 85658 Egmating Peter E. Braun Schopenhauer Str. 23 85579 Neubiberg and Mrs. Karin Wittkewitz Schreckweg 1 85658 Egmating versus iQ BATTERY Research & Development GmbH, Inselkammerstr. 4 82008 Unterhaching We waive hereby all interest fees payable for our long term demands against iQ BATTERY for the year 1996 and the years prior to that. . . . . . . . . . . . . . 15/12/97 . . . . . . . . . . . . . . . . . Place, Date Signature Dr. Bauer . . . . . . . . . . . . . 21/12/97 . . . . . . . . . . . . . . . . . Place, Date Signature H.D. Braun . . . . . . . . . . . . . 19/12/97 . . . . . . . . . . . . . . . . . Place, Date Signature P.E. Braun . . . . . . . . . . . . . 21/12/97 . . . . . . . . . . . . . . . . . Place, Date Signature Karin Wittkewitz . . . . . . . . . . . . . 21/12/97 . . . . . . . . . . . . . . . . . Place, Date Signature iQ BATTERY EX-6.30 37 AGREEMENT Agreement Exhibit 6.30 Page 1 of 1 between Mr. Horst Dieter Braun, Schrenkweg 1, 85658 Egmating and Mr. Peter Eugen Braun, grad. eng., Schopenhauerstr, 23,85579 Neubiberg, on one part and IQ Battery Research & Development GmbH, Inselkammerstr.4,82008 Unterhaching. We, Horst Dieter Braun and Peter E. Braun, grad. eng. Are hereby waiving the counter performance payable to us pursuant to Sec.2.1b) and c) of the contract regarding commercial property rights and Know-how effected between us and the IQ Battery Research & Development GmbH., dated 15.03.1995 (40% of the revenue from not turnover-dependent license fees, including fees for the granting of options to effect license contracts, as well as 20% of all annual and turnover-dependent license revenues of the company from license contracts with contract-related industrial property rights up to the year 2000. IQ Battery Research & Development GmbH. is accepting this waiver. Place, date Horst Dieter Braun Munich, 9.10.1998 (signature) Place, date Peter Eugen Braun, grad. eng. Munich, 9.10.1998 (signature) Place, date IQ Battery Research & Development GmbH. Munich, 9.10.1998 (signature) EX-6.31 38 1998 STOCK OPTION PLAN Exhibit 6.31 iQ POWER TECHNOLOGY INC. 1998 STOCK OPTION PLAN This 1998 Stock Option Plan (the "Plan") provides for the grant of options to acquire shares of common stock (the "Common Stock") of iQ Power Technology Inc., a Canadian corporation (the "Corporation"). The purposes of this Plan are to retain the services of valued key employees and consultants of the Corporation and such other persons as the Plan Administrator may select in accordance with Section 2 below, to encourage such persons to acquire a greater proprietary interest in the Corporation, thereby strengthening their incentive to achieve the objectives of the shareholders of the Corporation, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by the Plan Administrator. 1. ADMINISTRATION. This Plan will be administered initially by the Board of Directors of the Corporation (the "Board"), except that the Board may, in its discretion, establish a committee composed of two (2) or more members of the Board or two (2) or more other persons to administer the Plan, which committee (the "Committee") may be an executive, compensation or other committee, including a separate committee especially created for this purpose. The Committee will have the powers and authority vested in the Board hereunder (including the power and authority to interpret any provision of the Plan or of any Option). The members of any such Committee will serve at the pleasure of the Board. A majority of the members of the Committee will constitute a quorum, and all actions of the Committee will be taken by a majority of the members present. Any action may be taken by a written instrument signed by all of the members of the Committee and any action so taken will be fully effective as if it had been taken at a meeting. The Board or, if applicable, the Committee is referred to in this Plan as the "Plan Administrator." If and when the Corporation becomes subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan Administrator will be either the full Board of Directors or a committee composed of two (2) or more members of the Board who are "Non-Employee Directors" as defined under Rule 16b-3 (as amended from time to time) promulgated under the Exchange Act or any successor rule or regulatory requirement. Subject to the provisions of this Plan, and with a view to effecting its purpose, the Plan Administrator has sole authority, in its absolute discretion, to (i) construe and interpret this Plan; (ii) define the terms used in the Plan; (iii) prescribe, amend and rescind the rules and regulations relating to this Plan; (iv) correct any defect, supply any omission or reconcile any inconsistency in this Plan; (v) grant Options under this Plan; (vi) determine the individuals to whom Options will be granted under this Plan; (vii) determine the time or times at which Options are granted under this Plan; (viii) determine the number of shares of Common Stock subject to each Option, the exercise price of each Option, the duration of each Option and the times at which each Option will become exercisable; (ix) determine all other terms and conditions of the Options; and (x) make all other determinations and interpretations necessary and advisable for the administration of the Plan. All decisions, determinations and interpretations made by the Plan Administrator will be binding and conclusive on all participants in the Plan and on their legal representatives, heirs and beneficiaries. The Board or, if applicable, the Committee may delegate to one or more executive officers of the Corporation the authority to grant Options under this Plan to employees of the Corporation who, on the Date of Grant, are not subject to Section 16 of the Exchange Act with respect to the Common Stock ("Insiders"), and in connection therewith the authority to determine: (i) the number of shares of Common Stock subject to such Options; (ii) the duration of the Option; (iii) the vesting schedule for determining the times at which such Option will become exercisable; and (iv) all other terms and conditions of such Options. The exercise price for any Option granted by action of an executive officer or officers pursuant to such delegation of authority will not be less than the fair market - 1 - value per share of the Common Stock on the Date of Grant. Unless expressly approved in advance by the Board or the Committee, such delegation of authority will not include the authority to accelerate vesting, extend the period for exercise or otherwise alter the terms of outstanding Options. The term "Plan Administrator" when used in any provision of this Plan other than Sections 1, 4(f),4(m), and 10 refers to the Board or the Committee, as the case may be, and an executive officer who has been authorized to grant Options pursuant thereto, insofar as such provisions may be applied to persons that are not Insiders and Options granted to such persons. 2. ELIGIBILITY. Options may be granted to officers, directors, employees of the Corporation or its subsidiaries ("Employees") and to such other persons, including consultants, as the Plan Administrator may select. Options may be granted in substitution for outstanding Options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization between such other corporation and the Corporation or any subsidiary of the Corporation. Options also may be granted in exchange for outstanding Options. Any person to whom an Option is granted under this Plan is referred to as an "Optionee." Any person who is the owner of an Option is referred to as a "Holder." 3. STOCK. The Plan Administrator is authorized to grant Options to acquire up to a total of 3,000,000 common shares of the Corporation's authorized but unissued, or reacquired, Common Stock. The number of shares with respect to which Options may be granted hereunder is subject to adjustment as set forth in Section 5(m) hereof. If any outstanding Option expires or is terminated for any reason, the shares of Common Stock allocable to the unexercised portion of such Option may again be subject to an Option granted to the same Optionee or to a different person eligible under Section 2 of this Plan. 4. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under this Plan will be evidenced by a written agreement approved by the Plan Administrator (the "Agreement"). Agreements may contain such provisions, not inconsistent with this Plan, as the Plan Administrator in its discretion may deem advisable. All Options must also comply with the following requirements: (a) Number of Shares and Type of Option. Each Agreement must state the number of shares of Common Stock to which it pertains. (b) Date of Grant. Each Agreement must state the date the Plan Administrator has deemed to be the effective date of the Option for purposes of this Plan (the "Date of Grant"). (c) Option Price. Each Agreement must state the price per share of Common Stock at which it is exercisable. The Plan Administrator may fix the exercise price in its sole discretion; provided that Options granted in substitution for outstanding options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization involving such other corporation and the Corporation or any subsidiary of the Corporation may be granted with an exercise price equal to the exercise price for the substituted option of the other - 2 - corporation, subject to any adjustment consistent with the terms of the transaction pursuant to which the substitution is to occur. (d) Duration of Options. At the time of the grant of the Option, the Plan Administrator will designate, subject to paragraph 4(g) below, the expiration date of the Option. In the absence of action to the contrary by the Plan Administrator in connection with the grant of a particular Option, all Options granted under this Section 4 will expire ten (10) years from the Date of Grant. (e) Vesting Schedule. No Option will be exercisable until it has vested. The Plan Administrator will specify the vesting schedule for each Option at the time of grant of the Option prior to the provision of services with respect to which such Option is granted; provided, that if no vesting schedule is specified at the time of grant, the Option will vest according to the following schedule: Number of Years Percentage of Total Following Date of Grant Option Vested - ------------------------------------- ---------------------------------- One 25% Two 50% Three 75% Four 100% The Plan Administrator may specify a vesting schedule for all or any portion of an Option based on the achievement of performance objectives established in advance of the commencement by the Optionee of services related to the achievement of the performance objectives. Performance objectives will be expressed in terms of one or more of the following: return on equity, return on assets, share price, market share, sales, earnings per share, costs, net earnings, net worth, inventories, cash and cash equivalents, gross margin or the Corporation's performance relative to its internal business plan. Performance objectives may be in respect of the performance of the Corporation as a whole (whether on a consolidated or unconsolidated basis), or a subdivision, operating unit, product or product line of either of the foregoing. Performance objectives may be absolute or relative and may be expressed in terms of a progression or a range. An Option that is exercisable (in full or in part) upon the achievement of one or more performance objectives may be exercised only following written notice to the Optionee and the Corporation by the Plan Administrator that the performance objective has been achieved. (f) Acceleration of Vesting. The vesting of one or more outstanding Options may be accelerated by the Plan Administrator at such times and in such amounts as it determines in its sole discretion. (g) Term of Option. Vested Options will terminate, to the extent not previously exercised, upon the occurrence of the first of the following events: (i) the expiration of the Option, as designated by the Plan Administrator in accordance with Section 4(d) above; (ii) the date of an Optionee's termination of employment or contractual relationship with the Corporation or any subsidiary for cause (as determined in the sole discretion of the Plan Administrator); (iii) the expiration of ninety (90) days from the date of an Optionee's termination of employment or contractual relationship with the Corporation or any subsidiary for any reason whatsoever other than cause, death or Disability (as defined - 3 - below) unless the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option; or (iv) the expiration of one year from termination of an Optionee's employment or contractual relationship by reason of death or Disability (as defined below) unless the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option. Upon the death of an Optionee, any vested Options held by the Optionee will be exercisable only by the person or persons to whom such Optionee's rights under such Option will pass by the Optionee's will or by the laws of descent and distribution of the state or county of the Optionee's domicile at the time of death and only until such Options terminate as provided above. For purposes of the Plan, unless otherwise defined in the Agreement, "Disability" means medically determinable physical or mental impairment which has lasted or can be expected to last for a continuous period of not less than twelve (12) months or that can be expected to result in death. The Plan Administrator will determine whether an Optionee has incurred a Disability on the basis of medical evidence acceptable to the Plan Administrator. Upon making a determination of Disability, the Plan Administrator will, for purposes of the Plan, determine the date of an Optionee's termination of employment or contractual relationship. Unless accelerated in accordance with Section 4(f) above, unvested Options will terminate immediately upon termination of employment of the Optionee by the Corporation for any reason whatsoever, including death or Disability. For purposes of this Plan, transfer of employment between or among the Corporation and/or any subsidiary will not be deemed to constitute a termination of employment with the Corporation or any subsidiary. For purposes of this subsection, employment will be deemed to continue while the Optionee is on military leave, sick leave or other bona fide leave of absence (as determined by the Plan Administrator). The foregoing notwithstanding, employment will not be deemed to continue beyond the first ninety (90) days of such leave, unless the Optionee's re-employment rights are guaranteed by statute or by contract. (h) Exercise of Options. Options will be exercisable, in full or in part, at any time after vesting, until termination. If less than all of the shares included in the vested portion of any Option are purchased, the remainder may be purchased at any subsequent time prior to the expiration of the Option term. No portion of any Option for less than fifty (50) shares (as adjusted pursuant to Section 4(m) below) may be exercised; provided, that if the vested portion of any Option is less than fifty (50) shares, it may be exercised with respect to all shares for which it is vested. Only whole shares may be issued pursuant to an Option, and to the extent that an Option covers less than one (1) share, it is unexercisable. Options or portions thereof may be exercised by giving written notice to the Corporation, which notice will specify the number of shares to be purchased, and be accompanied by payment in the amount of the aggregate exercise price for the Common Stock so purchased, which payment must be in the form specified in Section 4(i) below. The Corporation will not be obligated to issue, transfer or deliver a certificate of Common Stock to the Holder of any Option, until provision has been made by the Holder, to the satisfaction of the Corporation, for the payment of the aggregate exercise price for all shares for which the Option has been exercised and for satisfaction of any tax withholding obligations associated with such exercise. During the lifetime of an Optionee, Options are exercisable only by the Optionee or any transferee who takes title to such Option in the manner permitted by subsection 4(k) hereof. (i) Payment upon Exercise of Option. Upon the exercise of any Option, the aggregate exercise price will be paid to the Corporation in cash or by certified or cashier's check. In addition, the Holder may pay for all or any portion of the aggregate exercise price by complying with one or more of the following alternatives: (1) by delivering to the Corporation shares of Common Stock previously held by such Holder, or by the Corporation withholding shares of Common Stock otherwise deliverable pursuant to exercise of the Option, which shares of Common Stock received or withheld have a fair market value at the date of exercise (as - 4 - determined by the Plan Administrator) equal to the aggregate exercise price to be paid by the Optionee upon such exercise; (2) by delivering a properly executed exercise notice together with irrevocable instructions to a broker promptly to sell or margin a sufficient portion of the shares and deliver directly to the Corporation the amount of sale or margin loan proceeds to pay the exercise price; or (3) by complying with any other payment mechanism approved by the Plan Administrator at the time of exercise. (j) Rights as a Shareholder. A Holder will have no rights as a shareholder with respect to any shares covered by an Option until such Holder becomes a record holder of such shares, irrespective of whether such Holder has given notice of exercise. Subject to the provisions of Section 5(m) hereof, no rights will accrue to a Holder and no adjustments will be made on account of dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights declared on, or created in, the Common Stock for which the record date is prior to the date the Holder becomes a record holder of the shares of Common Stock covered by the Option, irrespective of whether such Holder has given notice of exercise. (k) Transfer of Option. Options granted under this Plan and the rights and privileges conferred by this Plan may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will, by applicable laws of descent and distribution or pursuant to a qualified domestic relations order, and will not be subject to execution, attachment or similar process; provided however, that any Agreement may provide or be amended to provide that an Option to which it relates is transferable without payment of consideration to immediate family members of the Optionee or to trusts or partnerships or limited liability companies established exclusively for the benefit of the Optionee and the Optionee's immediate family members. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of any right or privilege conferred by this Plan contrary to the provisions hereof, or upon the sale, levy or any attachment or similar process upon the rights and privileges conferred by this Plan, such Option will thereupon terminate and become null and void. (l) Securities Regulation and Tax Withholding. (1) Shares will not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such shares must comply with all relevant provisions of law, any applicable state securities laws, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder and the requirements of any stock exchange or automated inter-dealer quotation system of a registered national securities association upon which such shares may then be listed, and such issuance will be further subject to the approval of counsel for the Corporation with respect to such compliance, including the availability of an exemption from registration for the issuance and sale of such shares. The inability of the Corporation to obtain from any regulatory body the authority deemed by the Corporation to be necessary for the lawful issuance and sale of any shares under this Plan, or the unavailability of an exemption from registration for the issuance and sale of any shares under this Plan, will relieve the Corporation of any liability with respect to the non-issuance or sale of such shares. As a condition to the exercise of an Option, the Plan Administrator may require the Holder to represent and warrant in writing at the time of such exercise that the shares are being purchased only for investment and without any then-present intention to sell or distribute such shares. At the option of the Plan Administrator, a stop-transfer order against such shares may be placed on the stock books and records of the Corporation, and a legend indicating that the stock may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any applicable law or regulation, may be stamped on the certificates representing such shares in order to assure an exemption from registration. The Plan Administrator also - 5 - may require such other documentation as may from time to time be necessary to comply with federal and state securities laws. THE CORPORATION HAS NO OBLIGATION TO REGISTER THE OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF OPTIONS. (2) The Holder must pay to the Corporation by certified or cashier's check, promptly upon exercise of an Option or, if later, the date that the amount of such obligations becomes determinable, all applicable federal, state, local and foreign withholding taxes that the Plan Administrator, in its discretion, determines to result upon exercise of an Option or from a transfer or other disposition of shares of Common Stock acquired upon exercise of an Option or otherwise related to an Option or shares of Common Stock acquired in connection with an Option. Upon approval of the Plan Administrator, a Holder may satisfy such obligation by complying with one or more of the following alternatives selected by the Plan Administrator: (A) by delivering to the Corporation shares of Common Stock previously held by such Holder or by the Corporation withholding shares of Common Stock otherwise deliverable pursuant to the exercise of the Option, which shares of Common Stock received or withheld must have a fair market value at the date of exercise (as determined by the Plan Administrator) equal to any withholding tax obligations arising as a result of such exercise, transfer or other disposition; (B) by executing appropriate loan documents approved by the Plan Administrator by which the Holder borrows funds from the Corporation to pay any withholding taxes due under this Paragraph 2, with such repayment terms as the Plan Administrator may select; or (C) by complying with any other payment mechanism approved by the Plan Administrator from time to time. (3) The issuance, transfer or delivery of certificates of Common Stock pursuant to the exercise of Options may be delayed, at the discretion of the Plan Administrator, until the Plan Administrator is satisfied that the applicable requirements of the federal and state securities laws and the withholding provisions of the Code have been met and that the Holder has paid or otherwise satisfied any withholding tax obligation as described in (2) above. (m) Stock Dividend or Reorganization. (1) If (i) the Corporation is at any time involved in a corporate merger, consolidation, acquisition of property or shares, separation, reorganization or liquidation to which the Corporation or a parent or subsidiary corporation of the Corporation is a party, (ii) the Corporation declares a dividend payable in, or subdivides or combines, its Common Stock or (iii) any other event with substantially the same effect occurs, the Plan Administrator will, subject to applicable law, with respect to each outstanding Option, proportionately adjust the number of shares of Common Stock subject to such Option and/or the exercise price per share so as to preserve the rights of the Holder substantially proportionate to the rights of the Holder prior to such event, and to the extent that such action includes an increase or decrease in the number of shares of Common Stock subject to outstanding Options, the number of shares available under Section 4 of this Plan will automatically be increased or decreased, as the case may be, proportionately, without further action on the part of the Plan Administrator, the Corporation, the Corporation's shareholders, or any Holder. (2) If the presently authorized capital stock of the Corporation is changed into the same number of shares with a different par value, or without par value, the stock resulting from any such change will be deemed to be Common Stock within the meaning of the Plan, and each Option will apply to the same number of shares of such new stock as it applied to old shares immediately prior to such change. (3) If the Corporation at any time declares an extraordinary dividend with respect to the Common Stock, whether payable in cash or other property, the Plan Administrator may, subject to applicable law, - 6 - in the exercise of its sole discretion and with respect to each outstanding Option, proportionately adjust the number of shares of Common Stock subject to such Option and/or adjust the exercise price per share so as to preserve the rights of the Holder substantially proportionate to the rights of the Holder prior to such event, and to the extent that such action includes an increase or decrease in the number of shares of Common Stock subject to outstanding Options, the number of shares available under Section 4 of this Plan will automatically be increased or decreased, as the case may be, proportionately, without further action on the part of the Plan Administrator, the Corporation, the Corporation's shareholders, or any Holder. (4) The foregoing adjustments in the shares subject to Options will be made by the Plan Administrator, or by any successor administrator of this Plan, or by the applicable terms of any assumption or substitution document. (5) The grant of an Option will not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge, consolidate or dissolve, to liquidate or to sell or transfer all or any part of its business or assets. 5. EFFECTIVE DATE; TERM. Options may be granted by the Plan Administrator from time to time on or after the date on which this Plan is adopted (the "Effective Date") through the day immediately preceding the tenth anniversary of the Effective Date. Termination of this Plan will not terminate any Option granted prior to such termination. 6. NO OBLIGATIONS TO EXERCISE OPTION. The grant of an Option will impose no obligation upon the Optionee to exercise such Option. 7. NO RIGHT TO OPTIONS OR TO EMPLOYMENT. The Plan Administrator will determine whether or not any Options are to be granted under this Plan in its sole discretion, and nothing contained in this Plan will be construed as giving any person any right to participate under this Plan. The grant of an Option will in no way constitute any form of agreement or understanding binding on the Corporation or any subsidiary, express or implied, that the Corporation or any subsidiary will employ or contract with an Optionee for any length of time, nor will it interfere in any way with the Corporation's or, where applicable, a subsidiary's right to terminate Optionee's employment at any time, which right is hereby reserved. 8. APPLICATION OF FUNDS. The proceeds received by the Corporation from the sale of Common Stock issued upon the exercise of Options will be used for general corporate purposes, unless otherwise directed by the Board. 9. INDEMNIFICATION OF PLAN ADMINISTRATOR. In addition to all other rights of indemnification they may have as members of the Board, members of the Plan Administrator will be indemnified by the Corporation for all reasonable expenses and liabilities of any type or nature, including attorneys' fees, incurred in connection with any action, suit or proceeding to which they or any of them are a party by reason of, or in connection with, this Plan or any Option granted under this Plan, and against all amounts paid by them in settlement thereof (provided that such settlement is approved by independent legal counsel - 7 - selected by the Corporation), except to the extent that such expenses relate to matters for which it is adjudged that such Plan Administrator member is liable for willful misconduct; provided, that within fifteen (15) days after the institution of any such action, suit or proceeding, the Plan Administrator member involved therein will, in writing, notify the Corporation of such action, suit or proceeding, so that the Corporation may have the opportunity to make appropriate arrangements to prosecute or defend the same. 10. AMENDMENT OF PLAN. The Plan Administrator may, at any time, modify, amend or terminate this Plan or modify or amend Options granted under this Plan, including, without limitation, such modifications or amendments as are necessary to maintain compliance with applicable statutes, rules or regulations; provided, however, no amendment with respect to an outstanding Option which has the effect of reducing the benefits afforded to the Holder thereof will be made over the objection of such Holder; further provided, that the events triggering acceleration of vesting of outstanding Options may be modified, expanded or eliminated without the consent of Holders. The Plan Administrator may condition the effectiveness of any such amendment on the receipt of shareholder approval at such time and in such manner as the Plan Administrator may consider necessary for the Corporation to comply with or to avail the Corporation and/or the Optionees of the benefits of any securities, tax, market listing or other administrative or regulatory requirement. Without limiting the generality of the foregoing, the Plan Administrator may modify grants to persons who are eligible to receive Options under this Plan who are foreign nationals or employed outside of Canada to recognize differences in local law, tax policy or custom. This Plan was approved and adopted by the shareholders and directors of the Corporation on June 30, 1998. - --------------------------- SECRETARY Effective Date: June 30, 1998. - 8 - EX-6.32 39 FORM OF STOCK OPTION AGREEMENT Exhibit 6.32 iQ POWER TECHNOLOGY INC. 1998 STOCK OPTION PLAN STOCK OPTION AGREEMENT THIS AGREEMENT is entered into as of the _______ day of ________________, 1998 ("Date of Grant") between iQ Power Technology Inc., a Canadian corporation (the "Corporation"), and *(the "Optionee"). WHEREAS, the Board of Directors of the Corporation (the "Board") has approved the 1998 Stock Option Plan (the "Plan"), pursuant to which the Board is authorized to grant to employees and other selected persons stock options to purchase common stock, no par value, of the Corporation (the "Stock"); WHEREAS, the Plan Administrator (the "Plan Administrator") appointed by the Board has authorized the grant to the Optionee of options to purchase a total of * shares of Stock (the "Options"); NOW, THEREFORE, the Corporation agrees to offer to the Optionee the option to purchase, upon the terms and conditions set forth herein, * shares of Stock. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan. 1. Exercise Price. The exercise price of the Options shall be US$1.00 per share. -------------- 2. Limitation on the Number of Shares. If the Options granted hereby are ------------------------------------- Incentive Stock Options, the number of shares which may be acquired upon exercise thereof is subject to the limitations set forth in Section 5(a) of the Plan. 3. Vesting Schedule. The Options are exercisable in accordance with the ----------------- following vesting schedule: (a) all Options may be exercised effective from the Date of Grant. The vesting of one or more outstanding Options may be accelerated by the Plan Administrator at such times and in such amounts as it shall determine in its sole discretion. The vesting of Options also shall be accelerated under the circumstances described in Sections 5(m) and 5(n) of the Plan. 4. Options not Transferable. This Option and the rights and privileges conferred ------------------------ by this Agreement may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will and by applicable laws of descent and distribution and shall not be subject to execution, attachment or similar proce Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of any right or privilege conferred by this Agreement contrary to the provisions hereof, or upon the sale, levy or any attachment or similar process upon the rights and privileges conferred by this Agreement, such Option shall thereupon terminate and become null and void. 5. Investment Intent. By accepting the Option, the Optionee represents and ------------------ agrees that none of the shares of Stock purchased upon exercise of the Option will be distributed in violation of applicable federal and state laws and regulations. In addition, the Corporation may require, as a condition of exercising the Options, that the Optionee execute an undertaking, in such a form as the Corporation shall reasonably specify, that the Stock is being purchased only for investment and without any then-present intention to sell or distribute such shares. 6. Termination of Employment and Options. Vested Options shall terminate, to the ------------------------------------- extent not previously exercised, upon the occurrence of the first of the following events: (i) Expiration: five (5) years from the Date of Grant. ---------- - 1 - (ii) Termination Due to Death or Disability: The expiration of one (1) year -------------------------------------- from the date of the death of the Optionee or cessation of an Optionee's employment or contractual relationship by reason of Disability (as defined in Section 5(g) of the Plan). If an Optionee's employment or contractual relationship is terminated by death, any Option held by the Optionee shall be exercisable only by the person or persons to whom such Optionee's rights under such Option shall pass by the Optionee's will or by the laws of descent and distribution of the state or county of the Optionee's domicile at the time of death. (iii) Termination for Cause. The date of an Optionee's termination of ---------------------- employment or contractual relationship with the Corporation or any Related Corporation for cause (as defined in Section 5(n) of the Plan. (iv) Termination for Any Other Reason: The expiration of ninety (90) days -------------------------------- from the date of an Optionee's termination of employment or contractual relationship with the Corporation for any reason whatsoever other than cause, death or Disability (as defined in Section 5(g) of the Plan). Notwithstanding the occurrence of one of the above events, the exercise period of an Option may be extended by resolution of the Plan Administrator until a date not later than the expiration date of the Option. Each unvested Option granted pursuant hereto shall terminate immediately upon termination of the Optionee's employment or contractual relationship with the Corporation for any reason whatsoever, including death or Disability unless vesting is accelerated in accordance with Section 5(f) of the Plan. 7. Stock. In the case of any stock split, stock dividend or like change in the ----- nature of shares of Stock covered by this Agreement, the number of shares and exercise price shall be proportionately adjusted as set forth in Sections 5(m) of the Plan. 8. Exercise of Option. Options shall be exercisable, in full or in part, at any ------------------ time after vesting, until termination. If less than all of the shares included in the vested portion of any Option are purchased, the remainder may be purchased at any subsequent time prior to the expiration of the Option term. No portion of any Option for less than fifty (50) shares (as adjusted pursuant to Sections 5(m) and (n) of the Plan) may be exercised; provided, that if the vested portion of any Option is less than fifty (50) shares, it may be exercised with respect to all shares for which it is vested. Only whole shares may be issued pursuant to an Option, and to the extent that an Option covers less than one (1) share, it is unexercisable. Options or portions thereof may be exercised by giving written notice to the Corporation (which may be in the form attached hereto as Exhibit A) which notice shall specify the number of shares to be purchased and be accompanied by either: (i) the aggregate exercise price in cash or by certified or cashier's check. In addition, upon approval of the Plan Administrator, an Optionee may pay for all or any portion of the aggregate exercise price by delivering to the Corporation shares of Stock previously held by such Optionee or, with the prior consent of the Plan Administrator, by having shares withheld from the amount of Stock to be received by the Optionee. The shares of Stock received or withheld by the Corporation as payment for shares of Stock purchased on the exercise of Options shall have a fair market value at the date of exercise (as determined by the Plan Administrator) equal to the aggregate exercise price (or portion thereof) to be paid by the Optionee upon such exercise; or (ii) upon prior consent of the Plan Administrator, delivery of an irrevocable subscription agreement obligating the Optionee to take and pay for the shares of Stock to be purchased within one year of the date of such exercise. The Corporation shall not be obligated to issue, transfer or deliver a certificate of Stock to any Optionee, or to his personal representative, until the aggregate exercise price has been paid for all shares for which the Option shall have been exercised and adequate provision has been made by the Optionee for satisfaction of any tax withholding obligations associated with such exercise. During the lifetime of the Optionee, Options are exercisable only by the Optionee. - 2 - It is a condition precedent to the issuance of shares of Stock that the Optionee execute and deliver to the Corporation a Stock Transfer Agreement, in a form acceptable to the Corporation, to the extent required pursuant to the terms thereof. 9. Subject to the 1998 Stock Option Plan. The terms of the Options are subject -------------------------------------- to the provisions of the Plan, as the same may be amended from time to time, and any inconsistencies between this Agreement and the Plan, as the same may be amended from time to time, shall be governed by the provisions of the Plan, a copy of which has been delivered to the Optionee, and which is available for inspection at the principal offices of the Corporation. 10. Professional Advice. The acceptance of the Options and the sale of Stock -------------------- issued pursuant to the exercise of Options may have consequences under tax and securities laws which may vary depending upon the individual circumstances of the Optionee. Accordingly, the Optionee acknowledges that he or she has been advised to consult his or her personal legal and tax advisor in connection with this Agreement and his or her dealings with respect to Options for the Stock. 11. No Rights as a Shareholder. The Optionee shall have no rights as a ----------------------------- shareholder with respect to any shares covered by an Option until the Optionee becomes a record holder of such shares, irrespective of whether the Optionee has given notice of exercise. Subject to the provisions of Sections 5(m) of the Plan, no rights shall accrue to the Optionee and no adjustments shall be made on account of dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights declared on, or created in, the Stock for which the record date is prior to the date the Optionee becomes a record holder of the shares of Stock covered by the Option, irrespective of whether the Optionee has given notice of exercise. 12. No Rights to Employment. Nothing contained in this agreement shall be ------------------------ construed as giving any person any right to employment with the Corporation. The grant of Options hereby shall in no way constitute any form of agreement or understanding binding on the Corporation or any Related Corporation (as defined in the Plan), express or implied, that the Corporation or any Related Corporation will employ or contract with an Optionee for any length of time. 13. Entire Agreement. This Agreement is the only agreement between the Optionee ---------------- and the Corporation with respect to the Options, and this Agreement and the Plan supersede all prior and contemporaneous oral and written statements and representations and contain the entire agreement between the parties with respect to the Options. 14. Notices. All notices and other communications required or permitted under ------- this Agreement must be in writing and will be deemed received and effective upon the earlier of: (i) hand delivery to the recipient; (ii) one day after posting by traceable air courier; (iii) two (2) days after posting by certified or registered mail, postage prepaid, return receipt requested; or (iv) when initially transmitted by facsimile transmission (if confirmed by notice complying with (i), (ii) or (iii) above): (i) if to the Corporation: iQ Power Technology Inc. Suite 304, 850 Burrard Street Vancouver, BC V6Z 2J1 Canada Tel.: (604) 681-5152 Fax: (604) 681-7877 (ii) if to the Optionee: * ------------------------- ------------------------- Tel.: ------------------------- Fax: ------------------------- or to such other person or address as either of the parties will furnish in writing to the other party from time to time. - 3 - 15. Law and Jurisdiction. This Agreement is governed by the internal laws of the -------------------- Province of British Columbia, without giving effect to any laws or principles that would apply the laws of any other jurisdiction. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against either of the parties in the courts of the Province of British Columbia, and each of the parties irrevocably consents to the non-exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on either party anywhere in the world. 16. Headings And Gender. The headings of the Sections of this Agreement have ------------------- been included for convenience of reference purposes only and will in no way be interpreted to restrict or modify the terms of this Agreement. The use of pronouns of any gender in this Agreement will include pronouns of all other genders, as applicable. 17. Counterparts; Delivery by Facsimile. This Agreement may be signed in -------------------------------------- counterparts, either one of which will be deemed to be an original and both of which, when taken together, will constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telephone facsimile transmission will be effective as delivery of a manually executed counterpart of this Agreement. 18. Severability. Any term, condition or other provision of this Agreement that ------------ is prohibited or unenforceable in any jurisdiction will be ineffective, as to such jurisdiction, to the extent of such prohibition or unenforceability without affecting the validity or enforceability of such term, condition or provision in any other jurisdiction and without invalidating the remaining terms, conditions and other provisions of this Agreement 19. Attorneys' Fees. In the event of litigation arising out of or in connection with this Agreement, the prevailing party will be entitled to recover from the other party all of its attorneys' fees and other expenses incurred in connection with such litigation. 20. Parties in Interest. This Agreement may not be assigned or delegated by either party without the consent of the other, except that this Agreement (without the necessity of such consent) will be binding on and inure to the benefit of any successors, and assigns of the Corporation or any Related Corporation, whether by merger, consolidation, sale of assets or otherwise, and reference herein to the Corporation will be deemed to include any such successor or successors. IQ POWER TECHNOLOGY INC. By: _____________________________ _____________________________ Optionee Its: ____________________________ THERE MAY NOT BE PRESENTLY AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE SECURITIES LAWS FOR THE ISSUANCE OF SHARES OF STOCK UPON EXERCISE OF THESE OPTIONS. ACCORDINGLY, THESE OPTIONS CANNOT BE EXERCISED UNLESS THESE OPTIONS AND THE SHARES OF STOCK TO BE ISSUED UPON EXERCISE OF THESE OPTIONS ARE REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. - 4 - EXHIBIT A Notice of Election to Exercise This Notice of Election to Exercise shall constitute proper notice pursuant to Section 5(h) of the iQ Power Technology Inc. 1998 Stock Option Plan (the "Plan") and Section 8 of that certain Stock Option Agreement (the "Agreement") dated as of the ______ day of _____________ between iQ Power Technology Inc. (the "Corporation") and the undersigned. The undersigned hereby elects to exercise Optionee's option to purchase __________ shares of the common stock of the Corporation at a price of $__________ per share, for aggregate consideration of $______, on the terms and conditions set forth in the Agreement and the Plan. Such aggregate consideration, in the form specified in Section 8 of the Agreement, accompanies this notice. The undersigned has executed this Notice this ____ day of __________, 19__. ------------------------------------------- Signature ------------------------------------------- Name (typed or printed) - 5 - EX-6.33 40 LICENSE AGREEMENT Exhibit 6.33 LICENSE AGREEMENT THIS AGREEMENT is dated effective September 1, 1998. Between: IQ POWER TECHNOLOGY INC. of 1111 West Hastings Street, Suite 708-A, Vancouver, BC, V6E 2J3 (the "Licensee") And: MATTALEX MANAGEMENT LTD. of 1111 West Hastings Street, Suite 708, Vancouver, BC, V6E 2J3 (the "Licensor") In consideration of the fees to be paid and the covenants on the part of the Licensee to be performed, the undersigned licensor (the "Licensor") hereby grants to the Licensee a non-exclusive license (the "License") to occupy the Office Premises described below for its business office use on the following terms and conditions: Office: Premises: Southwest corner office in the Licensor's leased office premises at 1111 West Hastings Street, Suite 708, Vancouver, BC, or such equivalent office as may be designated by the Licensor from time to time therein. Access: The Licensee shall have access to the Office Premises between the normal business hours of the Licensor. Reception Services: The Licensor shall provide the Licensee with the non-exclusive services of a receptionist. Telephone: The Licensor, at the expense of the Licensee, shall provide the Licensee with telephone services through the Licensor's normal office telephone system. Term: The License shall have a term of one year commencing September 1, 1998, and continuing thereafter on a month to month basis until terminated, provided however, either party may terminate the License on one month's notice at any time after December 1, 1998. Monthly Fee: The Licensee shall prepay to the Licensor on the first day of each month a monthly fee of $750.00 for the use of the Office Premises during the month. The Licensee shall on execution of this License Agreement forthwith prepay $1,500, one-half of which represents payment of the first month fee and the remainder a deposit for the last month of the License. Other Charges: Except for the monthly fee, all other office services provided to the Licensee by the Licensor or its authorized suppliers shall be provided under the policies and at the rates from time to time established by the Licensor. All such charges shall be due on the rendering of an account therefor. Termination: If the Licensee a. fails or refuses to comply with the orders or requests of the Licensor, or b. permits any conduct or act which in the opinion of the Licensor is improper, or renders it inadvisable that the Licensee should be allowed to continue occupying the Office Premises under this License, or c. fails to comply with the terms and conditions in this License, the Licensor may terminate this License and take possession of the Office Premises and at the cost of the Licensee, remove him and all property therefrom, by force if necessary, and the Licensor shall not be liable in damages or otherwise by reason thereof, and notwithstanding such termination or removal the Licensee shall pay in full the License Fee. If payment of fees and all other moneys is not made in accordance with the terms of this License, this License may be canceled by written notice from the Licensor without prejudice to the Licensor's rights to recover for moneys due and owing hereunder. Transferability: The License may not be assigned or transferred in whole or in part. In consideration of the grant of the License, the Licensee covenants and agrees as follows: 1. to pay the monthly fee and all other charges due hereunder; 2. to indemnify the Licensor and its partners and employees from all claims, costs and liabilities which may arise as a result of the granting of this License; 3. the Licensor shall not be liable for the loss of or injury to any property, goods or effects of the Licensee due to any cause whatsoever; 4 to procure at its own expense all licenses and permits from municipal or provincial authorities which may be required to operate or conduct its trade or business and to pay all taxes that may be levied against it as a result of the operation of its trade or business in the Office Premises; and 5. not to assign or transfer the License. Executed and delivered by and on behalf of the Licensor at Vancouver, British Columbia, effective the date above-noted. IQ POWER TECHNOLOGY INC. Per: -------------------------------- ================================================================================ ================================================================================ Executed and delivered by and on behalf of the Licensor at Vancouver, British Columbia, effective the date above-noted. MATTALEX MANAGEMENT LTD. Per: -------------------------------- EX-6.34 41 AGREEMENT RE RIGHTS AND INTERESTS Exhibit 6.34 AGREEMENT RE RIGHTS AND INTERESTS This Agreement is made this 9th day of December, 1998 by and between H. Dieter Braun and Peter E. Braun, both citizens of Germany and residing at Schrenckweg 1, 85658 Egmating, Germany and Reineke Strasse 56, 81545 Munich, Germany (collectively "Assignors") and iQ Battery Research & Development GmbH, a German corporation having offices at Inselkammerstr. 4, 8008 Unterhaching, Germany ("Assignee"). WHEREAS, Assignors and Assignee have entered into agreements relating to the assignment of German Patent No. 41 42 628 and other rights and interests (collectively, the "IP Rights") through their Contract Concerning Industrial Property Rights and Know-How dated March 15, 1995 (the "Contract") and through their Patent Assignment and Trademark Assignment dated December 9, 1998; WHEREAS, Assignors and Assignee wish to address other interests as between them that are the subject of the Contract and related documents; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and intending for the Assignors and the Assignors' successors and assigns, and Assignee and Assignee's successors and assigns to be legally bound hereby, the parties hereby agree as follows: 1. The parties acknowledge that Section 2 of the Contract provides for payment to Assignors of the sum of four hundred thousand German Marks (DM 400,000) plus applicable value added tax thereon (collectively, the "Sum and VAT"), and, in addition, for payment of certain percentages of revenues from license fees and other income of Assignee. Notwithstanding this fact, Assignors and each of them hereby waive any and all rights to compensation based on the transfer of rights in any of the IP Rights to Assignee with the exception of the right to payment of the Sum and the VAT. 2. The parties further agree that the Sum and VAT shall be payable by Assignee to Assignors only out of and only to the extent of the gross profits of the Assignee. Such payment shall become due upon the availability of sufficient gross profits of the Assignee; provided, however, that Assignee may elect to pay the Sum and VAT at any time, in whole or in part. 3. The parties agree that no interest shall be due to Assignors from Assignee on the Sum and VAT irrespective of when the Sum and VAT are paid. 4. No course of dealing between Assignors and Assignee, nor any failure to exercise any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 1 4. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of the Agreement in any jurisdiction. 5. This Agreement constitutes the entire agreement as to the subject matter hereof, and is subject to modification only by a writing signed by the parties. 6. The benefits and burdens of the Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. 7. This agreement constitutes IN WITNESS WHEREOF, the Assignors and the duly authorized officers of Assignee have executed this Agreement. ASSIGNOR: /s/ H. Dieter Braun ------------------- H. Dieter Braun ASSIGNOR: /s/ Peter E. Braun ------------------ Peter E. Braun ASSIGNEE: iQ Battery Research & Development GmbH By: /s/ Peter E. Braun ------------------------- Name: Peter E. Braun Title: President 2 EX-6.35 42 TRADEMARK ASSIGNMENT Exhibit 6.35 TRADEMARK ASSIGNMENT This Agreement is made this 9th day of December, 1998 by and between H. Dieter Braun, a citizen of Germany having his address at Schrenckweg 1, 85658 Egmating, Germany ("Assignor") and iQ Battery Research & Development GmbH, a German corporation having offices at Inselkammrstr. 4, 8008 Unterhaching, Germany ("Assignee"). WHEREAS, Assignor is listed as owner of German Trademark Registration No. 2,061,981 for IQ and Design (the "Trademark"); WHEREAS, Assignor wishes for all rights and interest in such trademark registration and trademark in Germany to be transferred to and owned by Assignee; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and intending for the Assignor and the Assignor's successors and assigns, and Assignee and Assignee's successors and assigns to be legally bound hereby, the parties hereby agree as follows: 1. Assignors hereby confirms the assignment of the Trademark as provided for in the Contract Concerning industrial Property Rights and Know-How between Assignor and Peter E. Braun and Assignee and dated March 15, 1995. To the extent that such assignment may have been ineffective to transfer all rights, title and interest in the Trademark from Assignor to Assignee, Assignor hereby assigns all such rights, title and interest in the Trademark to Assignee. 2. Assignor hereby agrees to execute all documents, and do all things that may be reasonably required by Assignee to fully and properly secure, protect and perfect in Assignee its rights title and interest in the Patent Rights. 3. No course of dealing between Assignor and Assignee, nor any failure to exercise any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 4. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of the Agreement in any jurisdiction. 5. This Agreement is subject to modification only by a writing signed by the parties. 6. The benefits and burdens of the Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. IN WITNESS WHEREOF, the Assignor and the duly authorized officers of Assignee have executed this Agreement. ASSIGNOR: /s/ H. Dieter Braun ---------------------------------- H. Dieter Braun ASSIGNEE: iQ Battery Research & Development GmbH /s/ Peter E. Braun By: ------------------------------ Name: Peter E. Braun Title: President EX-6.36 43 PATENT ASSIGNMENT Exhibit 6.36 PATENT ASSIGNMENT This Agreement is made this 9th day of December, 1998 by and between H. Dieter Braun and Peter E. Braun, both citizens of Germany and residing at Schrenckweg 1, 85658 Egmating, Germany and Schopenhaur Str. 23, 85579 Neubiberg, Germany (collectively "Assignors") and iQ Battery Research & Development GmbH, a German corporation having offices at Inselkammrstr. 4, 8008 Unterhaching, Germany ("Assignee"). WHEREAS, Assignors or the Assignor H. Dieter Braun are listed as owners and/or owner of German Patent No. P4142628.2, European Patent No. EP 0617846 , U.S. Patent Nos. 5,508,126 and 5,599,636 and other patents and/or patent applications claiming priority based on the filing date of and/or disclosing substantially the same subject matter as said German patent; WHEREAS, Assignors wish for all rights and interest in such patents and applications, including all divisionals, patents of addition, continuations and continuations-in-part (the "Patent Rights") to be transferred to and owned by Assignee; NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and intending for the Assignors and the Assignors' successors and assigns, and Assignee and Assignee's successors and assigns to be legally bound hereby, the parties hereby agree as follows: 1. Assignors hereby confirms the assignment of all of the Patent Rights as provided for in the Contract Concerning industrial Property Rights and Know-How between Assignors and Assignee and dated March 15, 1995. To the extent that such assignment may have been in any respect ineffective to transfer all rights, title and interest in the Patent Rights from Assignors to Assignee, Assignors hereby assign all such rights, title and interest in the Patent Rights to Assignee, including the right to claim priority based on any and/or all of such patent applications. Assignors hereby further confirm the assignment of, and to the extent such assignment may have been in any respect ineffective, do hereby transfer all rights title and interest in all know-how relating to starter batteries and other batteries of the kind covered by the Patent Rights, including the rights to file for and obtain patents and to claim priority. 2. Assignors hereby agree to execute all documents, and do all things that may be reasonably required by Assignee to fully and properly secure, protect and perfect in Assignee its rights title and interest in the Patent Rights. 3. No course of dealing between Assignors and Assignee, nor any failure to exercise any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 4. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of the Agreement in any jurisdiction. 5. This Agreement is subject to modification only by a writing signed by the parties. 6. The benefits and burdens of the Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. IN WITNESS WHEREOF, the Assignors and the duly authorized officers of Assignee have executed this Agreement. ASSIGNOR: /s/ H. Dieter Braun ---------------------------------- H. Dieter Braun ASSIGNOR: /s/ Peter E. Braun ---------------------------------- Peter E. Braun ASSIGNEE: iQ Battery Research & Development GmbH /s/ Peter E. Braun By: ------------------------------ Name: Peter E. Braun Title: President EX-7.1 44 LIST OF MATERIAL FOREIGN PATENTS List of Material Foreign Patents Exhibit 7.1 Page 1 of 1 Name of Patent Date Issuer Holder Number 1. Braun, Dieter Nr. 41 42 628 05/06/93 Bundesrepublik Deutschland - URKUNDE 2. Braun, Dieter European Patent 07/10/96 European Patent Office No. 0617846 EX-10.1 45 CONSENT OF DELOITTE & TOUCHE [Deloitte & Touche Letterhead] Suite 2100 Telephone: (604) 669-4466 1055 Dunsmuir Street Facsimile: (604) 685-0395 P.O. Box 49279 Four Bentall Centre Vancouver, British Columbia V7X 1P4 Exhibit 10.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report relating to iQ Power Technology Inc. dated October 15, 1998, in the Registration Statement on Form SB-1 and related Prospectus of iQ Power Technology Inc. /s/ Deloitte & Touche L.L.P. Chartered Accountants Vancouver, British Columbia, Canada December 9, 1998 EX-10.2 46 CONSENT OF DELOITTE & TOUCHE GMBH [Deloitte & Touche Letterhead] Suite 2100 Telephone: (604) 669-4466 1055 Dunsmuir Street Facsimile: (604) 685-0395 P.O. Box 49279 Four Bentall Centre Vancouver, British Columbia V7X 1P4 Exhibit 10.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report relating to iQ Battery Research and Development GmbH dated October 15, 1998, in the Registration Statement on Form SB-1 and related Prospectus of iQ Power Technology Inc. /s/ Deloitte & Touche GmbH Chartered Accountants Munich, Germany December 9, 1998 EX-13.1 47 FORM F-X CONSENT Exhibit 13.1 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form F-X APPOINTMENT OF AGENT FOR SERVICE OF PROCESS AND UNDERTAKING A. Name of issuer or person filing ("Filer"): IQ POWER TECHNOLOGIES INC. B. This is [x] an original filing for the Filer [ ] an amended filing for the Filer C. Identify the filing in conjunction with which this Form is being filed: Name of registrant: IQ POWER TECHNOLOGIES INC. Form type: Form SB-1 Registration Statement File Number: Filed by: IQ POWER TECHNOLOGIES INC. Dated Filed: Filed Concurrently D. The Filer is incorporated or organized under the laws of the Canada and has its principal place of business at Suite 708-A, 1111 West Hastings Street, Vancouver, British Columbia V6E 2J3. Its phone number at that location is (604) 669-3132. E. The Filer designates and appoints Bogle & Co., Suite 4700, 601 Union Street, Seattle, Washington 98101-2346 as the agent of the Filer upon whom may be served any process, pleadings, subpoenas, or other papers in (a) any investigation or administrative proceeding conducted by the Commission; and (b) any civil suit or action brought against the Filer or to which the Filer has been joined as defendant or respondent, in any appropriate court in any place subject to the jurisdiction of any state or of the United States or of any of its territories or possessions or of the District of Columbia, where the investigation, proceeding or cause of action arises out of or relates to or concerns (i) any offering made or purported to be made in connection with the securities registered or qualified by the Filer on Form SB-1 on November ___, 1998 or any purchase or sales of any security in connection therewith; (ii) the securities in relation to which the obligation to file an annual report on Form 40-F arises, or any purchases or sales of such securities; (iii) any tender offer for the securities of a Canadian issuer with respect to which filings are made by the Filer with the Commission on Schedule 13E-4F, 14D-1F or 14D-9F; or (iv) the securities in relation to which the Filer acts as trustee pursuant to an exemption under Rule 10a-5 under the Trust Indenture Act of 1939. The Filer stipulates an agrees that any such civil suit or action or administrative proceeding may be commenced by the service of process upon, and that service of an administrative subpoena shall be effected by service upon such agent for service of process, and that service as aforesaid shall be taken and held in all courts and administrative tribunals to be valid and binding as if personal service thereof had been made. F. Each person filing this Form in connection with: (a) the use of Form F-9, F-10, 40-F, or SB-2 or Schedule 13K-4F, 14D-1F or 14D-9F stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed from the date the issuer of the securities to which such Forms and Schedules relate has ceased reporting under the Exchange Act; (b) the use of Form F-8 or Form F-80 stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed following the effective date of the latest amendment to such Form F-8 or Form F-80; (c) its status as trustee with respect to securities registered on Form F-7, F-8, F-9, F-10, F-80, or SB-2 stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time during which any of the securities subject to the indenture remain outstanding; and (d) the use of Form 1-A or other Commission form for an offering pursuant to Regulation A stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed from the date of the last sale of securities in reliance upon the Regulation A exemption. Each filer further undertakes to advise the Commission promptly of any change to the Agent's name and address during the applicable period by amendment of this Form, referencing the file number of the relevant form in conjunction with which the amendment is being filed. G. Each person filing this Form, other than a trustee filing in accordance with General Instruction I (e) of this Form, undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the Forms, Schedules and offering statements described in General Instructions I. (a), I. (b), I. (c), I. (d) and I. (f) of this Form, as applicable; the securities to which such Forms, Schedules and offering statements relate; and the transactions in such securities. The Filer certifies that it has duly caused this power of attorney, consent, stipulation and agreement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Province of British Columbia, Country of Canada, this 30th day of November , 1998. IQ POWER TECHNOLOGIES INC. By /s/ Gunther Bauer ---------------------------------------- Its Vice President, Research & Development --------------------------------------- This statement has been signed by the following persons and on the dates indicated. /s/ Peter Braun ------------------------------------------ Signature ------------------------------------------ Title President ------------------------------------------ Date November 30, 1998 -----END PRIVACY-ENHANCED MESSAGE-----