-----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, EhbgmtrLeqSWkDQTzfTqP/MJAIVh3EtjG0CsSF67QC2GA0oXffop3CIjL75Ye3v/ nYviTiAmJrV9A6DE1NcOTQ== 0001137091-03-000170.txt : 20030808 0001137091-03-000170.hdr.sgml : 20030808 20030808155357 ACCESSION NUMBER: 0001137091-03-000170 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 16 REFERENCES 429: 000-24641 FILED AS OF DATE: 20030808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUNOTECHNOLOGY CORP CENTRAL INDEX KEY: 0000789097 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841016435 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-107794 FILM NUMBER: 03831940 BUSINESS ADDRESS: STREET 1: 1661 LAKEVIEW CIRCLE CITY: OGDEN STATE: UT ZIP: 84403 BUSINESS PHONE: 8013993632 FORMER COMPANY: FORMER CONFORMED NAME: IMMUNOTECHNOLOGY LABORATORIES INC DATE OF NAME CHANGE: 19900503 FORMER COMPANY: FORMER CONFORMED NAME: LJC CORP DATE OF NAME CHANGE: 19891025 S-4 1 immuns-4new.txt AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 2003 --------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 IMMUNOTECHNOLOGY CORPORATION (Exact Name of Registrant as specified in its Charter) Delaware 84-1016435 - -------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 1661 Lakeview Circle, Ogden, Utah 84403 - --------------------------------- ----- (Address of registrant's principal executive offices) (Zip Code) 801.399.3632 ------------ (Registrant's Telephone Number, Including Area Code) 1661 LAKEVIEW CIRCLE OGDEN, UTAH 84403 801.399.3632 (Address, Including Zip Code, and Telephone Number, Including Area Code of Registrant's Principal Executive Offices) MARK SCHARMANN PRESIDENT AND CHIEF EXECUTIVE OFFICER IMMUNOTECHNOLOGY CORPORATION 1661 LAKEVIEW CIRCLE OGDEN, UTAH 84403 801.399.3632 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) COPIES TO: JOHN C. THOMPSON, LLC ATTENTION: JOHN THOMPSON, ESQ. 22 EAST 100 SOUTH #403 SALT LAKE CITY, UTAH 84111 FACSIMILE NO.: 801.606.2855 1 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the registration statement is declared effective and the satisfaction or waiver of all of the conditions to the proposed merger of Immunotechology, Inc. with and into Ultimate Security Systems Corporation, as is described in the enclosed information statement/prospectus. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] 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(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. [ ]
CALCULATION OF REGISTRATION FEE - ----------------------- --------------------- -------------------- --------------------- -------------------- Title of each class Amount to be Proposed maximum Proposed aggregate Amount of of securities to be registered (1) offeringprice per offering price registration fee registered share (2) (3) - ----------------------- --------------------- -------------------- --------------------- -------------------- Common Stock, $.00001 370,266,667 $0.11 $40,719,333.37 $3,294.20 par value - ----------------------- --------------------- -------------------- --------------------- --------------------
(1) The number of common shares, par value $.00001, of Immunotechnology Inc., a Delaware corporation, to be registered is based upon the following: (i) 366,666,667 share of common stock of Immunotechology, Inc. to be issued to the shareholders of Ultimate Security Systems Corporation, a Nevada corporation in the merger of Immunotechnology Corporation with and into Ultimate Security Systems Corporation; and (ii) 3,600,000 shares underlying options to purchase combined company stock to be granted to Dollars and Sterling Corporation d/b/a Shulman & Associates, a Florida corporation (1,600,000 options), and Stenton Leigh Business Resources, Inc. (2,000,000 options). (2) Estimated solely for the purpose of determining the registration fee in accordance with Rule 457(f) under the Securities Act of 1933, as amended. The above calculation is based on the average of the bid and ask prices for the common stock of Immunotechnology Corporation as reported on the NASD over-the-counter bulletin board on August 4, 2003, and adjustment thereof based on the ratio of the number of shares of Immunotechnology Corporation shares to be issued in the merger. 2 (3) $0.0000809 per $1,000,000 of aggregate offering price, pursuant to Section 6(b) of the Securities Act of 1933. 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 SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 3 INFORMATION STATEMENT/PROSPECTUS PROSPECTUS OF INFORMATION STATEMENT OF IMMUNOTECHNOLOGY CORPORATION IMMUNOTECHNOLOGY CORPORATION WE ARE REGISTERING 370,266,667 SHARES OF IMMUNOTECHOLOGY, INC. COMMON STOCK, PAR VALUE $.00001. THE AVERAGE BID AND ASK PRICE OF IMMUNOTECHNOLOGY CORPORATION COMMON STOCK AS REPORTED ON THE NASD OVER-THE-COUNTER BULLETIN BOARD ON JULY 15, 2003, WAS $0.12. The boards of directors of Immunotechnology Corporation ("IMNT") and Ultimate Security Systems Corporation ("USSC") have unanimously approved the merger of the two companies. The holders of USSC common stock, except as otherwise provided in this information statement/prospectus, will receive 11.211446 shares of combined company common stock for each share of USSC common stock that they own. The holders of USSC's Series A and Series B preferred stock will receive 22.4228892 shares of combined company common stock for each share of preferred stock that they own. USSC will hold a meeting of its shareholders on ____________, 2003 to consider and vote on the approval of the merger. Although the merger has been approved, by written consent without a meeting, by the requisite percentage of IMNT common stock, we are required to send our shareholders a copy of this information statement/prospectus. The merger has been approved by a majority of the IMNT common entitled to vote on such matters. The merger must still be approved by at least 51% of USSC's common stock entitled to vote on such matters and at least two-thirds of USSC Series A Preferred Stock and two-thirds of USSC Series B Preferred Stock. WE ARE NOT ASKING YOU FOR A PROXY AND DO NOT SEND US A PROXY Please read this information statement/prospectus carefully. YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 25 FOR A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING THE MERGER. This document incorporates important business and financial information about Immunotechnology Corporation and Ultimate Security Systems Corporation. - ---------------------------------------- Mark Scharmann, President and Chief Executive Officer Immunotechnology Corporation 4 NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE COMMON STOCK TO BE ISSUED UNDER THIS DOCUMENT OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This information statement/prospectus is dated ________, 2003, and is intended to be first mailed to shareholders on or about _____________, 2003. - -------------------------------------------------------------------------------- REFERENCES TO ADDITIONAL INFORMATION THIS INFORMATION STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT IMMUNOTECHNOLOGY CORPORATION AND ULTIMATE SECURITY SYSTEMS CORPORATION THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU IF YOU CALL OR WRITE TO MARK SCHARMANN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF IMMUNOTECHNOLOGY CORPORATION, 1661 LAKEVIEW CIRCLE OGDEN, UTAH 84403, PHONE 801.399.3632, IF YOU WISH TO OBTAIN TIMELY DELIVERY OF ADDITIONAL INFORMATION, ASSUMING WE CAN PROVIDE SUCH INFORMATION, YOU SHOULD REQUEST INFORMATION AS SOON AS POSSIBLE, BUT NO LATER THAN ________________, 2003. 5 IMMUNOTECHNOLOGY CORPORATION 1661 LAKEVIEW CIRCLE OGDEN, UTAH 84403 801.399.3632 NOTICE OF ACTION TAKEN BY MAJORITY CONSENT OF SHAREHOLDERS This information statement is being furnished to our stockholders in connection with our prior receipt of approval by written consent of the holders of a majority of our common stock to approve an Agreement and Plan of Merger (the "Merger") with Ultimate Security Systems Corporation, a Nevada corporation ("USSC"). Pursuant to the Merger, the following will occur: - - We will merge with USSC, with IMNT being the surviving corporation; - - the outstanding shares of USSC common stock and Series A and Series B preferred stock will convert into the right to receive 366,666,667 shares of common stock of the combined company upon completion of the merger which collectively will represent 88% of the outstanding combined company common stock and 88% on a fully diluted basis; - - the combined company will be named "Ultimate Security Systems Corporation"; - - we will increase our authorized common stock from 50,000,000 authorized to 500,000,000 authorized; - - all outstanding warrants, options or rights of any kind to acquire any shares of capital stock or other securities of any kind from USSC will be converted into the right to purchase common stock of the combined company on the terms and conditions which applied to such rights prior to the Merger and as described in the information statement/prospectus; and - - the board of directors of the combined company will consist of the current members of the USSC board and our current officers and directors will resign. We describe the merger agreement more fully in the attached information statement/prospectus. THIS INFORMATION STATEMENT IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT _________, 2003. UNDER APPLICABLE FEDERAL SECURITIES LAWS, THE AGREEMENT AND PLAN OF MERGER WITH USSC CANNOT BE MADE EFFECTIVE UNTIL AT LEAST 20 DAYS AFTER THIS INFORMATION STATEMENT IS SENT OR GIVEN TO OUR STOCKHOLDERS. ACTION BY WRITTEN CONSENT, RECORD DATE, OUTSTANDING SHARES AND REQUIRED VOTE Pursuant to Section 228 of the Delaware General Corporation Law, any action that may be taken at any meeting of our stockholders may also be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary 6 to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted (here, a majority of the outstanding shares of our common stock) and delivered to us. Our Board of Directors fixed the close of business on March 31, 2003 as the record date for the determination of holders of common stock entitled to vote on the implementation of the Agreement and Plan of Merger by written stockholder consent. As of the record date, we had 10,000,000 shares of common stock outstanding. Each outstanding share of common stock is entitled to one vote per share. The affirmative vote of a majority of the outstanding shares of common stock was required to approve the Agreement and Plan of Merger and related actions. By written consent in lieu of a meeting, the holders of a majority of the outstanding shares of common stock approved the Agreement and Plan of Merger. BY ORDER OF THE BOARD OF DIRECTORS - ------------------------------ Mark Scharmann, President Ogden, Utah __________, 2003 7 TABLE OF CONTENTS QUESTIONS AND ANSWERS ABOUT THE MERGER . . . . . . . . . . . . . . . . . . . .10 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 THE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 19 RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25 POST-MERGER COMBINED COMPANY CAPITALIZATION TABLE . . . . . . . . . . . . . . 33 TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 EXCHANGE OF STOCK CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . 34 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 35 CONDITIONS TO COMPLETE THE MERGER . . . . . . . . . . . . . . . . . . . . . . 35 ALLOCATION OF COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . .36 APPRAISAL (DISSENTER'S) RIGHTS . . . . . . . . . . . . . . . . . . . . . . . .36 VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF . . . . . . . . . . . . . . . 44 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY . . . . . . . . . . 45 COMMON TO BE ISSUED AS PART OF THE RESTRUCTURING PLAN, INCLUDING THE MERGER . 47 MATERIAL DIFFERENCES BETWEEN SHAREHOLDERS RIGHTS . . . . . . . . . . . . . . .47 COMPARISON OF MARKET VALUE OF USSC COMMON STOCK AND IMNT COMMON STOCK . . . . 47 PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 48 BUSINESS OF THE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . 53 USSC MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION FOLLOWING THE CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . .55 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 8 IMMUNOTECHNOLOGY CORPORATION ANNUAL REPORT . . . . . . . . . . . . . . . . . .56 OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . 57 WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . 57 IMMUNOTECHNOLOGY CORPORATION SEC FILINGS . . . . . . . . . . . . . . . . . . .57 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . 69 APPENDICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXHIBITS AND FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 69 UNDERTAKINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 9 QUESTIONS AND ANSWERS ABOUT THE MERGER Q: WHY ARE THE TWO COMPANIES MERGING? A: The board of directors of Ultimate Security Systems Corporation, a Nevada corporation (referred to herein as "USSC" or "Ultimate") and Immunotechnology Corporation (sometimes referred to herein as "IMNT") have adopted the plan of merger, which is fully described under "Proposal 1 -- Approval of the Agreement and Plan of Merger -- Background of the Merger " and "Proposal 1 -- Approval of the Agreement and Plan of Merger -- Determination of the Terms of the Merger" that will result in the merger between USSC and IMNT. The Agreement and Plan of Merger shall be referred to herein as the "Merger Agreement". The transactions contemplated by the Merger Agreement shall be referred to herein as the "Merger". The board of directors of USSC and IMNT believe that the merger is in the best interests of both companies, including the respective shareholders, for the following reasons: IMNT REASONS FOR APPROVING THE MERGER. We have had no operations since 1992. Since then, our management has been actively seeking potential business acquisitions or opportunities to enter into in an effort to commence business operations that will prove to be beneficial to us and our shareholders. In evaluating potential business opportunities, our management has considered various factors including financial requirements and the availability of additional financing, history of operations, the nature of present and expected competition, the quality and experience of management, and the potential for future growth, expansion and profits. After investigation and evaluation of USSC, our management has determined that the merger with Ultimate provides the best opportunity we have discovered to date. Ultimate's management has presented us with a business plan that is focused on commercializing a proprietary device for the protection of automobiles from theft. Ultimate's management intends to aggressively pursue its current business strategy and therefore our shareholders may be able to benefit from any related increased market activity in our common stock. There are, however, no assurances that Ultimate's management will be able to conduct profitable operations or that our shareholders will benefit from increased market activity in our common stock. Our Board of Directors has not obtained an independent opinion or other evaluation regarding the fairness of the terms of the Merger Agreement due to the substantial costs in obtaining such an opinion or evaluation. ULTIMATE'S REASONS FOR THE APPROVING THE MERGER. The Board of Directors of Ultimate believes that the Merger will provide Ultimate stockholders an opportunity to increase the liquidity of their shares. Specifically, assuming that the Merger is consummated, Ultimate shareholders will own shares in a "public company" and, as such, will be entitled to sell their stock through the Over-the-Counter Bulletin Board. In reaching its decision to approve the Merger Agreement, the Ultimate Board of Directors consulted with its financial and legal advisors and with management and considered a number of factors, including, without limitation, the following material factors: 10 - - the strategic and financial alternatives available to Ultimate, including remaining a privately held company; - - the structure of the transaction, which is intended to qualify as a tax-free "reorganization" under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and the related sections thereunder; and - - Ultimate's desire to have its shares publicly traded by using IMNT as a vehicle to accomplish that desire without the time and expense typically associated with an IPO. This discussion of the information and factors considered by the Ultimate Board of Directors in making their decision to approve the Merger Agreement is not intended to be exhaustive but includes all material factors considered by the Ultimate Board of Directors. Q: WHAT WILL BE THE NAME OF THE COMBINED COMPANY? A: The surviving corporation in the merger will be named Ultimate Security Systems Corporation. Q: WILL THE COMBINED COMPANY HAVE A NEW SYMBOL ON THE NASD BULLETIN BOARD? A: Yes. The combined company will apply for authorization to trade on the NASD over-the-counter bulletin board and for a new symbol upon completion of the merger. Q: WHAT WILL USSC SHAREHOLDERS RECEIVE FOR THEIR SHARES? A: The holders of USSC common stock and the holders of USSC Series A and Series B preferred stock will receive 11.211446 shares of common stock of the combined company for each share of USSC common stock that they own. If the merger is consummated with the requisite shareholder vote, the combined company will convert each share of USSC Series A and Series B preferred stock into two (2) shares of combined company common stock and, thereafter, each USSC preferred shareholder will receive two (2) shares of combined company common stock for each share of USSC preferred stock so converted. As a result, each USSC preferred shareholder will effectively receive 22.4228892 shares of combined company common stock for each share of preferred stock. The combined company will not issue fractional shares in the merger. The USSC shareholders, upon completion of the Merger, will own 88% of the outstanding combined company common stock and 88% on a fully diluted basis. Q: WHAT WILL SHULMAN AND ASSOCIATES AND STENTON LEIGH BUSINESS RESOURCES, INC. RECEIVE IN THE MERGER? A: On or about July 1, 2003, USSC entered into a Consulting and Acquisition Management Agreement (the "SA Agreement") (attached hereto as Exhibit 10.1) with Dollars and Sterling Corporation d/b/a Shulman & Associates, a Florida 11 corporation ("SA") wherein SA agreed to advise USSC on certain business matters, including, but not limited to, potential acquisitions and financial public relations. In exchange, USSC agreed to pay SA an initial fee of $5,000 and a monthly fee of $5,000 and, upon completion of the merger between IMNT and USSC, issue SA options to purchase 1,600,000 shares of the combined company's common stock at $0.10 per share (the conversion price is subject to change according to the terms of the SA Agreement). USSC has also agreed to pay no less than a 4% cash fee as an advisory and introduction fee related to financing and funding. The term of the SA Agreement is two (2) years from the date of execution but can be terminated by either party with thirty (30) written notice. The compensation ultmimately paid to SA depends on several factors more particularly described in the agreement attached as Exhibit 10.1. IMNT has agreed to assume USSC's obligations under the SA Agreement in conjunction with the merger. The underlying shares to be issued upon conversion by SA are being registered in this registration statement. On or about February 19, 2003, USSC entered into an Advisory Services Agreement (the "Stenton Agreement") (attached hereto as Exhibit 10.2) with Stenton Leigh Business Resources, Inc. ("Stenton") wherein Stenton agreed to provide consulting services related to certain business matters, including, but not limited to, USSC's merger with IMNT. In exchange, USSC agreed to pay Stenton $500,000 when the following conditions have been met: (i) the IMNT/USSC merger is completed; and (ii) USSC is able to raise $5,000,000 pursuant to a private placement of its stock. Upon the completion of the merger, USSC also agreed to issue Stenton options to purchase 2,000,000 shares of USSC's common stock at $0.10 per share. The Stenton Agreement provides that the options will have a "cashless exercise provision" allowing for conversion by Stenton at the difference between the stock market bid price at the time of conversion and the $0.10 exercise price. The compensation ultmimately paid to SA depends on several factors more particularly described in the agreement attached as Exhibit 10.2. IMNT has agreed to assume USSC's obligations under the SA Agreement in conjunction with the merger. The underlying shares to be issued upon conversion by Stenton are being registered in this registration statement. Q: HOW WERE THE MERGER EXCHANGE RATIOS DETERMINED? A: In determining the exchange rate, USSC's Board of Directors and our Board of Directors considered, among other things, the following: o We have no business and USSC's business will be our business following the Merger. o There is no public market for USSC's common or preferred stock. o The volume of trading in our stock is minimal to nonexistent. o The Merger may increase the value of our common stock. o The Merger may increase the value of USSC's common stock. Q: WHO WILL BE THE 5% OR OVER SHAREHOLDERS WHEN THE MERGER IS COMPLETED? 12 The following table reflects the anticipated ownership of the combined company's stock following the Merger for all stockholders who will beneficially own 5% or more of the combined company's outstanding common stock. ULTIMATE SECURITY SYSTEMS, INC. (COMBINED CORPORATION) OWNERSHIP OF CAPITAL
Exercise of Preferred Beneficial Owner Immediate Exercise of Preferred Stock Warrants Post-Merger Stock Warrants and Options - ---------------------------------------------------------- ------------------ ---------------------- ---------------------- Title of Class and Number James Cooper, president, of Shares Owned 29,897,181 29,897,181 29,897,181 chief executive officer and director of USSC Approximate % of Class 7.2% 5.5% 5.5% - ----------------------------- --------------------------- ------------------ ---------------------- ---------------------- Title of Class and Number John Hillard of Shares Owned 29,897,181 29,897,181 29,897,181 Approximate % of Class 7.2% 5.5% 5.5% - ----------------------------- --------------------------- ------------------ ---------------------- ---------------------- Title of Class and Number Karl Madl Family Trust (1) of Shares Owned 22,445,315 22,445,315 22,445,315 Approximate % of Class 5.4% 4.1% 4.1% - ----------------------------- --------------------------- ------------------ ---------------------- ---------------------- Title of Class and Number Mark Scharmann, president of Shares Owned 29,223,365 29,223,365 29,223,365 of IMNT and a member of the Board of Directors Approximate % of Class 7.0% 5.4% 5.3% - ----------------------------- --------------------------- ------------------ ---------------------- ---------------------- Title of Class and Number Stenton Leigh Business of Shares Owned 22,422,892 22,422,892 24,422,892 Resources, Inc. (2) Approximate % of Class 5.4% 4.1% 4.5% ============================= =========================== ================== ====================== ====================== No.of Outstanding Shares 416,666,667 542,840,202 546,440,202 ============================ ================== ====================== ======================
(1) The Karl Madl Family Trust owns 1,001,000 shares of USSC Series A Convertible Preferred Stock. Upon conversion of the preferred stock and accrued dividends to combined company common stock, the Karl Madl Family Trust will own 22,445,315 shares of combined company common stock. The Karl Madl Family Trust is located at Coccolaba, 41 White Sands Road, Paget, Bermuda, PG6. (2) Assuming that Stenton Leigh Business Resources, Inc., exercises all of its options. Q: WHO WILL MANAGE THE COMBINED COMPANY? A: The board of directors and executive officers of the combined company will be the same as the board of directors and executive officers of USSC. 13 Q: WHAT DO I NEED TO DO NOW? A: We are not soliciting proxies. We have obtained the affirmative vote, by written consent without a meeting, of the holders of a majority of the outstanding shares of our common stock in favor of the Merger Agreement. Pursuant to Section 228 of the Delaware General Corporation Law, any action that may be taken at any meeting of our stockholders may also be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted (here, a majority of the outstanding shares of our common stock) and delivered to us. A condition of the Merger Agreement is that at least two-thirds (2/3) of the USSC Series A Preferred Stock and at least two-thirds (2/3) of the USSC Series B Preferred Stock vote in favor of the merger. As a condition to the closing of the Merger, Ultimate must also obtain the affirmative vote of the holders of a majority of the outstanding shares of our common stock in favor of the Merger Agreement. Q: DO I HAVE THE RIGHT TO DISSENT TO THE MERGER AND OBTAIN APPRAISAL RIGHTS? Holders of shares of our common stock who do not approve of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the Delaware General Corporation Law. THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO APPRAISAL RIGHTS UNDER THE DELAWARE GENERAL CORPORATION LAW AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262 WHICH IS ATTACHED TO THIS INFORMATION AS APPENDIX A. YOU SHOULD READ APPENDIX A IN ITS ENTIRETY. EXCEPT WHERE THE CONTEXT REQUIRES OTHERWISE, ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF IMNT'S COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF IMNT'S COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS. Under the Delaware General Corporation Law, persons who hold shares of IMNT common stock who follow the procedures set forth in Section 262 will be entitled to have their shares of IMNT's common stock appraised by the Delaware Court of Chancery and to receive payment of the "fair value" of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, as determined by such court. 14 Under Section 262, where notice of a merger is sent to stockholders, as in the case of the adoption of the Merger Agreement by written consent of a majority of our stockholders, the corporation, not less than 20 days prior to the effective date of the merger, must notify each of its stockholders entitled to appraisal rights that such appraisal rights are available and include in such notice a copy of Section 262. THIS INFORMATION STATEMENT SHALL CONSTITUTE SUCH NOTICE, AND THE APPLICABLE STATUTORY PROVISIONS ARE ATTACHED TO THIS INFORMATION STATEMENT AS APPENDIX A. A holder of shares of our common stock wishing to exercise such holder's appraisal rights must deliver to us, before the effective date of the Merger Agreement, a written demand for the appraisal of their shares, and must signify that they are not in favor of the adoption of the Merger Agreement. A holder of shares of IMNT's common stock wishing to exercise such holder's appraisal rights must hold of record such shares on the date the written demand for appraisal is made and must continue to hold such shares of record through the effective time of the merger. A letter stating that the holder is against the adoption of the Merger Agreement will not in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262. The demand must reasonably inform us of the identity of the holder as well as the intention of the holder to demand an appraisal of the 'fair value' of the shares held by such holder. Only a holder of record of shares of IMNT's common stock is entitled to assert appraisal rights for the shares of IMNT common stock registered in that holder's name. A demand for appraisal in respect of shares of IMNT common stock should be executed by or on behalf of the holder of record, fully and correctly, as such holder's name appears on such holder's stock certificates, and must state that such person intends thereby to demand appraisal of such holder's shares of IMNT common stock in connection with the merger. If the shares of IMNT common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares of IMNT common stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that in executing the demand, the agent is agent for such owner or owners. A record holder such as a broker who holds shares of IMNT common stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of IMNT common stock held for one or more beneficial owners while not exercising such rights with respect to the shares of IMNT common stock held for other beneficial owners; in such case, however, the written demand should set forth the number of shares of IMNT common stock as to which appraisal is sought and where no number of shares of IMNT common stock is expressly mentioned the demand will be presumed to cover all shares of IMNT common stock held in the name of the record owner. Stockholders who hold their shares of IMNT common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee. 15 ALL WRITTEN DEMANDS FOR APPRAISAL PURSUANT TO SECTION 262 SHOULD BE SENT OR DELIVERED TO US AT 1661 LAKEVIEW CIRCLE OGDEN, UTAH 84403, ATTENTION: CORPORATE SECRETARY. Within ten days after the effective time of the merger, the surviving corporation must notify each holder of our common stock who has complied with Section 262 of the date that the merger has become effective. Within 120 days after the effective date of the merger, the surviving corporation or any holder of IMNT common stock who has so complied with Section 262 and is entitled to appraisal rights under Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of such holder's shares of IMNT common stock. The surviving corporation is under no obligation to and has no present intention to file such a petition. Accordingly, it is the obligation of the holders of IMNT's common stock to initiate all necessary action to perfect their appraisal rights in respect of such shares of IMNT common stock within the time prescribed in Section 262. Within 120 days after the effective date of the merger, any holder of IMNT common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such statement must be mailed within ten days after a written request for the statement has been received by the surviving corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. If a petition for an appraisal is timely filed by a holder of shares of IMNT common stock and a copy of the petition is served upon the surviving corporation, the surviving corporation will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to such stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on such petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights under Section 262. The Delaware Court of Chancery may require the holders of shares of IMNT common stock who demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation on the certificate of the pendency of the appraisal proceeding; and if any stockholder fails to comply with such direction, the Delaware Court of Chancery may dismiss the proceedings as to such stockholder. After determining the holders of IMNT common stock entitled to appraisal, the Delaware Court of Chancery will appraise the 'fair value' of their shares of IMNT common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. 16 Holders of IMNT common stock considering seeking appraisal should be aware that the fair value of their shares of IMNT common stock as so determined could be more than, the same as or less than the consideration they would receive in the merger if they did not seek appraisal of their shares of IMNT common stock and that investment banking opinions as to fairness from a financial point of view are not necessarily opinions as to fair value under Section 262. The Delaware Supreme Court has stated that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in the appraisal proceedings. In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenter's exclusive remedy. The court will also determine the amount of interest, if any, to be paid upon the amounts to be received by persons whose shares of IMNT common stock have been appraised. The costs of the action may be determined by the court and taxed upon the parties as the court deems equitable. The court may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all the shares entitled to be appraised. Any holder of shares of IMNT common stock who has duly demanded an appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote the shares of IMNT common stock subject to such demand for any purpose or be entitled to the payment of dividends or other distributions on those shares of IMNT common stock (except dividends or other distributions payable to holders of record of IMNT common stock as of a record date prior to the effective time of the merger). If any stockholder who demands appraisal of such holder's shares of IMNT common stock under Section 262 fails to perfect, or effectively withdraws or loses, such holder's right to appraisal, the shares of IMNT common stock of such stockholder will be converted into the right to receive the merger consideration. A stockholder will fail to perfect, or effectively lose or withdraw, such holder's right to appraisal if no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder delivers to the surviving corporation a written withdrawal of such holder's demand for appraisal and an acceptance of the merger, except that any such attempt to withdraw made more than 60 days after the effective time of the merger will require the written approval of the surviving corporation and, once a petition for appraisal is filed, the appraisal proceeding may not be dismissed as to any holder absent court approval. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW? A: No. You should not send in your stock certificates at this time. After the merger, the certificates currently representing shares of IMNT common stock will then represent the right to receive the same number of shares of common stock of the combined company. The holders of USSC common stock and the holders of USSC Series A and Series B preferred stock will receive 11.211446 shares of common 17 stock of the combined company for each share of USSC common stock that they own. If the merger is consummated with the requisite shareholder vote, the combined company will convert each share of USSC Series A and Series B preferred stock into two (2) shares of combined company common stock and, thereafter, each USSC preferred shareholder will receive two (2) shares of combined company common stock for each share of USSC preferred stock so converted. As a result, each USSC preferred shareholder will effectively receive 22.4228892 shares of combined company common stock for each share of preferred stock. The combined company will not issue fractional shares in the merger. The USSC shareholders, upon completion of the Merger, will own 88% of the outstanding combined company common stock and 88% on a fully diluted basis. Following the merger, the combined company will mail instructions to all IMNT and USSC shareholders for exchanging their stock certificates. Q: WHEN DO YOU EXPECT TO MERGE? A: We expect to complete the merger shortly after receipt of the shareholder approvals and after the Registration Statement on S-4, of which this Information Statement is a part, is declared effective by the Securities and Exchange Commission. Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES OF THIS DOCUMENT? A: Mark Scharmann President and Chief Executive Officer of Immunotechnology Corporation 1661 Lakeview Circle Ogden, Utah 84403 801.399.3632 SUMMARY This summary highlights selected information contained in this information statement/prospectus. This summary does not contain all of the information that is important to you and is qualified in its entirety by the more detailed information appearing elsewhere in this document or that is incorporated by reference. THE COMPANIES ULTIMATE SECURITY SYSTEMS CORPORATION 18271 West McDurmott, Suite F Irvine, California 92612 USSC was incorporated in August 1994 in the state of Nevada to develop and commercialize an automobile anti-theft device. USSC's activities to date have included raising capital, developing prototype devices, and selling such devices, beginning in September 2000, through multiple distribution channels. USSC's product is known as the "Powerlock (TM)" which is a "sealed" electronic system which arms within 45 seconds of the ignition being turned off. PowerLock(TM) works by creating an open ignition circuit that disables the starting circuitry directly at the starter. If the system is tampered with the horn will sound for 60 seconds. The system can also protect the contents of the vehicle by sounding the horn or a siren in case of a break-in. 18 The product is an adaptable security module with microprocessors that prevents electrical current from being delivered through the vehicle's starter solenoid. An enhanced version was introduced by USSC in early 2002, allowing USSC to market both the basic unit and the new "proximity transponder" version. Once the enhanced version is wired into a vehicle's power door locks, the customer can automatically unlock the vehicle's doors without pressing any buttons. This gives the customer not only the security feature of the basic version, but also hands-free convenience. USSC has also developed a version which can be installed onto motorcycles. The motorcycle application operates in the same manner as the automobile application, however, the system is specially engineered to withstand greater levels of vibration, moisture exposure, and temperature fluctuations. IMMUNOTECHNOLOGY CORPORATION 1661 Lakeview Circle Ogden, Utah 84403 801.399.3632 Since the sale of our assets in August 2001, our management has been seeking potential business acquisition or opportunities to enter in an effort to recommence business operations. We did not restrict our search for a business opportunity to any particular industry or geographical area and considered the possibility of engaging in essentially any business in any industry. The selection of a business opportunity in which to participate is complex and risky. Additionally, as we had only limited resources, it was difficult to find good opportunities. There was no assurance that we could identify a business opportunity which would ultimately prove to be beneficial to us and our shareholders. The risks we faced were further increased as a result of our lack of resources and our inability to provide a prospective business opportunity with significant capital. We finally selected the potential business opportunity offered by the merger with USSC based on our management's business judgment. THE MERGER NATURE OF THE MERGER The merger will combine USSC and IMNT with IMNT being the surviving corporation after the merger. Following the merger, the combined company will operate under the Ultimate Security Systems Corporation name. We will accomplish the merger through the statutory merger of USSC into IMNT and issue shares of the combined company to the shareholders of both USSC and IMNT. 19 BACKGROUND OF THE MERGER -- RESTRUCTURING PLAN The merger is part of a restructuring plan that will result in the statutory merger of USSC and IMNT such that both USSC and IMNT shareholders will receive shares of the combined entity. Once this Registration Statement on Form S-4 is declared "effective" by the Securities and Exchange Commission, the shares of the combined entity registered herein will be eligible for quotation on the Over-the-Counter Bulletin Board maintained by the National Association of Securities Dealers, Inc. WHAT IMNT SHAREHOLDERS WILL RECEIVE AS A RESULT OF THE MERGER The holders of IMNT common stock will receive one share of common stock of the combined company for each share of IMNT common stock that they own. The combined entity will continue USSC's business. WHAT USSC SHAREHOLDERS WILL RECEIVE AS A RESULT OF THE MERGER The holders of USSC common stock and the holders of USSC Series A and Series B preferred stock will receive 11.211446 shares of common stock of the combined company for each share of USSC common stock that they own. If the merger is consummated with the requisite shareholder vote, the combined company will convert each share of USSC Series A and Series B preferred stock into two (2) shares of combined company common stock and, thereafter, each USSC preferred shareholder will receive two (2) shares of combined company common stock for each share of USSC preferred stock so converted. As a result, each USSC preferred shareholder will effectively receive 22.4228892 shares of combined company common stock for each share of preferred stock. The combined company will not issue fractional shares in the merger. The USSC shareholders, upon completion of the Merger, will own 88% of the outstanding combined company common stock and 88% on a fully diluted basis. WHAT JAMES COOPER WILL RECEIVE AS A RESULT OF THE RESTRUCTURING PLAN As a result of the Merger, James Cooper, president and a director of USSC, will be issued 29,897,182 shares of the combined company common stock in exchange for the 2,666,666 shares of USSC common stock currently owned by Mr. Cooper. As a result, Mr. Cooper will own approximately 7.2% of the total issued and outstanding common stock of the combined company. 20 OWNERSHIP OF THE COMBINED COMPANY FOLLOWING THE COMPLETION OF THE MERGER As a result of the merger, the pre-merger USSC shareholders will own 88% and the pre-merger shareholders of IMNT will own 12% of the outstanding common stock of the combined company. On a fully diluted basis, assuming conversion of all preferred equity of the combined company that is convertible into shares of common stock of the combined company, the pre-merger USSC shareholders will own approximately 88%, the shareholders of IMNT will own approximately 12%, James Cooper will own approximately 7.2% and John Hillard will own approximately 7.2% of the combined company common stock. INCLUSION OF SHARES OF THE COMBINED COMPANY COMMON STOCK FOR TRADING ON THE NASD OVER-THE-COUNTER BULLETIN BOARD Following the merger, the combined company will seek authorization for its common stock to be traded on the NASD over-the-counter bulletin board and a stock symbol will be issued for such trading. IT IS NOT ANTICIPATED THAT THE COMBINED COMPANY WILL PAY DIVIDENDS FOLLOWING THE MERGER Neither USSC nor IMNT has ever paid dividends on its common stock. It is not anticipated that the combined company will pay dividends after the merger. THE TAX CONSEQUENCES OF THE MERGER ARE UNCERTAIN The companies have not received a tax opinion regarding the federal income tax consequences of the merger. The range of possible tax consequences is described in this information statement/prospectus under the heading "Material Federal Income Tax Consequences." THERE ARE NO MATERIAL FEDERAL OR STATE REGULATORY REQUIREMENTS NECESSARY TO CONSUMMATE THE MERGER There are no material federal or state regulatory requirements to be complied with to consummate the merger. However, the merger will not be effective until USSC and IMNT file articles of merger with the Secretary of State of the State of Nevada and the Secretary of the State of Delaware. USSC AND IMNT SHAREHOLDERS WILL HAVE APPRAISAL RIGHTS Under the Nevada Revised Statutes and the Delaware General Corporation Law, notwithstanding the approval of the merger by the holders of the requisite number of shares of capital stock of USSC and IMNT, USSC and IMNT shareholders who deliver a written notice to USSC or IMNT of his or her intent to demand payment for his shares if the merger is effectuated, who does not vote his or her shares in favor of the merger and who otherwise strictly complies with the requirements of Nevada law (for USSC shareholders) or Delaware law (for IMNT shareholders) may be able to demand payment from USSC or IMNT for the fair value of his or her shares. 21 BOARD OF DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER Following consummation of the merger, USSC's Board of Directors will continue as the board of directors of the combined company. James Cooper, currently serving as president, secretary, treasurer, chief executive officer and chairman of the board of USSC, will be president, secretary, treasurer, chief executive officer and chairman of the board of the combined company. Jay Bitner, current member of USSC's board of directors, will become a member of the board of directors of the combined entity. COMPARATIVE PER SHARE MARKET PRICE INFORMATION Shares of IMNT common stock trade on the NASD over-the-counter bulletin board on which bid and ask prices are quoted. ACCOUNTING TREATMENT The transaction involves the merger of Ultimate Security Systems Corporation ("USSC"), a privately held Nevada corporation, into Immunotechnology Corporation ("IMNT"), a publicly held Delaware corporation. USSC is an active business corporation and IMNT is a dormant shell. IMNT is the surviving corporation and will continue the business of USSC. The name of the combined entity will change to USSC. S.E.C. Regulation S-X requires presentation of a pro forma income statement using the registrant's fiscal year end, unless unusual events affect the result. The fiscal year end of IMNT (i.e., the registrant) is June 30th, while USSC's is December 31st. USSC is the operating company, therefore its financial statements are more representative of combined operations. The audited financial statements for USSC'S latest fiscal year, December 31, 2002, is the basis for the pro forma statements. Results of IMNT operations for the same four quarters were determined from its quarterly filings. Pro forma financial statements have been prepared to show the results of operations as they would have been had the merger took place at the beginning of the latest USSC fiscal year ended December 31, 2002. The Balance Sheet represents the union of the two companies as at December 31, 2002. The legal, formal structure is that of IMNT, but it is a continuation of the business of USSC, the nominal acquiree. The name of the combined legal entity is therefore changed to USSC, to communicate the substance of the transaction to investors. The pro forma Statement of Operations is essentially that of USSC, with the income and expenses of IMNT included. The pooling of interests method of accounting for business combinations has been eliminated. The Financial Accounting Standards Board imposed the purchase method on July 1, 2002, the effective date of SFAS 141. The merger of USSC into IMNT will therefore be accounted for as a purchase transaction. SFAS 141 requires that the purchaser be identified. 22 The merger is to be accomplished by the issue of IMNT stock to USSC stockholders in exchange for 100% of their stock. The combined entity is re-named USSC. The result is that former USSC stockholders will be the majority owners of the combined entity. This is a reverse acquisition. USSC is the acquirer. However IMNT, by the legal nature of the transaction, is the nominal acquirer. The accounting treatment follows the legal form in reporting the equity accounts of the consolidated entity. Accordingly, IMNT equity accounts are continued and USSC's are eliminated. The equity accounts are modified appropriately for new shares issued. The purchase method generates goodwill, where purchase price exceeds fair value of the acquiree. However, the S.E.C. has ruled that no goodwill can be recognized in the special case of a publicly held shell company and a privately held nominal acquiree. This stems from the rule in SFAS 141 that prohibits recognition of goodwill where the value of the issuer's stock cannot be determined. The view is that there is substantial doubt about the true existence of goodwill in a dormant shell, and there may be unusual difficulty in valuing the transaction. No goodwill has been recognized. Earnings (loss) per share under the standard of SFAS 128 requires that basic earnings per share be calculated on the weighted average number of shares outstanding during the year. The shares outstanding are those of the legal entity, IMNT, which changes its name to USSC in the merger. The weighted average number of shares in the pro forma statements is calculated as if the merger had occurred at the beginning of the fiscal year. The calculation accommodates a 5 for 1 forward split of IMNT shares, which is a condition of the merger. The resulting pro forma Balance Sheet at December 31, 2002 indicates combined working capital of $1,179,693, which is the same as net worth (book value). The Statement of Operations for the 12 months ended December 31, 2003 shows a net loss of $1,168,967. This is updated with a Statement of Operations for the three months ended March 31, 2003, wherein the net loss is $246,416. Nonrecurring charges directly attributable to the merger transaction are not included in the pro forma statements. These charges for the 12 months following March 31, 2003 are forecast to be $125,000 (IMNT) and $ 125,000 (USSC), total $250,000. WHEN WE EXPECT THE MERGER TO CLOSE We expect completion of the merger as soon as practicable following approval of the merger by the shareholders of USSC at their special shareholders meeting and satisfaction of all other conditions to the merger, including IMNT's Registration Statement on S-4 being declared "effective" by the Securities and Exchange Commission. 22 OUR REASONS FOR THE MERGER We have had no operations since 1992. Since then, our management has been actively seeking potential business acquisitions or opportunities to enter into in an effort to commence business operations that will prove to be beneficial to us and our shareholders. In evaluating potential business opportunities, our management has considered various factors including financial requirements and the availability of additional financing, history of operations, the nature of present and expected competition, the quality and experience of management, and the potential for future growth, expansion and profits. After investigation and evaluation of USSC, our management has determined that the merger with USSC provides the best opportunity we have discovered to date. USSC's management has presented us with a business plan that is focused on commercializing a proprietary device for the protection of automobiles from theft. USSC's management intends to aggressively pursue its current business strategy and therefore our shareholders may be able to benefit from any related increased market activity in our common stock. There are, however, no assurances that USSC's management will be able to conduct profitable operations or that our shareholders will benefit from increased market activity in our common stock. Our board of directors has not obtained an independent opinion or other evaluation regarding the fairness of the terms of the merger due to the substantial costs in obtaining such an opinion or evaluation. USSC'S REASONS FOR THE MERGER The board of directors and the shareholders of USSC believe that the merger with us will provide USSC stockholders an opportunity to increase the liquidity of their shares. Specifically, assuming that the merger is consummated, USSC shareholders will own shares in a "public company" and, as such, will be entitled to sell their stock through the over-the-counter bulletin board. In reaching its decision to approve the merger, the USSC board of directors consulted with its financial and legal advisors and with management and considered a number of factors, including, without limitation, the following material factors: - -the strategic and financial alternatives available to USSC, including remaining a privately held company, - -the structure of the transaction, which is intended to qualify as a tax-free "reorganization" under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and the related sections thereunder, and - -USSC's desire to have its shares publicly traded by using IMNT as a vehicle to accomplish that desire without the time and expense typically associated with an IPO. This discussion of the information and factors considered by the USSC board of directors and shareholders in making their decision to approve the merger is not intended to be exhaustive but includes all material factors considered by the USSC board of directors and shareholders. 24 RECOMMENDATION OF OUR BOARD OF DIRECTORS AND OUR MANAGEMENT Because our board of directors and management believes that the transactions contemplated by the merger are desirable and in the best interests of our shareholders, we were unanimous in recommending the merger. We believe that our shareholders will benefit through the strength, experience and knowledge of USSC's current and proposed executive management in the ongoing development of its business. THE USSC SPECIAL MEETING USSC will hold its special meeting of shareholders at its offices at 18271 West McDurmott, Suite F Irvine, California 92612 on _____________, 2003 at ______ a.m. local time. At that special meeting, the common stock and preferred stock shareholders will vote on the merger. RISK FACTORS The short and long term success of the combined company is subject to certain risks, many of which are substantial in nature. Because IMNT now has little to no operations other than searching for merger or acquisition candidate, the combined company will be subject to substantially the same risks as USSC prior to the merger. Therefore, the following risk factors focus mainly on the risks associated with USSC's business. You should consider carefully the following factors, in addition to other information contained in this information statement/prospectus. USSC AND IMNT BOTH HAVE A HISTORY OR OPERATING LOSSES AND MAY NEVER BECOME PROFITABLE WHICH COULD RESULT IN INVESTORS LOSING THEIR ENTIRE INVESTMENT. Both USSC and IMNT have incurred significant net operating losses since their formations. As of March 31, 2003, USSC had a deficit accumulated during the post development stage of $2,542,799. For the year ended December 31, 2001, USSC had a net loss of $1,153,495 compared to a net loss of $886,979 for the year ended December 31, 2002. For the three months ended March 31, 2003, USSC had a net loss of $244,440 compared to a net loss of $226,713 for the comparable period in 2002. From USSC's inception on August 18, 1994, to March 31, 2003, USSC had a net loss of approximately $3,283,691. The factors contributing to these significant operating losses include: - - marketing expenditures; - - expansion of research and development programs; - - regulatory compliance requirements; and - - implementation of programs to market products for distribution. As of March 31, 2003, IMNT had an accumulated deficit prior to the development stage of $151,332 and an accumulated deficit during the development stage of 25 $334,291. For the three-month period ended March 31, 2003, IMNT suffered a loss of approximately $16,634 compared to a net loss of $11,657 for the three-month period ended March 31, 2002. From its inception on November 30, 1989 to March 31, 2003, IMNT suffered a net loss of approximately $485,623. The factors contributing to these significant operating losses include: - - costs and expenses associated with keeping IMNT a reporting issuer with the Securities and Exchange Commission; and - - costs and expenses associated with identifying a potential acquisition or merger candidate. IMNT's, and after the merger, the combined company's, future success and ability to achieve profitability depends upon our ability to successfully operate USSC's business. The combined company may never achieve significant revenues or profitable operations. If the combined entity does not achieve profitable operations, investors in the combined entity (and former USSC and IMNT shareholders) could lose their entire investment. HOLDERS OF USSC PREFERRED STOCK, BOTH SERIES A AND SERIES B, HAVE THE RIGHT, UNDER CERTAIN CONDITIONS, TO DEMAND THAT USSC REDEEM THE PREFERRED STOCK. A SIGNIFICANT NUMBER OF USSC PREFERRED SHAREHOLDERS EXERCISING THEIR REDEMPTION RIGHTS COULD FINANCIALLY CRIPPLE USSC. Under the terms and conditions of the private placement memoranda for the USSC Series A and Series B Preferred Stock, shareholders holding USSC Series A and Series B Preferred Shares have the right to tender their shares to USSC for redemption. Such redemption right begins 3 years after purchase of the preferred shares and continues until USSC's stock is eligible for quotation on the Over-the-Counter Bulletin Board or equivalent quotation medium or other exchange. At June 30, 2003, USSC's redemption liability, assuming every USSC preferred shareholder with the right to redeem validly exercised such right, amounted to approximately $8,640,020. USSC does not have the resources to satisfy a significant number of redemption demands. If the number of redemption demands exceeds USSC's resources, USSC may be forced to cease its business operations and file for bankruptcy. As of July 24, 2003, USSC had received 2 requests for redemption. USSC is currently attempting to resolve the requests. Assuming that the merger is consummated and, thereafter, each USSC preferred share is converted into the allotted number of combined company common stock, the redemption liability will no longer be an issue. Neither USSC nor IMNT can guarantee that the redemption requests will not exceed USSC's resources and that, should that occur, USSC will be able to continue its current operations. USSC'S RECURRING LOSSES RAISE DOUBT ABOUT USSC'S ABILITY TO CONTINUE AS A GOING CONCERN. USSC's financial statements have been prepared on the assumption that USSC will continue as a going concern. USSC's independent public accountant has issued his report dated April 10, 2003 that includes an explanatory paragraph stating that USSC's recurring losses and accumulated deficit, among other things, raise substantial doubt about USSC's ability to continue as a going concern. USSC's historical sales are limited and USSC has relied upon financing from the sale of equity securities to sustain operations. If the combined company is not able to generate revenues and if its ability to raise capital through the sale of its equity is hindered, investors in the combined entity could lose their entire investment. 26 THE PLAN OF MERGER INVOLVES SUBSTANTIAL DILUTION TO USSC AND IMNT SHAREHOLDERS. Assuming the merger is consummated and assuming conversion or exercise of all preferred equity of the combined company that is convertible into shares of common stock of the combined company, the pre-merger IMNT shareholders will own 12% of the outstanding combined company common stock. Assuming the merger is consummated and assuming conversion or exercise of all preferred equity of the combined company that is convertible into shares of common stock of the combined company, the pre-merger USSC shareholders will own 88% of the outstanding combined company common stock. IF THE COMBINED COMPANY SELLS ADDITIONAL EQUITY SECURITIES, IT MAY RESULT IN ADDITIONAL SHAREHOLDER DILUTION. The combined company may need to sell additional equity securities or obtain other forms of financing to fund its operations. Absent such additional financing, the combined company may find it necessary to postpone or cancel some or all of its planned business activities. This postponement could adversely affect the combined company's ability to conduct its business operations, generate future revenues and introduce its products into the proper distribution channels. Furthermore, additional financing may not be available, or, if available, may not be available on acceptable terms or in required amounts. If additional funds are raised by issuing shares of common stock or securities convertible into common stock, those sales or conversion could result in further and possibly substantial dilution of the combined company's shareholders. Substantial dilution may make it more difficult for investors to sell their shares or may result in a lower price of the combined company's securities. As a result, the combined company shareholders may find it difficult or impossible to sell their shares, if freely tradeable, and, even if such sale is possible, may not be able to sell their shares for more than they paid. THE TRADING PRICE OF THE COMBINED COMPANY'S COMMON STOCK IS LIKELY TO BE VOLATILE WHICH COULD LEAD TO A SERIOUS DECLINE IN THE COMBINED COMPANY'S STOCK PRICE, LEADING TO SIGNIFICANT LOSS BY SHAREHOLDERS AND THE COMBINED COMPANY. The stock market in general and the prices of stock quoted on the over-the-counter bulletin board, specifically, has been subject to extreme volatility. The trading price of the combined company is likely to be subject to wide fluctuations in response to the quarter to quarter variations in the combined company's operating results, material announcements by the combined company or its competitors, governmental regulatory action, conditions in the industries in which they operate, or other events or factors, many of which will be beyond the combined company's control. The combined company's operating results in future quarters may be below the expectations of investors. There also may be certain periods where certain combined company shareholders find it prudent to attempt to sell large blocks of unrestricted stock. In such events, the price of the combined company common stock would likely decline, perhaps substantially. In addition, the stock market has historically experienced extreme price and volume fluctuations. Any of these factors either in isolation or in conjunction, could lead to investors losing their entire investment in us. 27 THE COMBINED COMPANY IS UNLIKELY TO PAY DIVIDENDS. Neither IMNT nor USSC has ever declared or paid cash dividends on its common stock and it is not anticipated that any cash dividends will be declared on the combined company's common stock in the foreseeable future. IF THE COMBINED COMPANY IS NOT SUCCESSFUL IN COMMERCIALIZING ITS PRODUCTS, IT WILL NOT BE ABLE TO GENERATE ENOUGH INCOME TO COVER ITS OPERATING EXPENSES AND DEBT SERVICE. USSC was founded in August 1994 to develop, manufacture and market an entirely new anti-vehicle theft device. USSC patented its product under the PowerLockTM brand name in the United States under patent number 5,548,164 and internationally under patent number 6,351,209. PowerLockTM is an anti-theft starter circuit system and electronic circuit security module housing apparatus. PowerLockTM an anti-theft device prevents an automobile ignition system from being "hot-wired" or by-passed. PowerLockTM is installed in a motor vehicle with an electrically operable starter motor and starter solenoids, which are specially designed electromagnets. The PowerLockTM electronic circuit security module housing is mechanically adaptable and installed directly on to the existing starter solenoids, while a system access code entry device is installed in the vehicle cabin. PowerLockTM is a "sealed" electronic system which arms within 45 seconds of the ignition being turned off. PowerLockTM works by creating an open ignition circuit that disables the starting circuitry directly at the starter. If the system is tampered with the horn will sound for 60 seconds. The PowerLockTM system can also protect the contents of the vehicle by sounding the horn or a siren in case of a break-in. USSC has also developed a version of the PowerLockTM which can be installed onto motorcycles. The motorcycle application of PowerLockTM operates in the same manner as the automobile application of the PowerLockTM system. The motorcycle application of the PowerLockTM system is specially engineered to withstand greater levels of vibration, moisture exposure, and temperature fluctuations Until December 31, 2000, USSC was engaged principally in research and development activities, and from January 1, 2001 through March 31, 2003, market development activities related to the PowerLockTM. While marketing of the PowerLockTM has commenced, PowerLockTM has not achieved full commercialization, and product applications are in various stages of commercialization. As a result, PowerLockTM has been sold only in limited quantities and there can be no assurance that a significant market will develop for the PowerLockTM. There can be no assurance that the PowerLockTM will meet future customer performance standards or will offer sufficient price or performance advantages required to achieve commercial success. The combined company's failure to develop, manufacture and commercialize USSC's products on a timely and cost effective basis will prevent it from generating enough revenues to cover its operating expenses. In the event that the combined company fails to generate enough revenues, the combined company may be forced to liquidate its assets. 28 IF THE COMBINED COMPANY IS NOT ABLE TO GENERATE ACCEPTANCE IN THE AUTO INDUSTRY FOR ITS PRODUCTS, IT WILL NEGATIVELY AFFECT REVENUES. The combined company's future success in selling the PowerLockTM depends largely on acceptance of the technology by the auto industry and the ability of the combined company to educate auto industry professionals as well as customers about the advantages of the PowerLockTM and the reasons that the PowerLockTM is superior to other, better known anti-theft devices. Traditionally, auto anti-theft end users have been slow to adopt new technologies until their consistent effectiveness and economic value have been evidenced. Successful introduction of the combined company's products will also depend to a large extent on recommendations of prior users and testimonials from auto industry professionals. Although USSC's research data has shown that its PowerLockTM is superior to other anti-theft devices, there is no guarantee that end users or industry professionals will agree with USSC's data. There can be no assurance that the combined company will be able to demonstrate that the PowerLockTM is superior to other better known anti-theft devices. In the event that the compbined company is unable to generate sufficient interest and confidence in the PowerLockTM, the revenue generating ability of the combined company will suffer. IF THE COMBINED COMPANY CANNOT PROTECT ITS PROPRIETARY INFORMATION, IT MAY LEAD TO INCREASED COMPETITION AND EXPENSES AND DECREASED REVENUES. The combined company's success will depend, in part, on its ability to obtain patent protection for the PowerLockTM to preserve its trade secrets, and to operate without infringing the patent or other proprietary rights of others. USSC patented its product under the PowerLockTM brand name in the United States under patent number 5,548,164 and internationally under patent number 6,351,209. USSC also recently received a federal trademark for its product. Any patents issued to USSC or the combined company may not be held valid if subsequently challenged, others may claim rights in the patents and other proprietary technology owned by the combined company, and others may have developed or will develop similar products or technologies without violating any of the combined company's proprietary rights. The combined company will rely on the strength and protectability of the patents already obtained by USSC. In the event the combined company is unable to protect those patents and/or trademarks, the combined company's ability to sell the PowerLockTM product and earn revenues will be harmed. The combined company's inability to obtain patent protection, preserve its trade secrets or operate without infringing the proprietary rights of others, as well as its loss of any rights to technology that it now has or acquires in the future, could have a negative impact on its ability to maintain or increase sales revenues. Litigation, which could result in substantial cost to, and diversion of effort by, the combined company, may be necessary to enforce patents owned by the combined company, to defend the combined company against infringement claims made by others, or to determine the ownership, scope or validity of the proprietary rights of the combined company and others. An adverse outcome in any such litigation could subject the combined company to 29 significant liabilities to third parties, require it to seek licenses from third parties, and/or require it to cease using certain technology, any of which could increase its operating costs or negatively impact its ability to maintain or increase sales. The combined company may also become involved in interference proceedings declared by the United States Patent and Trademark Office in connection with one or more of USSC's or, in the future, the combined company's patents or patent applications to determine priority of invention. Any such proceeding could result in substantial cost to the combined company, as well as a possible adverse decision as to priority of invention of the patent or patent application involved. In addition, the combined company may become involved in reissue or reexamination proceedings in the patent office in connection with the scope or validity of its patents. Any such proceeding could have a material adverse effect on its business, results of operations and financial condition, and an adverse outcome in such proceeding could result in a reduction of the scope of the claims of any such patents or such patents being declared invalid. In addition, from time to time, to protect its competitive position, the combined company may initiate reexamination proceedings in the patent office with respect to patents owned by others. Such proceedings could result in substantial cost to, and diversion of effort by, the combined company, and an adverse decision in such proceedings could increase the combined company's operating costs or negatively impact its ability to maintain or increase sales revenues. USSC relies and, in the future, the combined company will rely, on trade secrets and proprietary know how in the conduct of its operations. USSC uses employee and third party confidentiality and non-disclosure agreements to protect such trade secrets and know how. The combined company will take similar precautions. The obligation to maintain the confidentiality of such trade secrets or proprietary information may be breached by employees, consultants, advisors or others and the combined company may not have adequate remedies for any breach. In addition, the trade secrets or proprietary know how may otherwise become known or be independently developed or discovered by third parties. THE COMBINED COMPANY MAY NOT BE ABLE TO MAINTAIN OR INCREASE SALES REVENUES DUE TO COMPETITION. USSC believes that the Power Lock(TM) product has a competitive advantage over other "competing" products. Power Lock(TM) approaches vehicle security from a different point of view and very different technology. When it comes to immobilizing the starter, Power Lock(TM) uses a protective device which covers the starter solenoid (the electrical portion) and makes it impossible to start the engine. In addition, the Power Lock(TM) becomes part of the starter and cannot be removed. Specific competitors include: Directed Electronics, maker of the Viper product; Clifford security systems; Omega security systems; Audiovox, maker of the Prestige product; Lojack, maker of the Lojack system; Magnadyne security systems; and Omega, which makes the Excaliber system. All of these competitors use standard relays, located under the dash or in the engine compartment that are hot-wired around. 30 Although USSC believes that the Power Lock(TM) is a superior product, all of USSC's larger competitors have substantially greater financial and technical resources, larger research and development staffs, and greater manufacturing and marketing capabilities than USSC and, in the future, the combined company. There can be no assurance that USSC's and, in the future, the combined company's, product will compete effectively against products produced by such competitors. THE COMBINED COMPANY'S LIMITED MANUFACTURING CAPACITY AND EXPERIENCE MAY HARM ITS ABILITY TO MANUFACTURE, MARKET AND DISTRIBUTE ITS PRODUCT AND, IN TURN, REVENUE PRODUCTION WILL BE HARMED. The combined company's success will depend, in part, on its ability to manufacture its products in significant quantities, with consistent quality, at acceptable costs and on a timely basis. The combined company has limited experience in high volume manufacturing. If the combined company is not able to manufature, market and distribute the Power Lock(TM) product in a cost effective and timely mannter, customer satisfaction and loyalty will be harmed resulting in a reduced capacity to earn revenues. IF THE TECHNOLOGY RELIED UPON BY THE COMBINED COMPANY FAILS TO REMAIN COMPETITIVE, IT WILL NOT BE ABLE TO INCREASE OR MAINTAIN SALES REVENUES. The Power Lock(TM) is based on USSC's, and in the future, the combined company's patented technology. The fields in which USSC, and in the future, the combined company, intend to sell the Power Lock(TM) are highly competitive and intensive research and development is always being undertaken by private and public enterprises to develop new and more effective anti-theft devices. Competitive products may be introduced by third parties and different or new technologies may become commercially available. The combined company's competitors may succeed in developing or marketing technologies or products that exhibit superior performance or are more commercially desirable or more cost effective than those developed and marketed by the combined company. Any of the foregoing could have a negative affect on the combined company's ability to maintain or increase sales revenues without improving its products, developing new products or reducing costs. If the combined company lacks the resources to improve its products and/or develop new products, the combined company's revenues will suffer. THE COMBINED COMPANY'S LIMITED EXPERIENCE IN MARKETING PRODUCTS MAY HAVE A NEGATIVE IMPACT ON ITS ABILITY TO INCREASE SALES REVENUES. While the combined company's sales force has experience in marketing products to the auto anti-theft industry, the combined company has limited experience in marketing and selling products, in general. To market its products effectively, the combined company will be required to develop an expanded marketing and sales force that can effectively demonstrate the advantages of the Power Lock(TM). The Power Lock(TM) will also rely heavily on the recommendations of prior users. The combined company's future success will depend in part on the continued 31 relationships with auto makers and other industry professionals, its ability to enter into other similar arrangements, the continuing interest of the existing distributors in current and potential product applications and, eventually, the distributors' success in marketing and willingness to purchase the Power Lock(TM). If the combined company is unable to develop additional relationships or if existing USSC relationships fail to develop or are not sustained, the combined company will have difficulty generating revenues. LOSS OF KEY PERSONNEL BY THE COMBINED COMPANY WOULD FORCE THE COMBINED COMPANY TO EXPEND SIGNIFICANT TIME AND MONEY SEEKING REPLACEMENT PERSONNEL WHICH, IN TURN, WOULD HARM THE COMBINED COMPANY'S ABILITY TO EARN REVENUES. USSC's principal executive officer, James Cooper, has over 20 years of management experience. The loss of Mr. Cooper or other key personnel, or the failure of the combined company to attract and retain other skilled and experienced personnel on acceptable terms, would harm the combined company's ability to earn revenues. There is no key person insurance on Mr. Cooper. Mr. Cooper has an employment agreement with the company which expires on October 20, 2006, unless extended as provided for under the employment agreement and addendum No. 1 thereto. PERSONAL INJURY OR PROPERTY DAMAGE CLAIMS RELATING TO THE COMBINED COMPANY'S PRODUCTS COULD LEAD TO LARGE INSURANCE PREMIUMS AND/OR EXPENSIVE LAWSUITS WHICH COULD, IN TURN, RESTRICT THE COMBINED COMPANY'S ABILITY TO EARN REVENUES. Products sold by the combined company may expose it to potential liability for personal injury or property damage claims relating to the use of those products, particularly if used in a manner not in conformity with the combined company's instructions. Although product liability claims historically have not had a material adverse effect on USSC, the combined company may be subject to or incur liability for such claims in the future. USSC does not currently maintain product liability insurance. The combined company may maintain product liability insurance in amounts that management deems commercially reasonable. However, a significant claim that is uninsured or partially insured could result in loss or deferral of revenues, diversion of resources, or damage to the combined company's reputation, any of which could harm the combined company's ability to earn revenues. THE TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS ARE UNCERTAIN AND COULD BE ADVERSE. The material U.S. federal income tax consequences of the merger are uncertain and could be adverse. No tax opinion will be issued by IMNT's or USSC's tax advisors prior to the consummation of the merger as to the material federal income tax consequences of the merger. Each investor in IMNT and USSC should consult with their own tax advisor as to the potential state and federal tax consequences of the merger. POST-MERGER COMBINED COMPANY CAPITALIZATION TABLE The following Post-Merger Combined Company Capitalization Table shows the equity of the combined company following the merger on an outstanding and fully diluted basis as of March 31, 2003 (assuming conversion into common stock of all outstanding convertible debt and preferred stock and exercise of all outstanding warrants and options). 32 ULTIMATE SECURITIES CORPORATION (COMBINED CORPORATION) CAPITALIZATION TABLE
Exercise of Preferred Exercise of Preferred Stock Warrants Immediate Post-Merger Stock Warrants and Options ---------------------------------------------------- ------------------------- CAPITAL ASSETS Cash & Cash Equivalents $1,270,620 $ 8,733,406 $ 9,093,406 Other Current Assets $ 54,688 $ 54,688 $ 54,688 ----------- ------------ ------------ $1,325,308 $ 8,788,094 $ 9,148,094 Less: Current Liabilities $ 145,615 $ 145,615 $ 145,615 ----------- ------------ ------------ CAPITALIZATION $1,179,693 $ 8,642,479 $ 9,002,479 =========== ============ ============ CAPITAL STOCK Preferred Stock: $.00001 par value, 5,000,000 shares authorized, zero outstanding Common Stock, $.00001 par value; 50,000,000 shares authorized. Outstanding shares 416,666,667 542,840,202 546,440,202 Share capital $ 4,167 $ 5,428 $ 5,464 Contributed Capital $1,644,465 $ 9,105,990 $ 9,466,004 Accumulated Deficits $ (468,989) $ (468,989) $ (468,989) ----------- ------------ ------------ CAPITALIZATION $1,179,643 $ 8,642,429 $ 9,002,479 =========== ============ ============
TERMS OF MERGER We expect to complete the merger in the first quarter of 2004. The name of the combined company will be Ultimate Security Systems Corporation. Under the merger agreement, - - USSC will merge with and into IMNT, - - the separate corporate existence of USSC will cease, - - IMNT will survive and continue its corporate existence under the laws of the State of Delaware under the name Ulimate Security Systems Corporation, 33 - - subject to the satisfaction or waiver of conditions set forth in the merger agreement and described in "Conditions to Complete the Merger," the merger will become effective on the date and at the time specified in the articles of merger to be filed with the Secretary of State of the States of Delaware and Nevada. At the effective time, the IMNT certificate of incorporation, as amended, will be further amended to authorize the issuance of additional shares of common stock and preferred stock. The certificate of incorporation, as so amended, and the bylaws of IMNT will be the certificate of incorporation and bylaws of the combined company upon completion of the merger. EXCHANGE OF STOCK CERTIFICATES Immediately following the effective time of the merger, the combined company shall mail to the IMNT and USSC holders of record of a certificate or certificates that immediately prior to the effective time represented issued and outstanding shares of IMNT or USSC capital stock a letter of transmittal to surrender the certificates to the combined company for cancellation. Upon the surrender and cancellation of each certificate, the combined company shall mail to such holders the common stock of the combined company to which they are entitled under the merger agreement. Until properly surrendered, each unsurrendered certificate shall only represent the right to receive common stock of the combined company to the extent provided under the merger agreement. Holders of unsurrendered certificates of USSC and IMNT capital stock will not be entitled to receive any dividends or distributions with respect to the combined company's capital stock. Holders of IMNT and USSC capital stock should not send in certificates until they receive transmittal materials from the combined company. REPRESENTATIONS AND WARRANTIES The merger agreement contains the following representations and warranties by USSC: - - USSC is duly organized and good standing under the laws of Nevada; - - USSC's capitalization is as set forth in the merger agreement, all issued and outstanding shares of capital stock are validly authorized and issued and there are no pre-emptive rights with respect to the issuance or sale of its capital stock; - - USSC has the corporate power and authority to carry on its business, own or lease properties and enter into the merger agreement and consummate the transactions contemplated thereby; and - the merger agreement is a valid and binding obligation of USSC enforceable in accordance with its terms, the 34 execution and delivery of the merger agreement will not conflict with or violate any organizational documents, agreements or governmental orders and no filing or approval is required to consummate the merger except the filing of articles of merger and this information statement/prospectus. The merger agreement contains the following representations and warranties by IMNT: - - IMNT is duly organized and good standing under the laws of Delaware; - - IMNT's capitalization is as set forth in the merger agreement, all issued and outstanding shares of capital stock are validly authorized and issued and there are no pre-emptive rights with respect to the issuance or sale of its capital stock; - - IMNT has the corporate power and authority to carry on its business, own or lease properties and enter into the merger agreement and consummate the transactions contemplated thereby; and - - the merger agreement is a valid and binding obligation of IMNT enforceable in accordance with its terms, the execution and delivery of the merger agreement will not conflict with or violate any organizational documents, agreements or governmental orders and no filing or approval is required to consummate the merger except the filing of articles of merger and this information statement/prospectus. CONDITIONS TO COMPLETE THE MERGER Among other conditions specified more particularly in the merger agreement attached hereto, the obligations of each of IMNT and USSC to complete the merger are subject to the satisfaction or waiver, subject to compliance with applicable law, of conditions, including: - - either: (i) A Registration Statement on Form S-4 (the "Registration Statement") shall have been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceedings for that purpose shall have been initiated or, to the knowledge of IMNT or USSC, threatened by the SEC. - - the merger agreement and the other transactions contemplated by the merger agreement shall have been approved and adopted by the requisite vote of the stockholders of IMNT and USSC, to the extent, in each case, that stockholder approval is required under applicable law and governing documents. Each party to the merger agreement acknowledged that at least sixty-six and two-thirds percent (66 2/3%) of the USSC preferred stock must vote in favor of the merger in order for the merger to be consummated. - - at least two-thirds (2/3) of the holders of USSC Series A preferred stock and at least two-thirds (2/3) of the holders of USSC Series B preferred stock must agree to the merger. - - no Governmental Entity (as that term is defined in the merger agreement), nor any federal or state court of competent jurisdiction or arbitrator shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction or arbitration award or finding or other order (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the merger or any other transactions contemplated in the merger agreement. 35 - - all consents, approvals and authorizations of any Governmental Entity (as that term is defined in the merger agreement) required to be set forth in the related sections of the IMNT Disclosure Schedule or the USSC Disclosure Schedule shall have been obtained, in each case, without (i) the imposition of conditions, (ii) the requirement of divestiture of assets or property or (iii) the requirement of expenditure of money by IMNT or USSC to a third party in exchange for any such consent. ALLOCATION OF COSTS AND EXPENSES The merger agreement provides that each party to the merger agreement will be responsible for paying its own expenses, including, without limitation, all attorneys' fees and costs and all accountants' fees and costs. APPRAISAL (DISSENTER'S) RIGHTS Under the Nevada Revised Statutes and the Delaware General Corporation Law, notwithstanding the approval of the merger by the holders of the requisite number of shares of capital stock of USSC and IMNT, a USSC shareholder and an IMNT shareholder can refuse the merger consideration and exercise his or her appraisal rights and obtain payment for the fair value of his or her capital stock by strictly following the requirements of the applicable law. A copy of the relevant sections the Nevada Revised Statutes is attached as Appendix B and a copy of the relevant sections of the Delaware General Corporation Law is attached as Appendix A. You are urged to review the applicable statute carefully as failure to comply may result in the loss of your appraisal rights. FAILURE TO STRICTLY COMPLY WITH APPLICABLE LAW MAY RESULT IN A FORFEITURE OF APPRAISAL RIGHTS. A beneficial shareholder of USSC or IMNT stock may assert dissenters' rights as to shares held on the shareholder's behalf only if the shareholder submits to USSC, if a USSC shareholder, and to IMNT, if an IMNT shareholder, the written consent of the shareholder of record to the dissent not later than the time the beneficial shareholder asserts dissenters' rights and the beneficial shareholder does so with respect to all shares of which he is the beneficial shareholder or over which he has the power to direct the vote. USSC APPRAISAL (DISSENTER'S) RIGHTS THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO APPRAISAL RIGHTS UNDER THE NEVADA REVISED STATUTES AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE NEVADA REVISED STATUTES ATTACHED HERETO AS APPENDIX B. YOU SHOULD READ APPENDIX B IN ITS ENTIRETY. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF OUR COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS. 36 USSC shareholders who wish to assert dissenters' rights: (i) must deliver to USSC, before the vote is taken, a written notice of the shareholder's intent to demand payment for his or her shares if the merger is effectuated and (ii) must not vote his or her shares in favor of merger. If the merger is authorized by the shareholders, USSC will send a written dissenters' notice to all shareholders who provided timely notice of their intent to demand payment for their shares and who did not vote their shares in favor of the merger, within 10 days after effectuation of the merger. The notice will: (a) state where the demand for payment must be sent and where and when certificates for USSC's shares are to be deposited; (b) supply a form for demanding payment; (c) set a date by which USSC must receive the demand for payment, which may not be less than 30 nor more than 60 days after the date the notice is delivered; and (d) be accompanied by a copy of Sections 92A.300 through 92A.500 of the Nevada Revised Statutes. A shareholder to whom a dissenter's notice is sent must, by the date set forth in the dissenter's notice: (a) demand payment; (b) certify whether the shareholder acquired beneficial ownership of the shares before the date of the first announcement to the news media or to the shareholders of the proposed terms of the merger; and (c) deposit his or her certificates in accordance with the terms of the dissenter's notice. Shareholders who do not demand payment or deposit their certificates where required, each by the date set forth in the dissenter's notice, will not be entitled to demand payment for dissenters' rights under Nevada law. Within 30 days after receipt a valid demand for payment, USSC will pay each dissenter who complied with the procedures described by the Nevada dissenters' rights statute the amount USSC estimates to be the fair value of the shares, plus accrued interest. The payment will be accompanied by: 37 (a) USSC's balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, a statement of income for that fiscal year, a statement of changes in shareholders' equity for that fiscal year and the latest available interim financial statements, if any; (b) a statement of USSC's estimate of the fair value of the shares; (c) an explanation of how the interest was calculated; (d) a statement of the dissenters' rights to demand payment under Section 92A.480 of the Nevada Revised Statutes; and (e) a copy of Sections 92A.300 through 92A.500 of the Nevada Revised Statutes. USSC may elect to withhold payment from a dissenting shareholder if such shareholder became the beneficial owner of the shares on or after the date of the first announcement to the news media or to the shareholders of the proposed terms of the merger. To the extent USSC elects to withhold payment, after effectuating the merger, it will estimate the fair value of the shares, plus accrued interest, and will offer to pay this amount to each dissenter who agrees to accept it in full satisfaction of the shareholder's demand. USSC will send with its offer: (a) a statement of USSC's estimate of the fair value of the shares; (b) an explanation of how the interest was calculated; and (c) a statement of the dissenters' rights to demand payment pursuant to Section 92A.480 of the Nevada Revised Statutes. A dissenter may notify USSC in writing of the dissenter's own estimate of the fair value of the shares and interest due, and demand payment of his or her estimate, less USSC's fair value payment or offer for payment, or reject the offer for payment made by USSC and demand payment of the dissenter's shares and interest due if the dissenter believes that the amount paid or offered is less than the fair value of the dissenter's shares or that the interest due is incorrectly calculated. A dissenter waives his right to demand such payment unless the dissenter notifies USSC of his demand in writing within 30 days after USSC made or offered for payment for the dissenter's shares. If a demand for payment remains unsettled, USSC will commence a proceeding within 60 days after receiving the demand for payment and petition the court to determine the fair value of the shares and accrued interest. If USSCdoes not commence the proceeding within the 60-day period, it will be required to pay each dissenting stockholder whose demand remains unsettled the amount demanded. Each dissenter who is made a party to the proceeding is entitled to a judgment: 38 (a) for the amount, if any, by which the court finds the fair value of the dissenter's shares, plus interest, exceeds the amount paid by USSC; or (b) for the fair value, plus accrued interest, of the dissenter's after-acquired shares for which USSC elected to withhold payment pursuant to Nevada law. The court will determine all of the costs of the proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court. The court will assess the costs against USSC, except that the court may assess costs against all or some of the dissenters, in the amounts the court finds equitable, to the extent that the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable: (a) against USSC and in favor of all dissenters if the court finds USSC did not substantially comply with the Nevada dissenters' rights statute; or (b) against either USSC or a dissenter in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the dissenters' rights provided under the Nevada dissenters' rights statute. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against USSC, the court may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. If a proceeding is commenced because USSC did not pay each dissenter who complied with the procedures described by the Nevada dissenters' rights statute the amount USSC estimated to be the fair value of the shares, plus accrued interest within 30 days after receipt a valid demand for payment, the court may assess costs against USSC, except that the court may assess costs against all or some of the dissenters who are parties to the proceeding, in amounts the court finds equitable, to the extent the court finds that such parties did not act in good faith in instituting the proceeding. The foregoing summary of the rights of dissenting shareholders of USSC does not purport to be a complete statement of the procedures to be followed by shareholders desiring to exercise any available dissenters' rights. The preservation and exercise of dissenters' rights require strict adherence to the applicable provisions of Nevada law, a copy of which is attached hereto as Appendix B. After completion of the merger, we will notify you of the date on which the merger was completed. 39 IMNT DISSENTER'S RIGHTS THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO APPRAISAL RIGHTS UNDER THE DELAWARE GENERAL CORPORATION LAW AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262 WHICH IS ATTACHED TO HERETO AS APPENDIX A. YOU SHOULD READ APPENDIX A IN ITS ENTIRETY. EXCEPT WHERE THE CONTEXT REQUIRES OTHERWISE, ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF OUR COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF OUR COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS. Under the Delaware General Corporation Law, persons who hold shares of IMNT common stock who follow the procedures set forth in Section 262 will be entitled to have their shares of IMNT common stock appraised by the Delaware Court of Chancery and to receive payment of the 'fair value' of such shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, as determined by such court. Under Section 262, where notice of a merger is sent to stockholders, as in the case of the adoption of the merger agreement by written consent of a majority of IMNT's stockholders, IMNT, not less than 20 days prior to the effective date of the merger, must notify each of its stockholders entitled to appraisal rights that such appraisal rights are available and include in such notice a copy of Section 262. THIS INFORMATION STATEMENT SHALL CONSTITUTE SUCH NOTICE, AND THE APPLICABLE STATUTORY PROVISIONS ARE ATTACHED TO THIS INFORMATION STATEMENT AS APPENDIX A. A holder of shares of IMNT's common stock wishing to exercise such holder's appraisal rights must deliver to IMNT, before the effective date of the merger agreement, a written demand for the appraisal of their shares, and must signify that they are not in favor of the adoption of the merger agreement. A holder of shares of IMNT's common stock wishing to exercise such holder's appraisal rights must hold of record such shares on the date the written demand for appraisal is made and must continue to hold such shares of record through the effective time of the merger. A letter stating that the holder is against the adoption of the merger agreement will not in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262. The demand must reasonably inform IMNT of the identity of the holder as well as the intention of the holder to demand an appraisal of the 'fair value' of the shares held by such holder. Only a holder of record of shares of IMNT common stock is entitled to assert appraisal rights for the shares of IMNT common stock registered in that holder's name. A demand for appraisal in respect of shares of IMNT common stock should be 40 executed by or on behalf of the holder of record, fully and correctly, as such holder's name appears on such holder's stock certificates, and must state that such person intends thereby to demand appraisal of such holder's shares of IMNT common stock in connection with the merger. If the shares of IMNT common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares of IMNT common stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that in executing the demand, the agent is agent for such owner or owners. A record holder such as a broker who holds shares of IMNT's common stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of IMNT common stock held for one or more beneficial owners while not exercising such rights with respect to the shares of IMNT common stock held for other beneficial owners; in such case, however, the written demand should set forth the number of shares of IMNT common stock as to which appraisal is sought and where no number of shares of IMNT common stock is expressly mentioned the demand will be presumed to cover all shares of IMNT common stock held in the name of the record owner. Stockholders who hold their shares of IMNT common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee. ALL WRITTEN DEMANDS FOR APPRAISAL PURSUANT TO SECTION 262 SHOULD BE SENT OR DELIVERED TO IMNT AT 1661 LAKEVIEW CIRCLE, OGDEN, UTAH 84403, ATTENTION: CORPORATE SECRETARY. Within ten days after the effective time of the merger, the combined company must notify each holder of IMNT common stock who has complied with Section 262 of the date that the merger has become effective. Within 120 days after the effective date of the merger, the surviving corporation or any holder of IMNT common stock who has so complied with Section 262 and is entitled to appraisal rights under Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of such holder's shares of IMNT common stock. The surviving corporation is under no obligation to and has no present intention to file such a petition. Accordingly, it is the obligation of the holders of IMNT common stock to initiate all necessary action to perfect their appraisal rights in respect of such shares of IMNT common stock within the time prescribed in Section 262. Within 120 days after the effective date of the merger, any holder of IMNT common stock common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the combined company a statement setting forth the aggregate number of shares with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such statement must be mailed within ten days after a written request for the statement has been received by the combined company or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. 41 If a petition for an appraisal is timely filed by a holder of shares of IMNT common stock and a copy of the petition is served upon the combined company, the combined company will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to such stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on such petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights under Section 262. The Delaware Court of Chancery may require the holders of shares of IMNT common stock who demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation on the certificate of the pendency of the appraisal proceeding; and if any stockholder fails to comply with such direction, the Delaware Court of Chancery may dismiss the proceedings as to such stockholder. After determining the holders of IMNT common stock entitled to appraisal, the Delaware Court of Chancery will appraise the 'fair value' of their shares of IMNT common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. Holders of IMNT common stock considering seeking appraisal should be aware that the fair value of their shares of IMNT common stock as so determined could be more than, the same as or less than the consideration they would receive in the merger if they did not seek appraisal of their shares of IMNT common stock and that investment banking opinions as to fairness from a financial point of view are not necessarily opinions as to fair value under Section 262. The Delaware Supreme Court has stated that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in the appraisal proceedings. In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenter's exclusive remedy. The court will also determine the amount of interest, if any, to be paid upon the amounts to be received by persons whose shares of IMNT common stock have been appraised. The costs of the action may be determined by the court and taxed upon the parties as the court deems equitable. The court may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including, without limitation, reasonable attorneys' fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all the shares entitled to be appraised. Any holder of shares of IMNT common stock who has duly demanded an appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote the shares of IMNT common stock subject to such demand for any purpose or be entitled to the payment of dividends or other distributions on those shares of IMNT common stock (except dividends or other distributions payable to holders of record of IMNT common stock as of a record date prior to the effective time of the merger). If any stockholder who demands appraisal of such holder's shares of IMNT common stock under Section 262 fails to perfect, or effectively withdraws or loses, such holder's right to appraisal, the shares of IMNT common stock of such stockholder will be converted into the right to receive the merger consideration. A stockholder will fail to perfect, or effectively lose or 42 withdraw, such holder's right to appraisal if no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder delivers to the combined company a written withdrawal of such holder's demand for appraisal and an acceptance of the merger, except that any such attempt to withdraw made more than 60 days after the effective time of the merger will require the written approval of the combined company and, once a petition for appraisal is filed, the appraisal proceeding may not be dismissed as to any holder absent court approval. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF USSC. There were 9,625,892 shares of common stock, 7,582,414 shares of Series A preferred stock and 3,671,579 shares of Series B preferred stock outstanding as of July 24, 2003. As a condition of the merger, at least two-thirds (2/3) of the USSC Series A preferred shares and at least two-thirds (2/3) of the USSC Series B preferred shares must be voted in favor of the merger. IMNT. There were 50,000,000 shares of common stock and no shares of preferred stock outstanding as of July 24, 2003. As previously discussed, the requisite percentage of IMNT stock entitled to vote on such matters voted, by written consent without a formal meeting, in favor of the merger. To USSC's knowledge, the following table sets forth information regarding ownership of USSC's outstanding capital stock on July 24, 2003, assuming exercise of all outstanding warrants, options and convertible securities, by: (1) all persons known by USSC to be the beneficial owner of more than 5% of USSC's issued shares; (2) each director of USSC; (3) each of the "named executive officers" of USSC, as defined under the rules and regulations of the Securities Act 1933; and (4) all directors and named executive officers of USSC as a group.
==================== ================================ ============================= ======================== Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class - -------------------- -------------------------------- ----------------------------- ------------------------ Common Stock James Cooper, president, chief 2,666,666 shares 27.7% executive officer, director - -------------------- -------------------------------- ----------------------------- ------------------------ Common Stock John Hillard 2,666,666 shares 27.7% - -------------------- -------------------------------- ----------------------------- ------------------------ Series A Preferred Karl Madl Family Trust 1,001,000 shares of Series 14.0% of Series A Stock A preferred stock - -------------------- -------------------------------- ----------------------------- ------------------------ Series A Preferred Thomas Henry Wilding 500,000 shares of Series A 7.0% of Series A Stock preferred stock - -------------------- -------------------------------- ----------------------------- ------------------------ Common Stock All directors and named 2,666,666 shares 27.7% executive officers as a Group ==================== ================================ ============================= ========================
43 To IMNT's knowledge, the following table sets forth information regarding ownership of IMNT's outstanding capital stock on July 24, 2003, assuming exercise of all outstanding warrants, options and convertible securities, by: (1) all persons known by IMNT to be the beneficial owner of more than 5% of IMNT's issued shares; (2) each director of IMNT; (3) each of the "named executive officers" of IMNT, as defined under the rules and regulations of the Securities Act 1933; and (4) all directors and named executive officers of IMNT as a group.
===================== ================================== ============================= ========================== Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class - --------------------- ---------------------------------- ----------------------------- -------------------------- Common Stock Mark Scharmann, president, chief 29,223,365 shares 58.45% executive officer, directors - --------------------- ---------------------------------- ----------------------------- -------------------------- Common Stock David Knudson, former officer 13,439,475 shares 26.88% and director of IMNT - --------------------- ---------------------------------- ----------------------------- -------------------------- Common Stock All directors and named 42,662,840 shares 85.33% executive officers as a Group ===================== ================================== ============================= ==========================
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY The individuals who are currently executive officers and directors of USSC will continue as the directors and executive officers of the combined company in their same capacities. Information concerning the identity and compensation of the directors and executive officers and certain relationships and related transactions is as follows: JAMES K. COOPER. Mr. Cooper, age 51, has been USSC's secretary and one of its directors since its inception. On August 18, 1994, Mr. Cooper became USSC's chief executive officer, president and treasurer. Mr. Cooper worked at Newport First, a general management consulting firm which focuses on providing strategic planning and related services to emerging and middle-market companies, from 1984 until 1999. His responsibilities at Newport First included, supervising clients involved in new venture launchings, growth management, and turnarounds. While at Newport First, Mr. Cooper held the offices of Chief Executive Officer, Chief Operations Officer, and Chief Financial Officer. Prior to working at Newport 44 First, Mr. Cooper was employed with Dalton, Haynes & Vance, Inc., as a senior management consultant for the period of 1982 until 1984. From 1975 until 1982, Mr. Cooper was the general manager of Archival Data Management. Mr. Cooper graduated in 1974 from San Diego State University with a Bachelor of Arts degree in Political Science. In 1987, Mr. Cooper received his Masters of Business Administration from Pepperdine University, and currently is a member of the Pepperdine University School of Business Management Partners. Mr. Cooper is not an officer or director of any reporting company. JAY A. BITNER. Mr. Bitner, age 61, has been USSC's director since October 1, 2002. Mr. Bitner possesses an extensive background in marketing, sales and logistics. Mr. Bitner began his executive career in 1988 as a vice president of The Unit Companies, Inc., one of the nation's largest third party suppliers of warehousing and distribution systems. As vice president, Mr. Bitner was responsible for the marketing and sales of the company's logistical applications and implemented sales and marketing initiatives which resulted in approximately $150 million in sales contracts within an eighteen month period. In 1994, Mr. Bitner joined Ryder System, Inc., a worldwide logistics and transportation provider, as Director of Business Development for its subsidiary UniRyder. In 1995, Mr. Bitner became Ryder System, Inc.'s Director of Integrated Inventory Deployment and was charged with establishing marketing, sales and technological conversion of a transactional firm to an integrated logistics third-party provider. In 1996, Mr. Bitner was responsible for Ryder System, Inc.'s technical infrastructure as its Director of Integrated Logistics. From 1997 through 2000, Mr. Bitner was employed as president and chief executive officer of The CCW Group, Inc., a third party logistics provider which offers contract warehousing and integrated manufacturing support services throughout the United States. In 1964, Mr. Bitner received has a bachelor of science in mathematics, and a bachelor of science in chemistry from Shippensburg State University. In 1969, Mr. Bitner received his master of business administration from Ball State University. Mr. Bitner is not an officer or director of any reporting company. EXECUTIVE COMPENSATION. Any compensation received by the combined company's officers, directors, and management personnel will be determined from time to time by the combined company's Board of Directors. The combined company's officers, directors, and management personnel will be reimbursed for any out-of-pocket expenses incurred on our behalf. The combined company does not anticipate compensating the combined company directors for their participation on the board of directors. The table set forth below summarizes the annual and long-term compensation for services in all capacities to USSC and, in the future, the combined company payable to USSC's president and USSC's other executive officers whose total annual salary and bonus are anticipated to exceed $50,000 during the year ending December 31, 2003. 45
============================ ========== ============== ==================== ===================== ==================== Name and Principal Position Year Annual Bonus Compensation Other Annual All Other Salary ($) ($) Compensation ($) Compensation ---------------------------- ---------- -------------- -------------------- --------------------- -------------------- James Cooper 2002 96,000 None None None president, secretary, treasurer, director 2003 96,000 None None None ============================ ========== ============== ==================== ===================== ====================
COMMON STOCK TO BE ISSUED AS PART OF THE RESTRUCTURING PLAN, INCLUDING THE MERGER The common stock of the combined company to be issued in the merger does not have preemptive rights, no special dividend rights and one vote per share on all matters on which the shareholders of the combined company are entitled to vote. In the event that the combined company declares or pays any dividends upon its common stock (whether payable in cash, securities or other property) other than dividends payable solely in shares of its common stock, the combined company shall also declare and pay to the holders of its senior convertible preferred stock, if any, the dividends which would have been declared and paid with respect to its common stock issuable upon conversion of its senior convertible preferred stock had all of the outstanding senior convertible preferred stock been converted immediately prior to declaration of such dividend upon its common stock. MATERIAL DIFFERENCES BETWEEN SHAREHOLDERS RIGHTS Upon completion of the merger, the shareholders of USSC will become shareholders of IMNT, which will be the surviving corporation in the merger. The rights of USSC shareholders are presently governed by Nevada law, the USSC articles of incorporation, as amended, and the USSC bylaws, as amended. Upon consummation of the merger, the rights of former USSC shareholders will be governed by Delaware law, the IMNT certificate of incorporation, as amended, and the IMNT bylaws, as amended. The USSC articles of incorporation, as amended, and bylaws, as amended, as well as the IMNT certificate of incorporation, as amended, and bylaws, as amended, are attached hereto. COMPARISON OF MARKET VALUE OF USSC COMMON STOCK AND IMNT COMMON STOCK Shares of IMNT common stock trade on the NASD over-the-counter bulletin board on which bid and ask prices are quoted under the symbol "IMNT.OB". Neither USSC common stock nor USSC preferred stock is quoted or listed on any market or exchange. The table on the following page sets forth, for the respective periods indicated, the prices for IMNT's common stock in the over-the-counter market as reported by the NASD's OTC Bulletin Board. The bid prices represent inter-dealer quotations, without adjustments for retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions. 46 High Bid Low Bid -------- ------- Fiscal Year Ended June 30, 2002 - ------------------------------- First Quarter $ 0.40 $ 0.12 Second Quarter $ 0.35 $ 0.13 Third Quarter $ 0.15 $ 0.15 Fourth Quarter $ 0.25 $ 0.12 Fiscal Year Ended June 30, 2003 - ------------------------------- First Quarter $ 0.12 $ 0.11 Second Quarter $ 0.24 $ 0.11 Third Quarter $ 0.74 $ 0.17 Fourth Quarter $ 1.80 $ 0.30 (1) The high represents the best (highest) price a prospective buyer is prepared to pay and the low represents the best (lowest) price at which someone who owns the security offers to sell it. Since its inception, IMNT has not paid any dividends on its common stock, and IMNT does not anticipate that it will pay dividends in the foreseeable future. PRO FORMA FINANCIAL INFORMATION INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION The unaudited pro forma condensed financial information presented below has been derived from the audited and unaudited historical financial statements of USSC and IMNT (collectively, the "combined entity") and reflects management's present estimate of pro forma adjustments to give effect to the contemplated merger (the "Merger") of USSC and IMNT. The unaudited pro forma condensed statements of operations give effect to the Merger as if the transaction had been consummated as of the beginning of each period presented. This information should be read in conjunction with the historical financial statements and notes thereto. The pro forma financial data have been included as required by the rules and regulations of the Securities and Exchange Commission and are provided for comparative purposes only. This pro forma presentation does not purport to represent what the financial position or results of operations would actually have been if such transactions and events had in fact occurred on those dates or to project results of operations for any future period. 47 ULTIMATE SECURITY SYSTEMS CORPORATION PRO FORMA STATEMENT OF OPERATIONS For the year ended December 31, 2002
Adjustments Immuno- Ultimate and "Ultimate Technology Security Eliminations Security" -------------- -------------- --------------- ---------------- Income Net Sales 89,588 89,588 Cost of Goods Sold 55,025 55,025 -------------- -------------- ---------------- Cost of Goods Sold 34,563 0 34,563 -------------- -------------- ---------------- Expenses Product Development Costs 162,697 162,697 Selling Expenses 467,676 89,421 557,097 General & Administrative Expenses 289,297 192,567 481,864 -------------- -------------- ---------------- 919,670 281,988 1,201,658 -------------- -------------- ---------------- Other Income Expense) (1,872) (1,872) -------------- -------------- --------------- ---------------- Net Profit (Loss) (886,979) (281,988) 0 (1,168,967) ============== ============== =============== ================ Basic earnings (loss) per common share ($0.003) ================ Diluted earnings (loss) per common share ($0.002) ================ Weighted average common shares outstanding 416,666,670 ================ Dilutive effect of warrants 115,868,371 ---------------- Weighted average common shares outstanding, assuming dilution 532,535,041 ================
48 ULTIMATE SECURITY SYSTEMS CORPORATION PRO FORMA STATEMENT OF OPERATIONS For the Three Months Ended March 31, 2003
Adjustments Immuno- Ultimate and "Ultimate Technology Security Eliminations Security" -------------- -------------- --------------- ---------------- Income Net Sales 7,428 7,428 Cost of Goods Sold 3,462 3,462 -------------- -------------- ---------------- Cost of Goods Sold 3,966 0 3,966 -------------- -------------- ---------------- Expenses Product Development Costs 0 Selling Expenses 156,012 156,012 General & Administrative Expenses 91,642 1,976 93,618 -------------- -------------- ---------------- 247,654 1,976 249,630 -------------- -------------- ---------------- Other Income Expense) (752) (752) -------------- -------------- --------------- ---------------- Net Profit (Loss) (244,440) (1,976) 0 (246,416) ============== ============== =============== ================ Basic earnings (loss) per common share ($0.001) ================ Diluted earnings (loss) per common share ($0.000) ================ Weighted average common shares outstanding 416,666,667 ================ Dilutive effect of warrants 118,009,473 ---------------- Weighted average common shares outstanding, assuming dilution 534,676,139 ================
49 BUSINESS OF THE COMPANIES BUSINESS OF IMMUNOTECHNOLOGY CORPORATION ("IMNT") BUSINESS. IMNT was incorporated on November 30, 1989, in the state of Delaware. The Company's predecessor was LJC Corporation, a Utah corporation, organized on November 8, 1984 ("LJC"). On October 7, 1989, LJC acquired ImmunoTechnology Laboratories, Inc., a Colorado corporation ("ITL"), by means of a stock-for-stock exchange with the shareholder of ITL. As a result of this transaction, ITL became a wholly owned subsidiary of LJC. On October 10, 1989, LJC changed its name to ImmunoTechnology Laboratories, Inc. ("ITL-UT"). At a special meeting of the shareholders of ITL-UT, the shareholders approved a proposal to redomicile ITL-UT in the state of Delaware, by forming a Delaware corporation and merging ITL-UT into the Delaware corporation, and changing the its name to ImmunoTechnology Corporation. The merger was effective on December 21, 1989. As a result of the merger, ITL-UT no longer exists. ITL was formed for the purpose of engaging in the business of operating a medical test related laboratory. IMNT's only business has been the operation of ITL, whose operations were discontinued in 1992. Since discontinuing the operations of ITL and since the sale of IMNT's assets in August 2001, IMNT's management has been seeking potential business acquisition or opportunities to enter in an effort to recommence business operations. IMNT did not restrict its search for a business opportunity to any particular industry or geographical area and considered the possibility of engaging in essentially any business in any industry. The selection of a business opportunity in which to participate is complex and risky. Additionally, as IMNT had only limited resources, it was difficult to find good opportunities. There was no assurance that IMNT could identify a business opportunity which would ultimately prove to be beneficial to IMNT and its shareholders. The risks IMNT faced were further increased as a result of IMNT's lack of resources and IMNT's inability to provide a prospective business opportunity with significant capital. IMNT finally selected the potential business opportunity offered by the merger with USSC based on IMNTs business judgment. IMNT is a fully reporting company with the U.S. Securities and Exchange Commission (the "Commission"). As such, IMNT is obligated to file with the Commission certain interim and periodic reports including an annual report containing audited financial statements. The report of IMNT's independent auditor at June 30, 2002, contains a going concern qualification as to IMNT's ability to continue as a going concern. Without the merger with USSC, IMNT did not believe that IMNT could continue to operate, as IMNT had no alternative source of capital. Even with the merger, there is substantial doubt about IMNT's ability to continue as a going concern, because USSC is also in need of additional funding in order to be able to continue. 50 EMPLOYEES. Other than its current officers, IMNT has no employees. FACILITIES. IMNT is currently using as its principal place of business the personal residence of its president and director located in Ogden, Utah. IMNT has no written agreement and pays no rent for the use of this facility. Following the consummation of the merger with USSC, we expect our operations to be conducted through USSC's offices in California. LEGAL PROCEEDINGS. None. MARKET FOR COMMON STOCK AND RELATED MATTERS. IMNT's common stock is eligible for quotation on the over-the-counter bulletin board maintained by the NASD. Holders of Common Stock. As of July 24, 2003, there were approximately 50 holders of record of IMNT's common stock. Immediately following the completion of the merger, it is expected that there will be approximately 730 holders of record of combined company common stock (assuming no USSC and no IMNT shareholders exercise their dissenters' rights). Dividends. IMNT has not declared any cash dividends on its common stock in the last two fiscal years or at any time thereafter. BUSINESS OF ULTIMATE SECURITY SYSTEMS CORPORATION ("USSC") BUSINESS. All information with respect to USSC's business activities has been provided by the management of USSC and is presented herein without independent verification. USSC has represented that the information is accurate and complete in all material respects. USSC's executive offices are located at 18271 West McDurmott, Suite F, Irvine, California 92614 and the telephone number is 800-689-8004. USSC was incorporated in August 1994 in the state of Nevada to develop and commercialize an automobile anti-theft device. USSC's activities to date have included raising capital and developing and selling prototype devices through multiple distribution channels. THE POWERLOCK PRODUCT. Powerlock(TM) is a "sealed" electronic system which arms within 45 seconds of the ignition being turned off. Powerlock(TM) works by creating an open ignition circuit that disables the starting circuitry directly at the starter. If the system is tampered with the horn will sound for 60 seconds. The system can also protect the contents of the vehicle by sounding the horn or a siren in case of a break-in. The product is an adaptable security module with microprocessors that prevents electrical current from being delivered through the vehicle's starter solenoid. An enhanced version was introduced by USSC in early 2002, allowing USSC to market both the basic unit and the new "proximity transponder" version. Once the enhanced version is wired into a vehicle's power door locks, the customer can automatically unlock the vehicle's doors without pressing any buttons. This gives the customer not only the security feature of the basic version, but also hands-free convenience. 51 USSC has also developed a version which can be installed onto motorcycles. The motorcycle application operates in the same manner as the automobile application, however, the system is specially engineered to withstand greater levels of vibration, moisture exposure, and temperature fluctuations. SALES AND DISTRIBUTION. USSC is attempting to penetrate two distinct markets: the traditional "mobile electronics" market segment and the non-traditional "bolt-on" segment. With this sales and distribution strategy in place, USSC believes it will be able to seriously penetrate the market and increase sales provided it can find additional financing. In September of 2000, Ultimate began product shipments, sales channel development and retail dealer acquisition activities. From then until now, both retail and wholesale price points have been verified. To strengthen the sales operation, USSC hired a 25-year sales and marketing veteran of the mobile electronic industry in July 2002. There are now 35 sales representatives, from 18 independent manufacturers' sales representative firms, covering about 80 percent of the United States market in the mobile electronics market segment. In June of 2002, USSC added another marketing veteran for the "bolt-on" market segment. There are now over 50 independent manufacturers' sales representatives in this market segment. COMPETITION. Powerlock(TM) approaches vehicle security from a different point of view and different technology from its competitors. When it comes to immobilizing the starter, the Powerlock(TM) uses a protective device which covers the starter solenoid (the electrical portion) and makes it impossible to start the engine. In addition, the Powerlock(TM) becomes part of the starter and USSC believes the unit cannot be removed. Specific competitors include: Directed Electronics, maker of the Viper product; Clifford security systems; Omega security systems; Audiovox, maker of the Prestige product; Lojack, maker of the Lojack system; Magnadyne security systems; and Omega, which makes the Excaliber system. All of these competitors use standard relays, located under the dash or in the engine compartment that are hot-wired around. Powerlock(TM) is a digitally encoded proprietary system that USSC believes is impossible to hot-wire around. USSC also believes that it is impossible to code grab or reproduce the digital encryption. USSC believes that only Powerlock(TM) features a patented, fault-proof design that cannot be circumvented. Even if a thief removes the vehicle's battery, cuts or jumps any electrical wires or removes the system control unit, the vehicle still won't start. Management believes that the Powerlock(TM) product can compete and surpass the competition because Powerlock(TM) is a "breakthrough" product in that it is not vulnerable to "hot wiring" as are all most other vehicle security products. Powerlock(TM), which arms passively, will not allow a casual or professional thief to "hot-wire" the vehicle. Because the vehicle cannot be started, it cannot be hot-wired by simply circumventing the device. By contrast, competitive products that claim immunity to theft all can be hot-wired. USSC believes that even those competing products that claim to immobilize the engine, or kill the ignition switch, are vulnerable to professional thieves who can "hot-wire" a vehicle in seconds. 52 INTELLECTUAL PROPERTY. The Powerlock(TM) is patented both in the United States (domestic patent #5,548,164) and overseas (international patent #6,351,209). USSC has also obtained a federal trademark for the name "Powerlock". MANUFACTURING. The following companies provide raw materials and manufacturing services to USSC: Benson Precision Machining; Digi-Key; Mammoth Products, Inc.; Mouser Electronics; Grizzle & Hunter Plastic, LLC. RESEARCH AND DEVELOPMENT. Research and development of the Powerlock(TM) is essentially complete, although USSC intends to continue to make improvements. Research and development expenses in 2002 and 2001 were approximately $12,500 and $42,000, respectively. USSC's management estimates that expenses for research and development in the next twelve months will be approximately $98,000 which expenses will encompass engineering fees, product improvements, new product development. EMPLOYEES. As of June 30, 2003, USSC had 5 full time and 1 part time employees. James Cooper entered into an employment agreement with USSC. Other than Mr. Cooper, all other employees are "at-will". USSC primarily uses independent contractors for sales and marketing services. SALES AND MARKETING. To date, USSC's sales and marketing campaign has consisted of a public relations campaign supported by targeted advertising, point-of-purchase and sales collateral materials. USSC believes that the public relations campaign in that potential customers have visited USSC's website. Moreover, USSC has received telephone calls to its toll-free number. USSC has also advertised in magazines distributed by the Mobile Electronics Retailer Association and the Specialty Equipment Market Association. Such advertisements have generated dealer inquiries. Following the consummation of the merger, USSC will seek funding to expand its sales and marketing activities. There is no guarantee that such funding will be available. Assuming it is available, the sales and marketing plan will focus on four areas: (i) an enhanced integrated advertising and public relations program; (ii) additions to the USSC sales staff to strengthen the dealer network and manufacturers sales representative network; (iii) increased penetration of retailers with all products; and (iv) the introduction of products for the heavy construction equipment market and the motorcycle market. FACILITIES. USSC's executive offices are located at 18271 West McDurmott, Suite F, Irvine, California 92614 and the telephone number is 800-689-8004. USSC currently leases those facilities for $2,608 a month pursuant to a lease with a 3 year term. 53 USSC's assembly facilities are located at 18226 McDurmott, Suite C, Irvine, California 92614. USSC leases its assembly facilities for $1,560 a month pursuant to a 2 year lease. LEGAL PROCEEDINGS. None. MARKET FOR COMMON STOCK AND RELATED MATTERS. USSC's stock is not publicly traded nor is USSC's stock eligible for quotation on the over-the-counter bulletin board maintained by the NASD or any other electronic quotation system. DIVIDENDS. USSC has not declared any cash dividends on its common stock in the last two fiscal years or at any time thereafter. HOLDERS OF COMMON STOCK. As of July 24, 2003, there were approximately 405 holders of record of USSC's common stock. Pursuant to the merger, all USSC shareholders will become IMNT shareholders. Holders of Preferred Stock. As of July 24, 2003, there were approximately 364 holders of record of USSC's Series A Convertible Preferred Stock and 266 holders of USSC's Series B Convertible Preferred Stock. Pursuant to the merger, all USSC shareholders will become IMNT shareholders. The certificates of designations for the Series A and Series B preferred stock are attached hereto as Exhibits 4.1 and 4.2, respectively. Under the terms and conditions of the private placement memoranda for the USSC Series A and Series B Preferred Stock, shareholders holding USSC Series A and Series B Preferred Shares have the right to tender their shares to USSC for redemption. Such redemption right begins 3 years after purchase of the preferred shares and continues until USSC's stock is eligible for quotation on the Over-the-Counter Bulletin Board or equivalent quotation medium or other exchange. At June 30, 2003, USSC's redemption liability, assuming every USSC preferred shareholder with the right to redeem validly exercised such right, amounted to approximately $8,640,020. As of July 24, 2003, USSC had received 2 requests for redemption. USSC MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION FOLLOWING THE CONSUMMATION OF THE MERGER The following discussion and analysis of USSC's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto appearing elsewhere in this information statement/prospectus. YEAR-END RESULTS OF OPERATIONS 2002 COMPARED TO 2001. During the year ended December 31, 2002, USSC had revenues of $89,588, compared to $102,541 for the year ended December 31, 2001. The decrease in revenues was due to the loss of a sales manager in 2002 and the inexperience of USSC's sales staff. Cost of revenue was $55,025 in 2002, compared to cost of revenue of $59,854 in 2001. 54 Research and development cost, specifically, engineering costs, decreased from $41,797 in 2001 to $12,565 in 2002 due to a reduction in research activities undertaken related to the Powerlock(TM). Specifically, most of the refinement of the Powerlock(TM) product occurred in 2001. Selling, general and administrative expenses decreased from $904,585 in 2001 to $756,973 in 2002. This decrease in 2002 was the result of reduced costs associated with public relations, office expenses, trade shows and other selling expenses. However, the following costs increased in 2002 from 2001: rent and office expenses. Product Development costs decreased from $314,765 in 2001 to $162,697 primarily due to USSC's new marketing manager setting fewer milestones for brand recognition during his break-in period. As a result of the foregoing, the net loss decreased from $1,153,495 in 2001 to $886,979 in 2002. YEAR-END LIQUIDITY AND CAPITAL RESOURCES Historically, USSC has been unable to finance its operations from cash flows from operating activities. As of December 31, 2002, USSC had cash and cash equivalents of $1,270,530. During 2002 and 2003, USSC obtained financing through the sale of its preferred stock, but has no other plans for its continued financing. USSC believes based on its current budget and sales that it will be able to pay its expenses for the next year. Cash flows provided by financing activities increased from $513,022 during 2001 to $1,531,840 during 2002. The cash from financing activities in 2001 and 2002 resulted from the sale of USSC preferred stock, both Series A and Series B. The financial statements of USSC for 2002 have been prepared on the assumption that it will continue as a going concern. USSC's independent public accountants have issued their report dated April 10, 2003, that includes an explanatory paragraph stating that USSC's recurring losses, among other things, raise substantial doubt about USSC's ability to continue as a going concern. USSC FIRST-QUARTER RESULTS OF OPERATIONS COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2003 WITH THE THREE MONTHS ENDED MARCH 31, 2002. During the three months ended March 31, 2003, USSC had revenues of $7,428, compared to $26,351 for the comparable three-month period in 2002. The decrease in sales was due to uncertain geopolitical and economic conditions triggered, in part, by adverse political events as automobile aftermarket dealerships were reluctant to add to inventory. Cost of sales was $3,462 for the three months ended March 31, 2003, compared to $16,546 for the same period in 2002. Cost of revenues as a percentage of sales was 46.6% during the three months ended March 31, 2003 compared to 62.8% during the corresponding period in 2002. This decrease in cost of sales reflected both a decrease in products manufactured for sale as well as the results of a labor training initiative. The training improved the manufacturing cost structure. 55 Total selling expenses were $156,012 for the three-month period ended March 31, 2003, compared to $169,318 for the three month period ended March 31, 2002. The relatively static selling expenses reflected a continuation of the same level of selling activity. An increased emphasis on trade shows was offset by a reduction in technical representative salaries. General and administrative expenses were $91,642 for the three-month period ended March 31, 2003, compared to $66,483 for the comparable period in 2002. The increase was primarily due to labor costs for engineering changes to circuit boards of the anti-theft device. During the three months ended March 31, 2003, USSC had a net loss of $244,440 compared to a net loss of $226,713 for the three months ended March 31, 2002. This increase in the net loss was attributable primarily to a decrease in sales. USSC FIRST-QUARTER LIQUIDITY AND CAPITAL RESOURCES Historically, USSC has been unable to finance its operations from cash flows from operating activities. As of March 31, 2003, it had cash of $1,279,588. USSC intends to carefully control its use of cash for the balance of 2003. As a long-term matter, USSC will require additional financing to maintain operations. USSC believes based on its current cash reserves and its current budget and sales that it will be able to pay its expenses for the next year. In the first three months of 2003, USSC had a net increase in cash and cash equivalents of $9,058 compared to a net decrease in cash and cash equivalents in the same period of 2002 of $25,520. The increase in cash was the result of a sale of preferred stock, the net proceeds of which was in excess of cash used in operating activities. USSC decreased its cash flows used in operations from $270,744 in the first three months of 2002 to $250,476 in the same period in 2003 due to the operating loss being more than offset by higher receivable collections, reduction in inventory purchases and stabilization of accrued interest. Cash flows provided by financing activities increased from $245,224 during the first three months of 2002 to $259,534 in the same period in 2003. The cash flows from financing activities during the first three months of 2003 resulted from the sale of USSC Series B preferred stock. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 56 IMMUNOTECHNOLOGY CORPORATION ANNUAL REPORT This information statement/prospectus is accompanied by a copy of IMNT's annual report on Form 10-KSB for the fiscal year ended December 31, 2002 and quarterly report on Form 10-QSB for the fiscal quarter ended March 31, 2003. OTHER MATTERS IMNT does not intend to hold an annual meeting prior to the scheduled completion of the merger. If the merger is not completed and IMNT does hold an annual meeting, IMNT will notify you of such meeting, including the date on which shareholder proposals must be received at IMNT's executive offices in order to be considered for inclusion in the proxy materials relating to such meeting. LEGAL MATTERS The validity of the issuance of the shares of common stock registered hereby will be passed upon for IMNT by John C. Thompson, LLC located in Salt Lake City, Utah. EXPERTS The financial statements of IMNT incorporated in this information statement/prospectus by reference from IMNT's annual report on Form 10-KSB for IMNT's fiscal year end of June 30, 2002 have been audited by Rose, Snyder & Jacobs, a corporation of certified public accountants, as stated in their report which is incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The financial statements of USSC for 2001 and 2002 included in this information statement/prospectus have been audited by John Kinross-Kennedy, Certified Public Accountant, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS IMNT and USSC have used and incorporated by reference "forward-looking statements" in this document. Words such as "will permit," "will afford," "believes," "expects," "may," "should," "projected," "contemplates," or "anticipates" may constitute forward-looking statements. These statements are within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to risks and uncertainties that could cause our actual results to differ materially. IMNT and USSC have used these statements to describe their expectations and estimates in various sections of this document. USSC and IMNT disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements included in this document to reflect future events or developments, except as required by the federal securities laws. USSC's actual results could differ materially from those set forth in the forward-looking statements because of many reasons, including the factors listed in this paragraph. This list may not be exhaustive. 57 WHERE YOU CAN FIND MORE INFORMATION IMNT files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information IMNT files at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The IMNT SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov. IMNT has filed a registration statement on Form S-4 to register with the SEC the IMNT common stock to be issued to the holders of USSC capital stock in the merger. This document is a part of that registration statement and constitutes a prospectus of IMNT in addition to being an information statement of IMNT to advise IMNT shareholders as to vote, on the merger of USSC and IMNT, of IMNT shareholders which was taken by written consent without a meeting. As allowed by SEC rules, this document does not contain all the information you can find in the registration statement or the exhibits to the registration statement. The SEC allows us to "incorporate by reference" information into this document, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this document, except for any information superseded by information in this document. This document incorporates by reference the documents set forth below that IMNT has previously filed with the SEC. These documents contain important information about IMNT, its finances and its capital stock. IMMUNOTECHNOLOGY CORPORATION SEC FILINGS - - annual report on Form 10-KSB for the year ended June 30, 2002; - - annual report on Form 10-KSB for the year ended June 30, 2001; - - quarterly report on Form 10-QSB for the quarter ended March 31, 2003; - - quarterly report on Form 10-QSB for the quarter ended December 31, 2002; and - - quarterly report on Form 10-QSB for the quarter ended September 30, 2002. If you are aN IMNT shareholder, IMNT may have sent you some of the documents incorporated by reference, but you can obtain any of them through IMNT or the SEC. You can obtain documents incorporated by reference from IMNT without charge, excluding all exhibits unless we have specifically incorporated by reference an exhibit in this document. 58 Shareholders may obtain documents incorporated by reference in this document by requesting them in writing or by telephone at the following address: Immunotechnology Corporation Attention: Mark Scharmann, president 1661 lakeview circle Ogden, Utah 84403 Phone: 801.399.3632 WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED JULY 24, 2003. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS DOCUMENT TO SHAREHOLDERS NOR THE ISSUANCE OF SHARES OF IMNT COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY. 59 APPENDIX A 262. APPRAISAL RIGHTS. TITLE 8 CORPORATIONS CHAPTER 1. GENERAL CORPORATION LAW SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION ss.262. Appraisal rights. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258,ss.263 orss.264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of ss. 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: 60 a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under ss. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand 61 as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to 62 withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior 63 to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. 64 (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. (8 Del. C. 1953,ss.262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186,ss.24; 57 Del. Laws, c. 148,ss.ss.27-29; 59 Del. Laws, c. 106,ss.12; 60 Del. Laws, c. 371,ss.ss.3-12; 63 Del. Laws, c. 25,ss.14; 63 Del. Laws, c. 152,ss.ss.1, 2; 64 Del. Laws, c. 112,ss.ss.46-54; 66 Del. Laws, c. 136,ss.ss.30-32; 66 Del. Laws, c. 352,ss.9; 67 Del. Laws, c. 376,ss.ss. 19, 20; 68 Del. Laws, c. 337,ss.ss.3, 4; 69 Del. Laws, c. 61,ss.10; 69 Del. Laws, c. 262,ss.ss.1-9; 70 Del. Laws, c. 79,ss.16; 70 Del. Laws, c. 186,ss.1; 70 Del. Laws, c. 299,ss.ss.2, 3; 70 Del. Laws, c. 349,ss.22; 71 Del. Laws, c. 120,ss.15; 71 Del. Laws, c. 339,ss.ss.49-52; 73 Del. Laws, c. 82,ss.21.) 65 APPENDIX B RIGHTS OF DISSENTING OWNERS UNDER THE NEVADA REVISED STATUTES SECTION 92A.300. DEFINITIONS. As used in NRS 92A.300 to 92A.500, inclusive, unless the context otherwise requires, the words and terms defined in NRS 92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those sections. SECTION 92A.305. "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means a person who is a beneficial owner of shares held in a voting trust or by a nominee as the stockholder of record. SECTION 92A.310. "CORPORATE ACTION" DEFINED. "Corporate action" means the action of a domestic corporation. SECTION 92A.315. "DISSENTER" DEFINED. "Dissenter" means a stockholder who is entitled to dissent from a domestic corporation's action under NRS 92A.380 and who exercises that right when and in the manner required by NRS 92A.400 to 92A.480, inclusive. SECTION 92A.320. "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's shares, means the value of the shares immediately before the effectuation of the corporate action to which he objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. SECTION 92A.325. "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record or a beneficial stockholder of a domestic corporation. SECTION 92A.330. "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means the person in whose name shares are registered in the records of a domestic corporation or the beneficial owner of shares to the extent of the rights granted by a nominee's certificate on file with the domestic corporation. SECTION 92A.335. "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the domestic corporation which is the issuer of the shares held by a dissenter before the corporate action creating the dissenter's rights becomes effective or the surviving or acquiring entity of that issuer after the corporate action becomes effective. 66 SECTION 92A.340. COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed from the effective date of the action until the date of payment, at the average rate currently paid by the entity on its principal bank loans or, if it has no bank loans, at a rate that is fair and equitable under all of the circumstances. SECTION 92A.350. RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A partnership agreement of a domestic limited partnership or, unless otherwise provided in the partnership agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the partnership interest of a dissenting general or limited partner of a domestic limited partnership are available for any class or group of partnership interests in connection with any merger or exchange in which the domestic limited partnership is a constituent entity. SECTION 92A.360. RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED-LIABILITY COMPANY. The articles of organization or operating agreement of a domestic limited-liability company or, unless otherwise provided in the articles of organization or operating agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the interest of a dissenting member are available in connection with any merger or exchange in which the domestic limited-liability company is a constituent entity. SECTION 92A.370. RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION. 1. Except as otherwise provided in subsection 2, and unless otherwise provided in the articles or bylaws, any member of any constituent domestic nonprofit corporation who voted against the merger may, without prior notice, but within 30 days after the effective date of the merger, resign from membership and is thereby excused from all contractual obligations to the constituent or surviving corporations which did not occur before his resignation and is thereby entitled to those rights, if any, which would have existed if there had been no merger and the membership had been terminated or the member had been expelled. 2. Unless otherwise provided in its articles of incorporation or bylaws, no member of a domestic nonprofit corporation, including, but not limited to, a cooperative corporation, which supplies services described in chapter 704 of NRS to its members only, and no person who is a member of a domestic nonprofit corporation as a condition of or by reason of the ownership of an interest in real property, may resign and dissent pursuant to subsection 1. 67 SECTION 92A.380. RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS AND TO OBTAIN PAYMENT FOR SHARES. 1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder is entitled to dissent from, and obtain payment of the fair value of his shares in the event of any of the following corporate actions: (a) Consummation of a plan of merger to which the domestic corporation is a constituent entity: (1) If approval by the stockholders is required for the merger by NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation, regardless of whether the stockholder is entitled to vote on the plan of merger; or (2) If the domestic corporation is a subsidiary and is merged with its parent pursuant to NRS 92A.180. (b) Consummation of a plan of exchange to which the domestic corporation is a constituent entity as the corporation whose subject owner's interests will be acquired, if his shares are to be acquired in the plan of exchange. (c) Any corporate action taken pursuant to a vote of the stockholders to the event that the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or nonvoting stockholders are entitled to dissent and obtain payment for their shares. 3. A stockholder who is entitled to dissent and obtain payment pursuant to NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent with respect to him or the domestic corporation. SECTION 92A.390. LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES OR SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER. 1. There is no right of dissent with respect to a plan of merger or exchange in favor of stockholders of any class or series which, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting at which the plan of merger or exchange is to be acted on, were either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc., or held by at least 2,000 stockholders of record, unless: (a) The articles of incorporation of the corporation issuing the shares provide otherwise; or (b) The holders of the class or series are required under the plan of merger or exchange to accept for the shares anything except: 68 (1) Cash, owner's interests or owner's interests and cash in lieu of fractional owner's interests of: (I) The surviving or acquiring entity; or (II) Any other entity which, at the effective date of the plan of merger or exchange, were either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc., or held of record by a least 2,000 holders of owner's interests of record; or (2) A combination of cash and owner's interests of the kind described in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b). 2. There is no right of dissent for any holders of stock of the surviving domestic corporation if the plan of merger does not require action of the stockholders of the surviving domestic corporation under NRS 92A.130. SECTION 92A.400. LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY TO SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER. 1. A stockholder of record may assert dissenter's rights as to fewer than all of the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the subject corporation in writing of the name and address of each person on whose behalf he asserts dissenter's rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which he dissents and his other shares were registered in the names of different stockholders. 2. A beneficial stockholder may assert dissenter's rights as to shares held on his behalf only if: (a) He submits to the subject corporation the written consent of the stockholder of record to the dissent not later than the time the beneficial stockholder asserts dissenter's rights; and (b) He does so with respect to all shares of which he is the beneficial stockholder or over which he has power to direct the vote. SECTION 92A.410. NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT. 1. If a proposed corporate action creating dissenters' rights is submitted to a vote at a stockholders' meeting, the notice of the meeting must state that stockholders are or may be entitled to assert dissenters' rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections. 69 2. If the corporate action creating dissenters' rights is taken by written consent of the stockholders or without a vote of the stockholders, the domestic corporation shall notify in writing all stockholders entitled to assert dissenters' rights that the action was taken and send them the dissenter's notice described in NRS 92A.430. SECTION 92A.420. PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES. 1. If a proposed corporate action creating dissenters' rights is submitted to a vote at a stockholders' meeting, a stockholder who wishes to assert dissenter's rights: (a) Must deliver to the subject corporation, before the vote is taken, written notice of his intent to demand payment for his shares if the proposed action is effectuated; and (b) Must not vote his shares in favor of the proposed action. 2. A stockholder who does not satisfy the requirements of subsection 1 and NRS 92A.400 is not entitled to payment for his shares under this chapter. SECTION 92A.430. DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT RIGHTS; CONTENTS. 1. If a proposed corporate action creating dissenters' rights is authorized at a stockholders' meeting, the subject corporation shall deliver a written dissenter's notice to all stockholders who satisfied the requirements to assert those rights. 2. The dissenter's notice must be sent no later than 10 days after the effectuation of the corporate action, and must: (a) State where the demand for payment must be sent and where and when certificates, if any, for shares must be deposited; (b) Inform the holders of shares not represented by certificates to what extent the transfer of the shares will be restricted after the demand for payment is received; (c) Supply a form for demanding payment that includes the date of the first announcement to the news media or to the stockholders of the terms of the proposed action and requires that the person asserting dissenter's rights certify whether or not he acquired beneficial ownership of the shares before that date; (d) Set a date by which the subject corporation must receive the demand for payment, which may not be less than 30 nor more than 60 days after the date the notice is delivered; and (e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive. SECTION 92A.440. DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF RIGHTS OF STOCKHOLDER. 70 1. A stockholder to whom a dissenter's notice is sent must: (a) Demand payment; (b) Certify whether he acquired beneficial ownership of the shares before the date required to be set forth in the dissenter's notice for this certification; and (c) Deposit his certificates, if any, in accordance with the terms of the notice. 2. The stockholder who demands payment and deposits his certificates, if any, before the proposed corporate action is taken retains all other rights of a stockholder until those rights are canceled or modified by the taking of the proposed corporate action. 3. The stockholder who does not demand payment or deposit his certificates where required, each by the date set forth in the dissenter's notice, is not entitled to payment for his shares under this chapter. SECTION 92A.450. UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER. 1. The subject corporation may restrict the transfer of shares not represented by a certificate from the date the demand for their payment is received. 2. The person for whom dissenter's rights are asserted as to shares not represented by a certificate retains all other rights of a stockholder until those rights are canceled or modified by the taking of the proposed corporate action. SECTION 92A.460. PAYMENT FOR SHARES: GENERAL REQUIREMENTS. 1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for payment, the subject corporation shall pay each dissenter who complied with NRS 92A.440 the amount the subject corporation estimates to be the fair value of his shares, plus accrued interest. The obligation of the subject corporation under this subsection may be enforced by the district court: (a) Of the county where the corporation's registered office is located; or (b) At the election of any dissenter residing or having its registered office in this state, of the county where the dissenter resides or has its registered office. The court shall dispose of the complaint promptly. 2. The payment must be accompanied by: (a) The subject corporation's balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, a statement of income for that year, a statement of changes in the stockholders' equity for that year and the latest available interim financial statements, if any; 71 (b) A statement of the subject corporation's estimate of the fair value of the shares; (c) An explanation of how the interest was calculated; (d) A statement of the dissenter's rights to demand payment under NRS 92A.480; and (e) A copy of NRS 92A.300 to 92A.500, inclusive. SECTION 92A.470. PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF DISSENTER'S NOTICE. 1. A subject corporation may elect to withhold payment from a dissenter unless he was the beneficial owner of the shares before the date set forth in the dissenter's notice as the date of the first announcement to the news media or to the stockholders of the terms of the proposed action. 2. To the extent the subject corporation elects to withhold payment, after taking the proposed action, it shall estimate the fair value of the shares, plus accrued interest, and shall offer to pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The subject corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenters' right to demand payment pursuant to NRS 92A.480. SECTION 92A.480. DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE. 1. A dissenter may notify the subject corporation in writing of his own estimate of the fair value of his shares and the amount of interest due, and demand payment of his estimate, less any payment pursuant to NRS 92A.460, or reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of his shares and interest due, if he believes that the amount paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his shares or that the interest due is incorrectly calculated. 2. A dissenter waives his right to demand payment pursuant to this section unless he notifies the subject corporation of his demand in writing within 30 days after the subject corporation made or offered payment for his shares. SECTION 92A.490. LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER. 1. If a demand for payment remains unsettled, the subject corporation shall commence a proceeding within 60 days after receiving the demand and petition the court to determine the fair value of the shares and accrued interest. If the subject corporation does not commence the proceeding within the 60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded. 72 2. A subject corporation shall commence the proceeding in the district court of the county where its registered office is located. If the subject corporation is a foreign entity without a resident agent in the state, it shall commence the proceeding in the county where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign entity was located. 3. The subject corporation shall make all dissenters, whether or not residents of Nevada, whose demands remain unsettled, parties to the proceeding as in an action against their shares. All parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. 4. The jurisdiction of the court in which the proceeding is commenced under subsection 2 is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or any amendment thereto. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. 5. Each dissenter who is made a party to the proceeding is entitled to a judgment: (a) For the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the subject corporation; or (b) For the fair value, plus accrued interest, of his after-acquired shares for which the subject corporation elected to withhold payment pursuant to NRS 92A.470. SECTION 92A.500. LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND FEES. 1. The court in a proceeding to determine fair value shall determine all of the costs of the proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court. The court shall assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment. 2. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable: (a) Against the subject corporation and in favor of all dissenters if the court finds the subject corporation did not substantially comply with the requirements of NRS 92A.300 to 92A.500, inclusive; or 73 (b) Against either the subject corporation or a dissenter in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by NRS 92A.300 to 92A.500, inclusive. 3. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the subject corporation, the court may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited. 4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters who are parties to the proceeding, in amounts the court finds equitable, to the extent the court finds that such parties did not act in good faith in instituting the proceeding. 5. This section does not preclude any party in a proceeding commenced pursuant to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68 or NRS 17.115. 74 PART II: INFORMATION NOT REQUIRED IN PROSPECTUS INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law provides that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to or is involved in any pending, threatened, or completed civil, criminal, administrative, or arbitration action, suit, or proceeding, or any appeal therein or any inquiry or investigation which could result in such action, suit, or proceeding, because of his or her being or having been our director, officer, employee, or agent or of any constituent corporation absorbed by us in a consolidation or merger or by reason of his or her being or having been a director, officer, trustee, employee, or agent of any other corporation or of any partnership, joint venture, sole proprietorship, trust, employee benefit plan, or such enterprise, serving as such at our request or of any such constituent corporation, or the legal representative of any such director, officer, trustee, employee, or agent, from and against any and all reasonable costs, disbursements, and attorney's fees, and any and all amounts paid or incurred in satisfaction of settlements, judgments, fines, and penalties, incurred or suffered in connection with any such proceeding. The IMNT Bylaws provide that IMNT shall, to the fullest extent to which it is empowered to do so by the Delaware General Corporation Law or any other applicable law, as may from time to time be in effect, indemnify any person who was or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of IMNT, or is or was serving at the request of IMNT as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following exhibits are filed as part of this registration statement: EXHIBIT NO. DESCRIPTION - ----------- ----------- 2.1 Agreement and Plan of Merger by and between USSC and IMNT 3.1 Articles of Incorporation of USSC 3.2 Amendment to USSC Articles of Incorporation 3.3 Amendment to USSC Articles of Incorporation 3.4 Amendment to USSC Articles of Incorporation 3.5 Amendment to USSC Articles of Incorporation 3.6 Bylaws of USSC 3.7 Certificate of Incorporation of IMNT and Related Amendments * 3.8 Bylaws of IMNT * 75 4.1 Certificate of Designations and Preferences for USSC Series A Convertible Preferred Stock 4.2 Certificate of Designations and Preferences for USSC Series B Convertible Preferred Stock 5.1 Legal Opinion of John Thompson regarding legality of shares being registered 10.1 Consulting and Acquisition Management Agreement between USSC and Shulman & Associates 10.2 Advisory Services Agreement between USSC and Stenton Leigh Business Resources, Inc. 10.3 Employment Agreement between USSC and James Cooper 10.4 Addendum to Cooper Employment Agreement 23.1 Consent of John Kinross, CPA 23.2 Consent of John Thompson (included as part of Exhibit 5.1) * Incorporated by reference from IMNT's registration statement on Form 10-SB filed on June 20, 1998 (b) The following financial statement schedules are filed as part of this registration statement. None. UNDERTAKINGS. The undersigned registrant hereby undertakes as follows: (1) that insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 20 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of such issue. (2) to respond to requests for information that is incorporated by reference into the registration statement pursuant to Items 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (3) to supply by means of a post-effective amendment all information concerning the Merger and related transactions of IMNT that was not the subject of and included in the registration statement when it became effective. 76 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Ogden, Utah on this 7th day of August 2003. IMMUNOTECHNOLOGY CORPORATION By: /s/ Mark Scharmann -------------------------------------- Mark Scharmann President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. /s/ Mark Scharmann Dated: August 7, 2003 - ----------------------------------- Mark A. Scharmann President and a director /s/ Dan Price Dated: August 7, 2003 - ----------------------------------- Dan Price Secretary, treasurer and a director 77 FINANCIAL STATEMENTS ULTIMATE SECURITY SYSTEMS CORPORATION AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2001 John Kinross-Kennedy Certified Public Accountant 4921 Birch Street, Suite 110 Newport Beach, CA 92660 Tel (949)399-2824 Fax (949)724-3812 jkinross@zamucen.com 78 JOHN KINROSS-KENNEDY CERTIFIED PUBLIC ACCOUNTANT 4921 BIRCH STREET, SUITE 110 NEWPORT BEACH, CA 92660 TEL (949) 399-2824 FAX (949)724-3817 jkinross@zamucen.com - ------------------------------------------------------------------------------- INDEPENDENT AUDITOR'S REPORT Board of Directors Ultimate Security Systems Corporation 18271 West McDurmott, Suite F Irvine, CA 92614 I have audited the accompanying balance sheet of Ultimate Security Systems Corporation as of December 31, 2001, and the related statements of operations, changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ultimate Security Systems Corporation as of December 31, 2001 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles generally accepted in the United States of America. My audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying information under title Supplemental Information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 7 to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. John Kinross-Kennedy April 9, 2003 79 ULTIMATE SECURITY SYSTEMS CORPORATION BALANCE SHEET DECEMBER 31, 2001 ASSETS ------
Current Assets: Cash and Cash Equivalents $ 627,626 Accounts Receivable 46,111 Inventories 18,087 --------------- Total Current Assets $ 691,824 ---------------- Total Assets $ 691,824 ================ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accrued Interest $ 48,647 --------------- Total Current Liabilities $ 48,647 Note Payable 50,000 Stockholders' Equity: Preferred Stock, Series A, $.01 par value; 7,000,000 shares authorized; 6,483,664 shares issued and outstanding $ 64,837 Preferred Stock, Series B, $.01 par value; 5,000,000 shares authorized; 242,750 shares issued and outstanding 2,428 Common Stock, $.01 par value; 50,000,000 shares authorized; 9,235,688 shares issued and outstanding 92,357 Contributed Capital 2,327,942 Deficit accumulated during the development stage (740,892) Deficit accumulated - post development stage (1,153,495) --------------- Total Stockholders' Equity 593,177 ---------------- Total Liabilities and Stockholders' Equity $ 691,824 ================
The accompanying notes are an integral part of these financial statements 80 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 Net Sales $ 102,541 Costs and Expenses: Cost of Sales $ 59,854 Product Development Costs 314,765 Selling Expenses 613,817 General and Administrative Expenses 290,768 1,279,204 ---------- ------------ (Loss) from Operations (1,176,663) Other Income (Expense): Interest Income $ 27,348 Interest Expense (4,180) 23,168 ---------- ------------ Net Loss $ (1,153,495) ============ The accompanying notes are an integral part of these financial statements 81 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001
Cash Flows from Operating Activities: - ------------------------------------- Net Loss from operations $ (1,153,495) Adjustments to reconcile net loss to net cash used in operating activities: Changes in assets and liabilities: Accounts Receivable (32,616) Inventories (12,183) Accrued Interest 21,647 --------------- Net cash used in operating activities $ (1,176,647) Cash Flows from Financing Activities: Net proceeds from sale of stock 513,022 --------------- Net cash provided by financing activities 513,022 --------------- Net decrease in cash and cash equivalents (663,625) Cash and cash equivalents, December 31, 2000 1,291,251 --------------- Cash and cash equivalents, December 31, 2001 $ 627,626 ===============
The accompanying notes are an integral part of these financial statements 82 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001
PREFERRED PREFERRED COMMON STOCK STOCK ACCUMULATED DEFICIT STOCK SERIES A SERIES B DEFICIT POST TOTAL -------------------- ------------------- ----------------- CONTRIBUTED DEVELOPMENT DEVELOPMENT STOCKHOLDERS Shares $$ Shares $$ Shares $$ CAPITAL STAGE STAGE EQUITY --------- --------- ---------- -------- -------- -------- ----------- ------------ ------------ ------------- Balance - December 31, 2000 8,477,498 $ 84,775 5,931,884 $ 59,319 - $ - $ 1,823,578 $ (740,892) $ - $ 1,226,780 Sale of Series A Preferred Stock 551,780 5,518 546,262 $ 551,780 Sale of Series B Preferred Stock 242,750 2,428 240,323 $ 242,751 Exercised Series A Warrants 758,190 7,582 360,243 $ 367,825 Costs related to sale of Series A (464,215) $ (464,215) Costs related to sale of Series B (178,249) $ (178,249) Net Loss December 31, 2001 (1,153,495) $ (1,153,495) - ------------------ --------- ---------- ---------- -------- -------- -------- ----------- ------------ ------------ ------------- Balance - December 31, 2001 $ 92,357 $ 64,837 $ 2,428 $ 2,327,942 $ (740,892) $(1,153,495) $ 593,177 ========== ======== ======== =========== ============ ============ ============= 9,235,688 6,483,664 242,750 ========= ========== ========
83 Ultimate Security Systems Corporation NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, 2001 NOTE 1 - DESCRIPTION OF THE COMPANY The Company's primary business is to develop, manufacture and market a vehicle anti-theft product that also has applications to the construction equipment market and the motorcycle market. The Company is subject to certain risks including competition from larger, more established companies marketing anti-theft products, the Company's ability to obtain adequate financing to support growth, reliance upon key employees, and the ability to attract and retain additional qualified personnel. NOTE 2 - HISTORY The Company was incorporated on August 18, 1994. Since inception and through the period ending December 31, 1995, the Company's efforts were devoted primarily to an assessment of the automotive aftermarket and commercial truck market structures, an assessment of competitors and their products within those markets, pricing strategies of competitors, product attribute and positioning strategies of competitors, and an assessment of the technologies employed in competitive products. During this same period, the Company began refining, with various industry sources, experts and consultants with industry knowledge and experience, competitive strategies for positioning its products, undertook product refinements and enhancements, and began to focus its efforts on securing manufacturer representatives for product representation, developing joint ventures, securing third party product endorsements, and securing financing to begin commercialization of its products. In 1996, the Company received its first patent, assigned from a founding member, covering the automotive anti-theft and anti-carjacking products. During the year, the company also filed a Continuation-In-Part to expand its patent coverage and to include product enhancements and refinements. In this same year, the Company initiated international patent filings. During this same year, the Company's efforts were primarily devoted to obtaining financing to begin commercialization of the Company's products in addition to the activities from the prior year. In the second quarter of 1996, the Company entered into a distribution agreement for the Los Angeles, California area and shortly thereafter, obtained financing to begin a limited introduction of its automotive aftermarket products for this region. A final assembly facility was set up in Manafee, Riverside County, California at a rental of $510 per month. 84 In 1997, the Company's efforts were devoted to obtaining additional financing for production and commercialization of the Company's products. This was in conjunction with the development of selling and marketing collateral for product introduction into the Los Angeles, California region. During this period, product development for commercialization and production of the automotive and commercial truck products yielded significant refinements in product design and manufacturability, as well as significant reductions in product costs. The Company's efforts in 1998 were a continuation of those from the prior year. In the second quarter of this year, the Company entered into another distribution agreement that is national in scope. In 1999, the Company continued its efforts from the prior year. During this period, limited trade advertising commenced together with limited specialty consumer public relations efforts. In 2000, the Company continued its efforts from the prior years. During this period, trade advertising for the acquisition of additional authorized retail dealers and manufacturers representative firms was increased together with the expansion of specialty consumer advertising and public relations efforts. In the second quarter, the Company commenced shipments of its product to dealers to fill retail sales orders. Sales was $19,286, representing 162 units. In 2001 the Company continued trade advertising and brand-building and expanded the dealer network. Sales were $102,541, representing 922 units. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The Company ceased being a Development Stage Enterprise on January 1, 2001, having concluded the principal activities attributed to a Development Stage Enterprise outlined in FAS 7. The company concluded the third round of capital acquisition, and management considers this function a periodic activity not associated with a Development Stage Enterprise. Revenue is not yet to the point of covering annual deficit, but considered significant, which places the company beyond a Development Stage Enterprise. 85 The accompanying audited financial statements have been prepared in accordance with generally accepted accounting principles. In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. RECLASSIFICATIONS Certain prior years' balance sheets have been reclassified to conform to the current year's presentation. Other Liabilities and Selling Costs in the 1999 financial statements were reclassified to Product Development Costs. 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE The company has had insufficient credit loss experience to formulate an allowance for credit losses. INVENTORIES Inventories are stated at the lower of cost or market, using the first-in-first-out method. Provisions are made, when required, to reduce excess and obsolete inventory to their estimated realizable values. Impaired inventory is first subjected to a re-manufacturing process. Non-Marketable inventory is written down and salvaged if possible as non working samples. Inventories at December 31, 2001 and 2000: 2001 2000 ---------------- ----------------- Components $ 6,240 $ 3,301 Materials & Supplies 1,860 903 Work In Process 520 460 Finished Goods 9,467 1,240 ---------------- ----------------- $ 18,087 $ 5,904 86 Limited manufacturing commenced in 1998 for demonstration products and in anticipation of sales. Finished units are furnished to both current and potential authorized dealers for evaluation, for display, or for installation on "project" vehicles, and to selling representatives. These units are charged to selling expense and removed from inventory. For the year ended December 31, 2001, the number of units and amounts charged to selling expenses were 159 and $9,331 respectively. RECENT ACCOUNTING PRONOUNCEMENTS In December 1999, The Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The adoption of SAB 101 did not have a material effect on the Company's financial position or results of operations. REVENUE RECOGNITION Revenues from the sale of anti-theft products are recognized upon shipment of goods in response to purchase order or sales contract. Any payments received prior to revenue recognition are recorded as as deferred revenue. The Company generally does not grant to its customers any rights to return products. The normal distribution channel is through distributors. Product revenues from sales to distributors are recognized upon shipment of goods in response to purchase order or sales contract. Product sales through manufacturer's representatives and sales agents are accomplished though drop shipments. Revenue is recognized in the usual way when the product is shipped to the customer. Commissions are paid on net invoice collected. COST OF SALES Cost of Sales consists of product component costs and assembly labor: 2001 2000 -------------- -------------- Direct component costs $ 56,478 $ 10,561 Assembly labor 3,376 1,384 ------------- -------------- $ 59,854 $ 11,945 87 In the first year of sales, 2000, Cost of Sales represented 61.9% of Sales, and in 2001, 58.3%. The cost of sales percentage planned by the third year of sales is 52%. As sales increase, additional labor will be hired from a plentiful supply of skilled assembly labor in Orange County. Labor inefficiencies are expected to rapidly decline as new hires are put through a training program. Component costs were higher than planned, because quantity discounts were not realized at the minimal level of sales achieved. As sales increase, price breaks will be negotiated on component purchases. The facility has the capability of expanding production to 60,000 units annually. SELLING EXPENSES 2001 2000 ---------------- ---------------- $ 613,817 $ 374,765 Selling Expenses consist mainly of marketing-related salaries and advertising. Other marketing related expenses include public relations, printing, trade shows and sample units. The increase from year to year matches the increase in sales. The scale of Selling Expenses was many more times net revenue in this second sales year. This was the result of the company's aggressive brand-building, promoting the product in the automobile after-market industry. The company anticipates that Selling Expenses will increase on an annual basis as it continues to pursue a brand-building strategy through advertising, distribution and an expanded sales force. ADVERTISING COSTS Advertising consisted of display ads in trade magazines. The balance was in promotional activities such as participation in car shows and advertising in magazines that distributors patronize such as Hot Rod and Power Tour. WARRANTY EXPENSE The company warrants its product against defects to the original purchaser still owning the auto that was originally fitted. Repair or replacement is at no charge. The Company warrants the performance of the product to the extent that, should the device be overcome and the vehicle stolen and not recovered, the insurance deductible is refunded to a limit of $10,000. There is insufficient warranty loss experience to establish an allowance for warranty costs. Warranty costs in 2001 of $4,437 were due to accommodating dealer returns following improper installations. 88 COMPREHENSIVE INCOME In June, 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and presentation of comprehensive income. SFAS 130 defines comprehensive income as the changes in equity (net assets) in a period, except those resulting from stockholder transactions. Comprehensive income (loss) for the years ended December 31, 1999 and 2000 approximated net income (loss). EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the average number of common shares outstanding during the period. Diluted earnings per share takes into consideration the potentially dilutive effect of common stock equivalents, such as outstanding convertible preferred stock and warrants, that if exercised or converted into common stock would then share in the earnings of the company. In accordance with SFAS No. 128, "Earnings Per Share", basic net income (loss) per common share has been calculated using the weighted average number of shares of common stock outstanding during the period, less shares subject to repurchase. For the years ended December 31, 2001 and 2000, the Company has excluded all convertible preferred stock and outstanding warrants from the calculation of diluted net loss per common share, because all such securities are antidilutive for those periods. The total number of shares excluded from the calculations of diluted net loss per common share were 19,510,992 and 17,795,652, respectively. Basic earnings per share for the years ended December 31, 2000 and 1999 was computed as follows: 2001 2000 ------------- ------------- Net Loss $ (1,153,495) $ (613,763) Average shares outstanding - basic 8,856,593 8,477,498 Earnings Per share - basic $ -0.13 $ -0.07 Antidilutive securities not included: Preferred Stock 13,007,328 11,863,768 ============ ============ Warrants 6,503,664 5,931,884 ============ ============ 89 NOTE 4 - BALANCE SHEET COMPONENTS Accounts Receivable 2001 2000 -------------- ------------- $ 46,111 $ 13,495 Accounts Receivable as at December 31, 2001 were collected subsequently. No allowance for doubtful accounts was made. Note Payable Note Payable consists of a Note in the amount of $50,000. The Note carries a cumulative interest rate of 12% per annum on any outstanding balance. The outstanding balance as of December 31, 2001 and 2000 was as follows: 2001 2000 -------------- ------------- $ 50,000 $ 50,000 The Note has no current portion. It must be retired by special payments that begin when product revenues begin and are in addition to interest. The note also retains the right to participation in revenues to certain limits, following retirement of the note. The three levels of payments are sequential: a) Retirement of the note: $10 for each unit sold until the amount of the Note is retired, then; b) Participation in revenue: $5 for each unit sold until the original amount of the note is again realized, then; c) Participation in revenue: 1% of the Company's gross revenues for a period of ten years after conditions a) and b) have been met. NOTE 5 - STOCKHOLDERS' EQUITY CAPITAL STOCK The company was incorporated in Nevada on August 18, 1994 with 10,000,000 common shares authorized of no par value. On April 3, 1995, the Company's Board of Directors approved amending the Company's Articles of Incorporation to: a) increase the number of authorized common shares to 20,000,000 with a par value of $.01; b) authorize 5,000,000 shares of preferred stock Series A with $.01 par value. 90 The certificate amending Articles of Incorporation was ultimately filed in 1997. The Company's Board of Directors also approved the issuance of up to 3,000,000 shares of common stock for sale to certain investors through a Regulation D, Rule 504 Offering in an aggregate amount not exceeding $1,000,000. In August of 1997, the Company sold 265,498 shares of common stock pursuant to a Regulation D, Rule 504 Offering. The Company also issued 180,000 shares of common stock for certain legal and administrative costs incurred in conjunction with the Offering. Other costs associated with the Offering are charged to "Capital in excess of par value." Proceeds of the sale of stock were used primarily for Product Development and the balance for General &Administrative Expenses. On September 6, 2000, the Company's Board of Directors approved amending the Company's Articles of Incorporation to: a) increase the number of authorized common shares to 50,000,000 with a par value of $.01 and; b) increase the number of authorized preferred shares to 6,000,000 with $.01 par value. The effect of this amendment has been presented retroactively to the date of inception in the accompanying financial statements. On September 6, 2000, the Company's Board of Directors also approved the sale of an additional 3 million shares of preferred stock through the Private Placement Regulation D, Rule 506 Offering. The proceeds were used for Product Development. As of December 31, 2000, the Company had sold 5,444,884 shares of preferred stock. Legal, printing, distribution, marketing and related costs associated with the Preferred Stock Offering are charged to "Capital in excess of par value." In 2001, 758,190 common shares were sold for $367,825, the proceeds of which were used for Selling Expenses and Product Development Costs. 91 Convertible Preferred Stock, Series A 2001 2000 --------- ---------- Authorized - 6,000,000 Outstanding - 6,483,664 issued and outstanding $ 64,837 $ 59,319 .. In August of 1999, the Company's Board of Directors approved the sale of 3 million shares of preferred stock through a Private Placement Regulation D, Rule 506 Offering. The shares are offered for $1.00 a share with a par value of $0.01 and a cumulative 14% per annum dividend rate. The preferred shares carry a mandatory redemption by the Company at a rate of $2.00 for each preferred share within thirty-six months of the subscription date, unless the Company first causes the common stock of the Company to be listed on a stock exchange. In the latter event, the preferred shares are converted to two shares of common stock for each share of preferred stock. The company anticipates listing on a stock exchange prior to the mandatory redemption date. Stock dividends will be paid in common stock. As of December 31, 1999, the Company had sold 237,000 shares of preferred stock and by December 31, 2000, 5,931,884 preferred shares. Legal, printing, distribution, marketing and related costs associated with the Preferred Stock Offering are charged to "Capital in excess of par value." On September 6, 2000 the Company's Board of Directors approved an increase in the number of Series A Preferred Stock to 5,000,000. The Board authorized a further increase of 1,000,000 to 6,000,000 in December 2000, formalized by an amendment to the Articles of Incorporation on March 12, 2001. As of December 31, 2000 the company had sold 5,694,884 preferred shares Series A and by December 31, 2001, a further 551,780 preferred shares Series A, proceeds being used for General and Administrative expenses and Product Development Costs. Additionally, each preferred share Series A carries a warrant to purchase one share of the Company's common stock for $0.50 a share. CONVERTIBLE PREFERRED STOCK, SERIES B 2001 2000 ----------- ---------- Authorized - 5,000,000 Outstanding - 242,750 issued and outstanding $ 2,428 $ 0 92 On November 22, 2001, the Company's Board of Directors approved amending the Articles of Incorporation to authorize 5,000,000 share of Series B preferred Stock with a par value of $0.01. The rights, privileges and terms of the Series B are the same as Series A. One warrant is attached to each Series B preferred share. 242,750 Series B preferred shares were sold in 2001. WARRANTS One warrant is attached to each share of Preferred Stock, entitling the stockholder to purchase one share of the Company's common stock at an exercise price of $0.50 per share (Series A) and $1.00 per share (Series B). Warrants are exercisable for a period of three years from first issue, or one year from the date the Company's common stock is quoted on the Over-The-Counter Bulletin Board or a similar electronic quotation system or stock exchange. Warrants are cancelled in the event that the Preferred Shares to which warrants are attached are redeemed. There is no provision for detaching the warrants from the stock and they are not separately valued. In 2001, 758,190 A warrants were exercised for an equal number of common shares. STOCK-BASED COMPENSATION The company accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and complies with the disclosure provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation". Each of the four founders of the Company was issued 2,000,000 shares individually in 1995 for the cost of certain technologies and marketing costs incorporated into the Company's products. Each of the four contributed an approximately equal share in their respective areas. Founder Alan McDougal was issued his stock in return for developing the company's anti-theft device to the patent stage. He shortly thereafter resigned from the corporation and from his interest in the patent. He transferred his stock equally among the other three founders. 93 Stockholder / Position Stock Issued for: Shares Value - ---------------------- ----------------------- --------------- ------------- Alan MacDougall Patent development 2,000,000 shares $ 50,000 (Assigned his shares to the other three) John Hilliard Inventor of patented auto anti-theft technology. Design and development 2,000,000 shares $ 50,000 cost Mike Rasmovitch Sales and Marketing. Design and engineering 2,000,000 shares $ 50,000 costs James K. Cooper Operations. Non accountable marketing costs 2,000,000 shares $ 50,000 Mobilization costs --------------- ------------ 8,000,000 shares $ 200,000 --------------- ------------ The value of the non-monetary exchange was determined in accordance with APB-29, as modified by FASB Interpretation No. 30. Consideration given as the measure of value could not be determined with any accuracy. The consideration received, stock, had no recognizable market to establish fair market value. The par value of the stock was used as a surrogate for value, on the assumption that the exchange was a reciprocal transfer of equal value. NOTE 6 - COMMITMENTS LEASES The Company's rented property in Costa Mesa and Riverside County is rented on a month to month basis. NOTE PAYABLE The $50,000 Note Payable described in Note 4 requires a commitment of payments based upon revenue. The note must be retired by special payments that begin when product revenues begin and are in addition to interest. The note also retains the right to participation in revenues to certain limits, following retirement of the note. The three levels of payments are sequential: d) Retirement of the note: $10 for each unit sold until the amount of the Note is retired, then; e) Participation in revenue: $5 for each unit sold until the original amount of the note is again realized, then; f) Participation in revenue: 1% of the Company's gross revenues for a period of ten years after conditions a) and b) have been met. 94 AUDITED FINANCIAL STATEMENTS ULTIMATE SECURITY SYSTEMS CORPORATION DECEMBER 31, 2002 95 JOHN KINROSS-KENNEDY CERTIFIED PUBLIC ACCOUNTANT 4921 BIRCH STREET, SUITE 110 NEWPORT BEACH, CA 92660 TEL (949) 399-2824 FAX (949)724-3812 jkinross@zamucen.com - ------------------------------------------------------------------------------- Board of Directors Ultimate Security Systems Corporation Irvine, California 92614 I have audited the accompanying balance sheets of Ultimate Security Systems Corporation as of December 31, 2002 and December 31, 2001, and the related statements of income, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I have conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities of Ultimate Security Systems Corporation as at December 31, 2002 and December 31, 2001 and the results of operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 7 to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. April 10, 2003 96 ULTIMATE SECURITY SYSTEMS CORPORATION AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2002 John Kinross-Kennedy Certified Public Accountant 4921 Birch Street, Suite 110 Newport Beach, CA 92660 Tel (949)399-2824 Fax (949)724-3812 jkinross@zamucen.com 97 ULTIMATE SECURITY SYSTEMS CORPORATION BALANCE SHEET DECEMBER 31, 2002 (See Independent Auditor's Report)
ASSETS ------ Current Assets: Cash $ 1,270,530 Accounts Receivable 13,504 Inventories 41,184 --------------- Total Current Assets $ 1,325,218 ---------------- Total Assets $ 1,325,218 ================ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accrued Interest $ 37,180 --------------- Total Current Liabilities $ 37,180 Note Payable 50,000 Stockholders' Equity: Preferred Stock, Series A, $.01 par value; 8,000,000 shares authorized; 7,269,414 shares issued and outstanding $ 72,695 Preferred Stock, Series B, $.01 par value; 5,000,000 shares authorized; 3,056,979 shares issued and outstanding 30,570 Common Stock, $.01 par value; 50,000,000 shares authorized; 9,625,892 shares issued and outstanding 96,259 Contributed Capital 3,846,547 Deficit accumulated during the development stage (740,892) Deficit accumulated - post development stage (2,040,474) Treasury Stock, at cost, 2,666,666 shares of common stock (26,667) --------------- Total Stockholders' Equity 1,238,038 ---------------- Total Liabilities and Stockholders' Equity $ 1,325,218 ================
The accompanying notes are an integral part of these financial statements 98 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF OPERATIONS FOR THE TWELVE MONTH PERIOD ENDING DECEMBER 31, 2002 (See Independent Auditor's Report)
Net Sales $ 89,588 Costs and Expenses: Cost of Sales $55,025 Product Development Costs 162,697 Selling Expenses 467,676 General and Administrative Expenses 289,297 974,695 ------------- -------------- Income (Loss) from Operations (885,107) Other Income (Expense): Interest Income $ 4,128 Interest Expense (6,000) (1,872) ------------- -------------- Income (Loss) before provision for income taxes (886,979) Provision for Income Taxes - -------------- Net Loss during the development stage $ (886,979) ============== Basic Earnings (Loss) per Common share (0.09) Diluted Earnings (Loss) per Common Share (0.03) Weighted Average Common shares Outstanding 9,430,790 Weighted Average Conmmon Shares Outstanding, assuming Dilution 34,251,810
The accompanying notes are an integral part of these financial statements 99 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF CASH FLOWS FOR THE TWELVE MONTH PERIOD ENDING DECEMBER 31, 2002 (See Independent Auditor's Report)
CASH FLOWS FROM OPERATING ACTIVITIES: - ------------------------------------- Net Income (Loss) from operations $ (886,979) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Changes in assets and liabilities, net of transactions: Accounts Receivable 32,607 Inventories (23,097) Accrued Interest (11,467) ---------------- Net cash used in operating activities $ (888,936) CASH FLOWS FROM FINANCING ACTIVITIES: - ------------------------------------- Repurchase of common stock (20,000) Net proceeds from sale of stock 1,551,840 ---------------- Net cash provided by financing activities 1,531,840 ----------------- Net Increase in cash and cash equivalents 642,904 Cash and equivalents, December 31, 2001 627,626 ----------------- Cash and equivalents, December 31, 2002 $ 1,270,530 =================
The accompanying notes are an integral part of these financial statements 100 ULTIMATE SECURITY SYSTEMS CORPORATION DECEMBER 31, 2002 101 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE TWELVE MONTH PERIOD ENDING DECEMBER 31, 2002 (See Independent Auditor's Report) ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2002
Accumu- Preferred Preferred lated Deficit Stock Stock Common Deficit Post Total Series A Series B Stock Contri- Develop- Develop- Treasury Stock Stock- --------------- --------------- --------------- buted ment ment --------------- holders Shares $$ Shares $$ Shares $$ Capital Stage Stage Shares $$ Equity ------- ------- -------- ------ -------- ------- --------- --------- ----------- ------- ------- ---------- Balance - Decem- ber 31, 2001 6,483,664 64,837 242,750 2,428 9,235,688 92,357 2,327,942 ($740,892)($1,153,495) 593,177 Sale of Series A Preferred Stock 785,750 7,858 777,893 $ 785,751 Sale of Series B Preferred Stock 2,814,229 28,142 2,786,087 $2,814,229 Series A Preferred Stock common stock dividends 3,056,870 30,569 (30,569) $ - Repurchase of Common Stock (2,666,666)(26,667) 33,334 2,666,666 (26,667)$ (20,000) Costs related to sale of Series A (467,253) $ (467,253) Costs related to sale of Series B (1,580,887) $(1,580,887) Net Loss December 31, 2002 (886,979) $(886,979) ------- ------- -------- ------ ------- -------- --------- --------- ----------- ------- ------- --------- Balance - December 31, 2002 $72,695 $30,570 $96,259 $3,846,547 $(740,892)$(2,040,474) $(26,667) $1,238,038 ======= ======= ======== ========= ========= =========== ======== ========== 7,269,414 3,056,979 9,625,892 2,666,666 ========= ========= ========= =========
102 Ultimate Security Systems Corporation NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2002 and 2001 NOTE 1 - DESCRIPTION OF THE COMPANY The Company's primary business is to develop, manufacture and market a vehicle anti-theft product that also has applications to the construction equipment market and the motorcycle market. The Company is subject to certain risks including competition from larger, more established companies marketing anti-theft products, the Company's ability to obtain adequate financing to support growth, reliance upon key employees, and the ability to attract and retain additional qualified personnel. NOTE 2 - HISTORY The Company was incorporated on August 18, 1994. Since inception and through the period ending December 31, 1995, the Company's efforts were devoted primarily to an assessment of the automotive aftermarket and commercial truck market structures, an assessment of competitors and their products within those markets, pricing strategies of competitors, product attribute and positioning strategies of competitors, and an assessment of the technologies employed in competitive products. During this same period, the Company began refining, with various industry sources, experts and consultants with industry knowledge and experience, competitive strategies for positioning its products, undertook product refinements and enhancements, and began to focus its efforts on securing manufacturer representatives for product representation, developing joint ventures, securing third party product endorsements, and securing financing to begin commercialization of its products. In 1996, the Company received its first patent, assigned from a founding member, covering the automotive anti-theft and anti-carjacking products. During the year, the company also filed a Continuation-In-Part to expand its patent coverage and to include product enhancements and refinements. In this same year, the Company initiated international patent filings. During this same year, the Company's efforts were primarily devoted to obtaining financing to begin commercialization of the Company's products in addition to the activities from the prior year. In the second quarter of 1996, the Company entered into a distribution agreement for the Los Angeles, California area and shortly thereafter, obtained financing to begin a limited introduction of its automotive aftermarket products for this region. A final assembly facility was set up in Manafee, Riverside County, California at a rental of $510 per month. 103 In 1997, the Company's efforts were devoted to obtaining additional financing for production and commercialization of the Company's products. This was in conjunction with the development of selling and marketing collateral for product introduction into the Los Angeles, California region. During this period, product development for commercialization and production of the automotive and commercial truck products yielded significant refinements in product design and manufacturability, as well as significant reductions in product costs. The Company's efforts in 1998 were a continuation of those from the prior year. In the second quarter of this year, the Company entered into another distribution agreement that is national in scope. In 1999, the Company continued its efforts from the prior year. During this period, limited trade advertising commenced together with limited specialty consumer public relations efforts. In 2000, the Company continued its efforts from the prior years. During this period, trade advertising for the acquisition of additional authorized retail dealers and manufacturers representative firms was increased together with the expansion of specialty consumer advertising and public relations efforts. In the second quarter, the Company commenced shipments of its product to dealers to fill retail sales orders. Sales was $19,286, representing 162 units. In 2001, the Company continued trade advertising and brand-building and expanded the dealer network. Sales were $102,541, representing 922 units. The aggressive marketing program continued throughout 2002, with consolidation of dealer networks. Experience with dealer returns from incorrect installation in 2001 generated a shift toward dealer training. Sales in 2002 was $89,588, representing 814 units. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The Company ceased being a Development Stage Enterprise on January 1, 2001, having concluded the principal activities attributed to a Development Stage Enterprise outlined in FAS 7. The company concluded the third round of capital acquisition, and management considers this function a periodic activity not associated with a Development Stage Enterprise. Revenue is not yet to the point of covering annual deficit, but considered significant, which places the company beyond a Development Stage Enterprise. 104 The accompanying audited financial statements have been prepared in accordance with generally accepted accounting principles. In the opinion of management, all adjustments necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. RECLASSIFICATIONS Certain prior years' balance sheets have been reclassified to conform to the current year's presentation. Other Liabilities and Selling Costs in the 1999 financial statements were reclassified to Product Development Costs. 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE The company has had insufficient credit loss experience to formulate an allowance for credit losses. INVENTORIES Inventories are stated at the lower of cost or market, using the first-in-first-out method. Provisions are made, when required, to reduce excess and obsolete inventory to their estimated realizable values. Impaired inventory is first subjected to a re-manufacturing process. Non-Marketable inventory is written down and salvaged if possible as non working samples. Inventories at December 31, 2002 and 2001: 2002 2001 ---------------- ----------------- Components $ 21,818 $ 6,240 Materials & Supplies 6,416 1,860 Work In Process 450 520 Finished Goods 12,500 9,467 ---------------- ----------------- $ 41,184 $ 18,087 105 Limited manufacturing commenced in Fiscal Year 1998 for demonstration products and in anticipation of sales. Finished units are furnished to both current and potential authorized dealers for evaluation, for display, or for installation on "project" vehicles, and to selling representatives. These units are charged to selling expense and removed from inventory. For the year ended December 31, 2002, the number of units and amounts charged to selling expenses were 150 and $8,850 respectively. RECENT ACCOUNTING PRONOUNCEMENTS In December 1999, The Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The adoption of SAB 101 did not have a material effect on the Company's financial position or results of operations. REVENUE RECOGNITION Revenues from the sale of anti-theft products are recognized upon shipment of goods in response to purchase order or sales contract. Any payments received prior to revenue recognition are recorded as as deferred revenue. The Company generally does not grant to its customers any rights to return products. The normal distribution channel is through distributors. Product revenues from sales to distributors are recognized upon shipment of goods in response to purchase order or sales contract. Product sales through manufacturer's representatives and sales agents are accomplished though drop shipments. Revenue is recognized in the usual way when the product is shipped to the customer. Commissions are paid on net invoice collected. COST OF SALES Cost of Sales consists of product component costs and assembly labor: 2002 2001 -------------- -------------- Direct component costs $ 52,164 $ 56,478 Assembly labor 2,861 3,376 -------------- -------------- $ 55,025 $ 59,854 106 In the first year of sales, 2000, Cost of Sales represented 61.9% of Sales; in 2001: 58.3%; in 2002: 61.4% The cost of sales percentage planned by the third year of sales is 52%. As sales increase, additional labor will be hired from a plentiful supply of skilled assembly labor in Orange County. Labor inefficiencies are expected to rapidly decline as new hires are put through a training program. Component costs were higher than planned, because quantity discounts were not realized at the minimal level of sales achieved. As sales increase, price breaks will be negotiated on component purchases. The facility has the capability of expanding production to 60,000 units annually. SELLING EXPENSES 2001 2000 -------------- ---------------- $ 467,676 $ 613,817 Selling Expenses consist mainly of marketing-related salaries and advertising. Other marketing related expenses include public relations, printing, trade shows and sample units. The increase from year to year matches the increase in sales. The scale of Selling Expenses was many more times net revenue. This was the result of the company's aggressive brand-building, promoting the product in the automobile after-market industry. The company anticipates that Selling Expenses will increase on an annual basis as it continues to pursue a brand-building strategy through advertising, distribution and an expanded sales force. ADVERTISING COSTS Advertising consisted of display ads in trade magazines. The balance was in promotional activities such as participation in car shows and advertising in magazines that distributors patronize such as Hot Rod and Power Tour. WARRANTY EXPENSE The company warrants its product against defects to the original purchaser still owning the auto that was originally fitted. Repair or replacement is at no charge. The Company warrants the performance of the product to the extent that, should the device be overcome and the vehicle stolen and not recovered, the insurance deductible is refunded to a limit of $10,000. There is insufficient warranty loss experience to establish an allowance for warranty costs. Warranty costs of $2,972 (2002) and $4,437 (2001) were due to accommodating dealer returns following improper installations. This compelled the company to generate a more comprehensive dealer training program in 2002. 107 COMPREHENSIVE INCOME In June, 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and presentation of comprehensive income. SFAS 130 defines comprehensive income as the changes in equity (net assets) in a period, except those resulting from stockholder transactions. Comprehensive income (loss) for the years ended December 31, 2002 and 2001 approximated net income (loss). EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the average number of common shares outstanding during the period. Diluted earnings per share takes into consideration the potentially dilutive effect of common stock equivalents, such as outstanding convertible preferred stock and warrants, that if exercised or converted into common stock would then share in the earnings of the company. In accordance with SFAS No. 128, "Earnings Per Share", basic net income (loss) per common share has been calculated using the weighted average number of shares of common stock outstanding during the period, less shares subject to repurchase. Earnings per share for the years ended December 31, 2002 and 2002 was computed as follows:
2002 2001 -------------- ---------------- Net Loss $ (886,979) $ (1,153,495) Earnings per share - basic $ -0.09 $ -0.13 Earnings per share - diluted $ -0.03 $ -0.04 Weighted Average common shares outstanding - basic 9,430,790 8,856,593 Dilutive effect of: Preferred Stock 17,052,807 12,658,298 Warrants 7,768,213 5,950,054 -------------- ---------------- Weighted Average common shares outstanding, Assuming dilution 34,251,810 27,464,945 ============== ===============
Weighted average common shares outstanding, assuming dilution, included the incremental shares that would be issued upon the assumed exercise of preferred shares, as well as the assumed conversion of the warrants. 108 NOTE 4 - BALANCE SHEET COMPONENTS ACCOUNTS RECEIVABLE 2002 2001 ----------------- ------------------ $ 13,504 $ 46,111 Accounts Receivable as at December 31, 2002 and December 31, 2001 were collected subsequently. No allowance for doubtful accounts was made. NOTE PAYABLE Note Payable consists of a Note in the amount of $50,000. The Note carries a cumulative interest rate of 12% per annum on any outstanding balance. The outstanding balance as of December 31, 2001and 2000 was as follows: 2002 2001 ----------------- ------------------ $ 50,000 $ 50,000 The Note has no current portion. It must be retired by special payments that begin when product revenues begin and are in addition to interest. The note also retains the right to participation in revenues to certain limits, following retirement of the note. The three levels of payments are sequential: a) Retirement of the note: $10 for each unit sold until the amount of the Note is retired, then; b) Participation in revenue: $5 for each unit sold until the original amount of the note is again realized, then; c) Participation in revenue: 1% of the Company's gross revenues for a period of ten years after conditions a) and b) have been met. 109 NOTE 5 - STOCKHOLDERS' EQUITY CAPITAL STOCK The company was incorporated in Nevada on August 18, 1994 with 10,000,000 common shares authorized of no par value. On April 3, 1995, the Company's Board of Directors approved amending the Company's Articles of Incorporation to: a) increase the number of authorized common shares to 20,000,000 with a par value of $.01; b) authorize 5,000,000 shares of preferred stock Series A with $.01 par value. The certificate amending Articles of Incorporation was ultimately filed in 1997. The Company's Board of Directors also approved the issuance of up to 3,000,000 shares of common stock for sale to certain investors through a Regulation D, Rule 504 Offering in an aggregate amount not exceeding $1,000,000. In August of 1997, the Company sold 265,498 shares of common stock pursuant to a Regulation D, Rule 504 Offering. The Company also issued 180,000 shares of common stock for certain legal and administrative costs incurred in conjunction with the Offering. Other costs associated with the Offering are charged to "Capital in excess of par value." Proceeds of the sale of stock were used primarily for Product Development and the balance for General &Administrative Expenses. On September 6, 2000, the Company's Board of Directors approved amending the Company's Articles of Incorporation to: a) increase the number of authorized common shares to 50,000,000 with a par value of $.01 and; b) increase the number of authorized preferred shares to 6,000,000 with $.01 par value. The effect of this amendment has been presented retroactively to the date of inception in the accompanying financial statements. On September 6, 2000, the Company's Board of Directors also approved the sale of an additional 3 million shares of preferred stock through the Private Placement Regulation D, Rule 506 Offering. The proceeds were used for Product Development. As of December 31, 2000, the Company had sold 5,444,884 shares of preferred stock. Legal, printing, distribution, marketing and related costs associated with the Preferred Stock Offering are charged to "Capital in excess of par value." In 2001, 758,190 common shares were sold for $367,825, the proceeds of which were used for Selling Expenses and Product Development Costs. 110 In 2002, 30569 common shares were sold for $66,568, the proceeds of which were used for expenses of the Company. CONVERTIBLE PREFERRED STOCK, SERIES A 2002 2001 ----------- ---------- Authorized - 6,000,000 Outstanding - 7,269,414 issued and outstanding $ 72,694 $ 64,837 In August of 1999, the Company's Board of Directors approved the sale of 3 million shares of preferred stock through a Private Placement Regulation D, Rule 506 Offering. The shares are offered for $1.00 a share with a par value of $0.01 and a cumulative 14% per annum dividend rate. The preferred shares carry a mandatory redemption by the Company at a rate of $2.00 for each preferred share within thirty-six months of the subscription date, unless the Company first causes the common stock of the Company to be listed on a stock exchange. In the latter event, the preferred shares are converted to two shares of common stock for each share of preferred stock. The company anticipates listing on a stock exchange prior to the mandatory redemption date. Stock dividends will be paid in common stock. As of December 31, 1999, the Company had sold 237,000 shares of preferred stock and by December 31, 2000, 5,931,884 preferred shares. Legal, printing, distribution, marketing and related costs associated with the Preferred Stock Offering are charged to "Capital in excess of par value." On September 6, 2000, the Company's Board of Directors approved an increase in the number of Series A Preferred Stock to 5,000,000. The Board authorized a further increase of 1,000,000 to 6,000,000 in December 2000, formalized by an amendment to the Articles of Incorporation on March 12, 2001. As of December 31, 2000 the company had sold 5,694,884 preferred shares Series A and by December 31, 2001, a further 551,780 preferred shares Series A, proceeds being used for General and Administrative expenses and Product Development Costs. Additionally, each preferred share Series A carries a warrant to purchase one share of the Company's common stock for $0.50 a share. 111 CONVERTIBLE PREFERRED STOCK, SERIES B 2002 2001 --------- -------- Authorized - 5,000,000 Outstanding - 3,056,979 issued and outstanding $ 30,570 $ 2,428 On November 22, 2001, the Company's Board of Directors approved amending the Articles of Incorporation to authorize 5,000,000 share of Series B preferred Stock with a par value of $0.01. The rights, privileges and terms of the Series B are the same as Series A. One warrant is attached to each Series B preferred share. 242,750 Series B preferred shares were sold in 2001. WARRANTS One warrant is attached to each share of Series A and Series B Preferred Stock, entitling the stockholder to purchase one share of the Company's common stock at an exercise price of $0.50 per share (Series A) and $1,00 per share (Series B). Warrants are exercisable for a period of three years from first issue, or one year from the date the Company's common stock is quoted on the Over-The-Counter Bulletin Board or a similar electronic quotation system or stock exchange. Warrants are cancelled in the event that the Preferred Shares to which warrants are attached are redeemed. There is no provision for detaching the warrants from the stock and they are not separately valued. In 2001, 758,190 warrants were exercised for an equal number of common shares. STOCK-BASED COMPENSATION The company accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and complies with the disclosure provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation". Each of the four founders of the Company was issued 2,000,000 shares individually in 1995 for the cost of certain technologies and marketing costs incorporated into the Company's products. Each of the four contributed an approximately equal share in their respective areas. Founder Alan McDougal was issued his stock in return for developing the company's anti-theft device to the patent stage. He shortly thereafter resigned from the corporation and from his interest in the patent. He transferred his stock equally among the other three founders. 112 Stockholder / Position Stock Issued for: Shares Value - ---------------------- ----------------------- ---------------- --------- Alan MacDougall Patent development 2,000,000 shares $ 50,000 (Assigned his shares to the other three) John Hilliard Inventor of patented auto anti-theft technology Design and development 2,000,000 shares $ 50,000 costs Mike Rasmovitch Sales and Marketing. Design and engineering 2,000,000 shares $ 50,000 costs James K. Cooper Operations. Non accountable 2,000,000 shares $ 50,000 marketing costs Mobilization costs ---------------- --------- 8,000,000 shares $ 200,000 ---------------- --------- The value of the non-monetary exchange was determined in accordance with APB-29, as modified by FASB Interpretation No. 30. Consideration given as the measure of value could not be determined with any accuracy. The consideration received, stock, had no recognizable market to establish fair market value. The par value of the stock was used as a surrogate for value, on the assumption that the exchange was a reciprocal transfer of equal value. Redemption of Stock 2,666,666 shares representing all of the shares owned by founder Michael Rasmovich was purchased by the Company in 2002 for $20,000 and recorded by the cost method. The stock was placed in Treasury. NOTE 6 - COMMITMENTS LEASES The Company's rented property in Costa Mesa and Riverside County is rented on a month to month basis. 113 NOTE PAYABLE The $50,000 Note Payable described in Note 4 requires a commitment of payments based upon revenue. The note must be retired by special payments that begin when product revenues begin and are in addition to interest. The note also retains the right to participation in revenues to certain limits, following retirement of the note. The three levels of payments are sequential: d) Retirement of the note: $10 for each unit sold until the amount of the Note is retired, then; e) Participation in revenue: $5 for each unit sold until the original amount of the note is again realized, then; f) Participation in revenue: 1% of the Company's gross revenues for a period of ten years after conditions a) and b) have been met. NOTE 7 - GOING CONCERN The company has suffered recurring losses from operations since inception. The company has not yet been able to gain market acceptance for its innovative auto theft device. Marketing at trade shows and auto sports events has not yet produced sufficient interest to generate material sales. The company is dependent upon this single product. However, customers who have bought the device are universally pleased with it. Management believes that it is only a matter of time before sales take-off occurs. The company has sufficient liquid reserves to wait out the current recession, but the long term prognosis is uncertain. Management is in the advanced planning stage for a merger with a public company, in order to provide the corporation with greater strategic and financial alternatives. It would permit integration with other automobile after-market corporations to broaden the product line. However, the current uncertainty remains. 114 FINANCIAL STATEMENTS ULTIMATE SECURITY SYSTEMS CORPORATION FINANCIAL STATEMENTS MARCH 31, 2003 AND 2002 115 John Kinross-Kennedy Certified Public Accountant 4921 Birch Street, Suite 110 Newport Beach, CA 92660 Tel (949) 399-2824 Fax (949) 724-3812 jkinross@zamucen.com --------------------- Board of Directors Ultimate Security Systems Corporation Irvine, California 92614 I have reviewed the accompanying balance sheet of Ultimate Security Systems Corporation as of March 31, 2003 and the statements of income, stockholders' equity and cash flows for the three months ended March 31, 2003 and March 31, 2002, in accordance with Statements on Standards for Accounting and Review Series issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Ultimate Security Systems Corporation. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion. Based on my review, I am not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. The financial statements for the year ended December 31, 2002 were audited by me, and I expressed a qualified opinion on them in my report dated April 10, 2003, but I have not performed any auditing procedures since that date. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Item 2 of Management's Discussion and Analysis accompanying these financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Item 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. John Kinross-Kennedy, C.P.A. June 30, 2003. 116 ULTIMATE SECURITY SYSTEMS CORPORATION BALANCE SHEET
March 31, December 31, 2003 2002 ------------------ ----------------- (unaudited) ASSETS ------ Current Assets: Cash $ 1,279,588 $ 1,270,530 Accounts Receivable 12,513 13,504 Inventories 49,411 41,184 ------------------ ----------------- Total Current Assets 1,341,512 1,325,218 ------------------ ----------------- Total Assets $ 1,341,512 $ 1,325,218 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accrued Interest $ 38,380 $ 37,180 Accrued Preferred Stock Dividends 257,885 - ------------------ ----------------- 296,265 37,180 Note Payable 50,000 50,000 ------------------ ----------------- Total Liabilities 346,265 87,180 ------------------ ----------------- Stockholders' Equity: Preferred Stock, Series A, $.01 par value; 8,000,000 shares authorized; 7,582,414 shares issued and outstanding 75,825 72,695 Preferred Stock, Series B, $.01 par value; 5,000,000 shares authorized; 3,671,579 shares issued and outstanding 36,716 30,570 Common Stock, $.01 par value; 50,000,000 shares authorized; 9,625,892 shares issued and outstanding 96,259 96,259 Contributed Capital 4,096,805 3,846,547 Deficit accumulated during the development stage (740,892) (740,892) Deficit accumulated - post development stage (2,542,799) (2,040,474) Treasury Stock, at cost, 2,666,666 shares of common stock (26,667) (26,667) ------------------ ----------------- Total Stockholders' Equity 995,247 1,238,038 ------------------ ----------------- Total Liabilities and Stockholders' Equity $ 1,341,512 $ 1,325,218 ================== =================
See accountants report and notes to unaudited financial statements 117 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
March 31, March 31, 2003 2002 --------------- ----------------- (unaudited) (unaudited) Net Sales $ 7,428 $ 26,351 Costs and Expenses: Cost of Sales 3,462 16,546 Product Development Costs - - Selling Expenses 156,012 169,318 General and Administrative Expenses 91,642 66,483 --------------- ----------------- 251,116 252,347 --------------- ----------------- Income (Loss) from Operations (243,688) (225,996) Other Income (Expense): Interest Income 748 783 Interest Expense (1,500) (1,500) --------------- ----------------- (752) (717) --------------- ----------------- Income (Loss) before provision for income taxes (244,440) (226,713) Provision for Income Taxes - - --------------- ----------------- Net Loss $ (244,440) $ (226,713) =============== ================= Basic Earnings (Loss) per Common Share (0.03) (0.02) =============== ================= Diluted Earnings (Loss) per Common Share (0.01) (0.01) =============== ================= Weighted Average Common Shares Outstanding 9,625,892 9,928,968 =============== ================= Weighted Average Common shares Outstanding, assuming Dilution 41,253,281 30,737,115 =============== =================
See accountants report and notes to unaudited financial statements 118 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
March 31, March 31, 2003 2002 ---------------- ----------------- (unaudited) (unaudited) Cash Flows from Operating Activities: - ------------------------------------- Net Income (Loss) from operations $ (244,440) $ (226,713) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Changes in assets and liabilities: Accounts Receivable 991 (6,230) Inventories (8,227) (21,834) Accrued Interest 1,200 (15,967) ---------------- ----------------- Net cash used in operating activities (250,476) (270,744) ---------------- ----------------- Cash Flows from Financing Activities: - ------------------------------------- Repayment of notes - Net proceeds from sale of stock 259,534 245,224 ---------------- ----------------- Net cash provided by financing activities 259,534 245,224 ---------------- ----------------- Net Increase in cash and cash equivalents 9,058 (25,520) Cash and equivalents, December 31, 2002 1,270,530 627,626 ---------------- ----------------- Cash and equivalents, March 31, 2003 $ 1,279,588 $ 602,106 ================ =================
See accountants report and notes to unaudited financial statements 119 SUPPLEMENTAL INFORMATION ULTIMATE SECURITY SYSTEMS CORPORATION MARCH 31, 2003 AND 2002 120 ULTIMATE SECURITY SYSTEMS CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2003 (Unaudited)
Accumu- Preferred Preferred lated Deficit Stock Stock Common Deficit Post Total Series A Series B Stock Contri- Develop- Develop- Treasury Stock Stock- --------------- ---------------- --------------- buted ment ment --------------- holders Shares Amount Shares Amount Shares Amount Capital Stage Stage Shares $$ Equity ------- ------- -------- ------- -------- ------- --------- --------- ----------- ------- ------- ---------- Balance December 31, 2002 7,269,414 72,695 3,056,979 30,570 9,625,892 96,259 3,846,547 ($740,892)($2,040,474) 2,666,666(26,667)$1,238,038 Sale of series A preferred stock 313,000 3,130 309,870 $ 313,000 Costs related to the sale of series A (225,298) $ (225,298) Sale of series B preferred stock 614,600 6,146 608,454 $ 614,600 Costs related to the sale of series B (442,768) $ (442,768) Net loss, 3 mo. ended March 31, 2002 (244,440) $ (244,440) Accrued series A preferred stock dividends (257,885) $ (257,885) ------- ------- -------- ------ -------- ------- --------- --------- ----------- ------- ------- ----------- Balance March 31, 2003 $75,825 $36,716 $96,259 $4,096,805($740,892)($2,542,799) ($26,667)$ 995,247 ======= ======= ======= ========= ========= =========== ======== =========== 7,582,414 3,671,579 9,625,892 2,666,666 ======== ========= ========= =========
121 Selling Expenses include advertising, public relations, printing, postage, travel, trade shows, sales personnel and commissions. Selling expenses remained relatively static at $156,012 and $169,318 in respective periods March 31, 2003 and 2002. Greater emphasis was placed on trade shows in the first quarter of 2003, which was offset by a reduction in tech rep salaries. Expenses in the first quarter included those for a trial in one market segment to re-brand the product. Feedback was not favorable and the decision was made to retain the brand name PowerLockTM for the product. General and Administrative Expenses include personnel costs and corporate functions such as legal, rent, insurance, and office expenses. The expenses were $91,642 in the first three months of fiscal 2003 and $66,483 in the corresponding period of the prior year. The $25,159 increase was due primarily to labor costs of engineering changes to circuit boards of the anti-theft device. As a result of the foregoing, net loss increased by $17,727 for the three months ended March 31, 3003 to $244,440 from $226,713 for the three months ended March 31, 2002. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows from operating, investing, and financing activities, as reflected in the statement of cash flows, are summarized in the following table: Three Months Ended -------------------- March 31, March 31, 2003 2002 --------- --------- Operating Activities (250,476) (270,744) Investing Activities Financing Activities 259,534 245,224 --------- --------- Net increase (decrease) in cash and cash equivalents 9,058 (25,520) --------- --------- Cash and cash equivalents increased by $9,058 in the first quarter of 2003. Cash used by operating activities was $250,476 in the first quarter of 2003, a decrease of $20,268 from $270,744 of the comparable period of 2002. This reflected our operating loss of $244,440, more than offset by higher receivable collections, reduction in inventory purchases and stabilization of accrued interest. 122 There were no investing activities in the first quarter of 2003 and the comparable period of 2002. Cash provided by financing activities increased by $14,310 in the first quarter of 2003, compared to the first quarter of 2002. Cash was provided by the sale of preferred stock in both years: $259,534 in the first quarter of 2003 and $245,224 in the first quarter of 2002. As of March 31, 2003 the Company had working capital of $1,045,247. The Company believes it has sufficient capital resources to meet its anticipated capital and operating requirements for the next twelve months. The company has no borrowings. Our operating results will continue to be adversely affected by economic timing factors and until market indifference to our innovative anti-theft device is overcome. We will need to redouble our efforts to raise public awareness of the benefits of our device. We will seek alliances with security organizations, businesses and non-profit agencies with a stake in prevention of auto theft. However, we cannot guarantee that sales will reverse the cash flow deficit in the next twelve months. We anticipate that we will continue to experience negative cash flows from operations through the next twelve months. ITEM 3. CRITICAL ACCOUNTING POLICIES, COMMITMENTS AND CERTAIN OTHER MATTERS In the Company's Form 10-K for the year ended December 31, 2002, the Company's critical accounting policies and estimates were identified as those relating to revenue recognition and deferred revenue, loss provisions on accounts receivable, research and development expenses, and valuation of cost basis investments. Management has considered the disclosure requirements of Financial Release ("FR")60, regarding critical policies, and FR61 regarding liquidity and capital resources, including commitments and commercial obligations, and concluded that nothing has materially changed during the three months ended March 31, 2003 that would warrant further disclosure. ITEM 4. PLANS FOR A MERGER The company is negotiating a plan of merger with Immunotechnology Corporation ("ITC") of Ogden, Utah. The merger contemplates USSC merging into ITC, with the combined company being known as USSC. The board of directors of USSC believe that a merger with ITC is in the best interests of the company, including the shareholders. ITC is a "public company", which will provide the shareholders with the opportunity to sell their shares through the Over-the-Counter Bulletin Board. It will provide the company with strategic and financial alternatives, which it does not have as a private company. 123 EX-2 3 exh2-1.txt 2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG IMMUNOTECHNOLOGY, INC., a Delaware corporation ULTIMATE SECURITY SYSTEMS CORPORATION, a Nevada corporation AND THE OTHER PARTIES SIGNATORY HERETO Dated as of April __, 2003 TABLE OF CONTENTS
Page - ---- Article 1 THE MERGER..............................................................................................1 1.1 The Merger..........................................................................................1 ---------- 1.2 Effective Time......................................................................................2 -------------- 1.3 Effect of the Merger on Constituent Corporations....................................................2 ------------------------------------------------ 1.4 Certificate of Incorporation and Bylaws of Surviving Corporation....................................2 ---------------------------------------------------------------- 1.5 Directors and Officers of Surviving Corporation.....................................................2 ----------------------------------------------- 1.6 Maximum Number of Shares of IMNT Common Stock to be Issued; Effect on Outstanding Securities of USSC3 ---------------------------------------------------------------------------------------------------- 1.7 Reservation of Shares...............................................................................4 --------------------- 1.8 Adjustments to Exchange Ratio.......................................................................4 ----------------------------- 1.9 Fractional Shares...................................................................................4 ----------------- 1.10 Dissenting Shares...................................................................................4 ----------------- 1.11 Exchange Procedures.................................................................................5 ------------------- 1.12 No Further Ownership Rights in USSC Common Stock....................................................6 ------------------------------------------------ 1.13 Lost, Stolen or Destroyed Certificates..............................................................6 -------------------------------------- 1.14 Tax Consequences....................................................................................6 ---------------- 1.15 Taking of Necessary Action: Further Action..........................................................7 ------------------------------------------ Article 2 REPRESENTATIONS AND WARRANTIES OF USSC..................................................................7 2.1 Organization and Qualification......................................................................7 ------------------------------ 2.2 Authority Relative to this Agreement................................................................7 ------------------------------------ 2.3 Capital Stock.......................................................................................8 ------------- 2.4 No Subsidiaries.....................................................................................9 --------------- 2.5 Directors and Officers..............................................................................9 ---------------------- 2.6 No Conflicts........................................................................................9 ------------ 2.7 Books and Records; Organizational Documents........................................................10 ------------------------------------------- 2.8 USSC Financial Statements..........................................................................10 ------------------------- 2.9 Absence of Changes.................................................................................10 ------------------ 2.10 No Undisclosed Liabilities.........................................................................12 -------------------------- 2.11 Taxes..............................................................................................12 ----- 2.12 Legal Proceedings..................................................................................15 ----------------- 2.13 Compliance with Laws and Orders....................................................................15 ------------------------------- 2.14 Employee Benefit Plans and Employee Matters........................................................15 ------------------------------------------- 2.15 Real Property......................................................................................18 ------------- 2.16 Tangible Personal Property.........................................................................18 -------------------------- 2.17 Intellectual Property..............................................................................18 --------------------- 2.18 Contracts..........................................................................................22 --------- 2.19 Insurance..........................................................................................24 --------- 2.20 Affiliate Transactions.............................................................................25 ---------------------- 2.21 Employees; Labor Relations.........................................................................25 -------------------------- 2.22 Environmental Matters..............................................................................26 --------------------- 2.23 Substantial Customers and Suppliers................................................................27 ----------------------------------- -i- 2.24 Accounts Receivable................................................................................28 ------------------- 2.25 Inventory..........................................................................................28 --------- 2.26 Other Negotiations; Brokers; Third Party Expenses..................................................28 ------------------------------------------------- 2.27 Banks and Brokerage Accounts.......................................................................29 ---------------------------- 2.28 Warranty Obligations...............................................................................29 -------------------- 2.29 Foreign Corrupt Practices Act......................................................................29 ----------------------------- 2.30 Tax-Free Reorganization............................................................................29 ----------------------- 2.31 Financial Projections..............................................................................30 --------------------- 2.32 Approvals..........................................................................................30 --------- 2.33 Information Statement..............................................................................30 --------------------- 2.34 No Solicitation....................................................................................31 --------------- 2.35 Disclosure.........................................................................................31 ---------- Article 3 REPRESENTATIONS AND WARRANTIES OF IMNT.................................................................31 3.2 Authority Relative to this Agreement...............................................................32 ------------------------------------ 3.3 Issuance of IMNT Common Stock......................................................................32 ----------------------------- 3.6 Books and Records; Organizational Documents........................................................34 ------------------------------------------- 3.7 Legal Proceedings..................................................................................34 ----------------- 3.8 Compliance with Laws and Orders....................................................................35 ------------------------------- 3.9 Banks and Brokerage Accounts.......................................................................35 ---------------------------- 3.10 Other Negotiations; Brokers; Third Party Expenses..................................................35 ------------------------------------------------- 3.11 Foreign Corrupt Practices Act......................................................................36 ----------------------------- 3.12 Approvals..........................................................................................36 --------- 3.13 Information Statement..............................................................................37 --------------------- 3.14 Disclosure.........................................................................................37 ---------- 3.16 Investment Advisors................................................................................37 ------------------- 3.17 Tax-Free Reorganization............................................................................37 ----------------------- Article 4 CONDUCT BEFORE THE EFFECTIVE TIME......................................................................38 4.1 Conduct of Business of USSC........................................................................38 --------------------------- 4.2 No Solicitation....................................................................................38 --------------- Article 5 ADDITIONAL AGREEMENTS..................................................................................39 5.1 Information Statement..............................................................................39 --------------------- 5.5 Stockholder Approval...............................................................................39 -------------------- 5.6 Access to Information..............................................................................40 --------------------- 5.7 Confidentiality....................................................................................40 --------------- 5.8 Expenses...........................................................................................41 -------- 5.9 Public Disclosure..................................................................................41 ----------------- 5.10 Approvals..........................................................................................41 --------- 5.12 Notification of Certain Matters....................................................................41 ------------------------------- 5.15 Additional Documents and Further Assurances; Cooperation...........................................41 -------------------------------------------------------- 5.18 USSC' s Auditors...................................................................................42 ---------------- 5.20 Takeover Statutes..................................................................................42 ----------------- 5.21 Treatment as Reorganization........................................................................42 --------------------------- 5.22 Intellectual Property..............................................................................42 --------------------- -ii- Article 6 CONDITIONS TO THE MERGER...............................................................................42 6.1 Conditions to Obligations of Each Party Under this Agreement.......................................43 ------------------------------------------------------------ 6.2 Additional Conditions to Obligations of USSC.......................................................43 -------------------------------------------- 6.3 Additional Conditions to the Obligations of IMNT...................................................44 ------------------------------------------------ Article 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS......................................45 7.1 Survival of Representations, Warranties, Covenants and Agreements..................................45 ----------------------------------------------------------------- Article 8 TERMINATION, AMENDMENT AND WAIVER......................................................................45 8.1 Termination........................................................................................45 ----------- 8.2 Effect of Termination..............................................................................46 --------------------- 8.3 Amendment..........................................................................................46 --------- 8.4 Extension; Waiver..................................................................................46 ----------------- Article 9 MISCELLANEOUS PROVISIONS...............................................................................47 9.1 Notices............................................................................................47 ------- 9.2 Entire Agreement...................................................................................48 ---------------- 9.3 Amendment..........................................................................................48 --------- 9.4 Further Assurances; Post-Closing Cooperation.......................................................48 -------------------------------------------- 9.5 Waiver.............................................................................................48 ------ 9.6 Remedies...........................................................................................48 -------- 9.7 Third Party Beneficiaries..........................................................................48 ------------------------- 9.8 No Assignment; Binding Effect......................................................................48 ----------------------------- 9.9 Invalid Provisions.................................................................................48 ------------------ 9.10 Governing Law......................................................................................49 ------------- 9.11 Waiver of Trial by Jury............................................................................49 ----------------------- 9.12 Costs and Expenses.................................................................................49 ------------------ 9.13 Construction.......................................................................................49 ------------ 9.14 Counterparts.......................................................................................49 ------------ 9.15 Specific Performance...............................................................................49 -------------------- Article 10 DEFINITIONS...........................................................................................50 10.1 Definitions........................................................................................50 ----------- 10.2 Construction.......................................................................................60 ------------
-iii- EXHIBITS - -------- Exhibit A--Certificate of Merger to be filed with Nev. Sec. of State Exhibit B--Delaware Certificate of Merger Exhibit C--IMNT officers' Certificate re: rep's and warranties Exhibit D--USSC officers' Certificate re: rep's and warranties -iv- AGREEMENT AND PLAN OF MERGER ---------------------------- THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of April __, 2003 by and among Immunotechnology, Inc., a Delaware corporation ("IMNT"), and Ultimate Security Systems Corporation, a Nevada corporation ("USSC"). Capitalized terms used and not otherwise defined herein have the meanings set forth in Article 10. RECITALS -------- A. The Boards of Directors of each of IMNT and USSC have approved this Agreement and deem it advisable and in the best interests of IMNT and USSC, respectively, and their respective stockholders that IMNT acquire USSC by the merger of USSC with and into IMNT (the "Merger") and, in furtherance thereof, have approved the Merger, this Agreement and the transactions contemplated hereby. B. Before the Effective Time and as a condition to consummation of the Merger, all outstanding shares of USSC Preferred Stock will be converted into outstanding shares of USSC Common Stock and all holders of USSC Preferred Stock shall have agreed to accept shares of IMNT common stock in exchange for all accrued but unpaid dividends. C. Pursuant to the Merger, among other things, and subject to the terms and conditions of this Agreement, (i) all of the outstanding shares of USSC Common Stock that are issued and outstanding immediately before the Effective Time of the Merger shall be converted into the right to receive shares of Common Stock, par value $0.001 per share, of IMNT ("IMNT Common Stock"), and (ii) all USSC Options, USSC Warrants and USSC Stock Purchase Rights then outstanding (whether vested or unvested) shall become exercisable for IMNT Common Stock, on the terms and subject to the conditions set forth in this Agreement. D. IMNT and USSC intend that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code and in furtherance thereof intend that this Agreement shall be a "plan of reorganization" within the meaning of Sections 354(a) and 361(a) of the Code. E. USSC and IMNT desire to make certain representations, warranties, covenants and agreements in connection with the Merger. NOW, THEREFORE, AS CONSIDERATION FOR the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration (the receipt and sufficiency of which hereby are acknowledged by the parties), intending to be legally bound hereby, the parties hereby agree as follows: 1 Article 1 THE MERGER 1.1 The Merger. At the Effective Time and on the terms and subject to the conditions of this Agreement and the applicable provisions of the applicable Nevada Delaware Law, USSC shall be merged with and into IMNT, the separate corporate existence of USSC shall cease, and IMNT shall continue as the surviving corporation. IMNT sometimes is referred to herein as the "Surviving Corporation." 1.2 Effective Time. Unless this Agreement is terminated earlier pursuant to Section 8.1 hereof, the closing of the Merger (the "Closing") is expected to occur on the date that the Registration Statement on Form S-4 is declared "effective" by the Securities and Exchange Commission and will occur no later than five (5) Business Days following satisfaction or waiver of the conditions set forth in Article 6, at the offices of MC Law Group, 4100 Newport Place, Suite 860, Newport Beach, California 92660, unless another place or time is agreed to by IMNT and USSC. The date on which the Closing actually occurs is referred to herein as the "Closing Date." On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing an Certificate of Merger (or similar instrument), in substantially the form attached hereto as Exhibit A (the "Nevada Certificate of Merger"), with the Nevada Secretary of State and filing a Certificate of Merger (or similar instrument), in substantially the form attached hereto as Exhibit B (the "Delaware Certificate of Merger"), with the Delaware Secretary of State, in each case in accordance with the relevant provisions of applicable law (the time of acceptance by the Delaware Secretary of State of such filing or such later time as may be agreed to by the parties and set forth in the Delaware Certificate of Merger being referred to herein as the "Effective Time"). 1.3 Effect of the Merger on Constituent Corporations. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware and Nevada Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of IMNT and USSC shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of IMNT and USSC shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. 1.4 Certificate of Incorporation and Bylaws of Surviving Corporation. ---------------------------------------------------------------- (a) At the Effective Time, the Certificate of Incorporation of IMNT, as in effect immediately before the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by law and such certificate of incorporation and the bylaws of the Surviving Corporation. (b) At the Effective Time, the Bylaws of IMNT, as in effect immediately before the Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended as provided by such bylaws, the certificate of incorporation of the Surviving Corporation and applicable law. 1.5 Directors and Officers of Surviving Corporation. Effective immediately upon the Closing, all of the current directors of IMNT will appoint the current directors of USSC as directors of the Surviving Corporation (the "Post-Closing Directors") and, thereafter, will resign as of the Effective Time, each Post-Closing Director to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. Effective immediately upon the Closing, all of the current officers of IMNT will resign and the Post-Closing Directors shall appoint new officers, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. 2 1.6 Maximum Number of Shares of IMNT Common Stock to be Issued; Effect on Outstanding Securities of USSC . The maximum number of shares of IMNT Common Stock to be issued (including IMNT Common Stock to be reserved for issuance upon exercise of USSC Options, USSC Warrants (if any) or USSC Stock Purchase Rights to be assumed by IMNT as provided herein) in exchange for the acquisition by IMNT of all shares of USSC Common Stock that are issued and outstanding immediately before the Effective Time and all vested and unvested USSC Options, USSC Warrants (if any) and USSC Stock Purchase Rights that then are outstanding (other than USSC Warrants that by their terms expire without payment, conversion, adjustment or other consideration at the Effective Time) shall not exceed the Aggregate Share Number. No adjustment shall be made in the number of shares of IMNT Common Stock issued in the Merger as a result of any consideration (in any form whatsoever) received by USSC from the date hereof to the Effective Time as a result of any exercise, conversion or exchange of USSC Options, USSC Warrants or USSC Stock Purchase Rights. On the terms and subject to the conditions of this Agreement, at the Effective Time, because of the Merger and without any action on the part of IMNT, USSC or the holders of shares of USSC Common Stock or USSC Options, USSC Warrants or USSC Stock Purchase Rights, the following shall occur: (a) Conversion of USSC Common Stock. Each share of USSC Common Stock (assuming conversion of all outstanding shares of USSC Preferred Stock) issued and outstanding immediately before the Effective Time (other than Dissenting Shares (as provided in Section 1.10)) shall be cancelled and extinguished, and each share of USSC Common Stock that is issued and outstanding immediately before the Effective Time shall be converted automatically into the right to receive, following the expiration or early termination of any waiting period under the HSR Act that is applicable to the holder of such share at the Effective Time, that number of shares of IMNT Common Stock equal to the Exchange Ratio (subject to Section 1.9). (b) IMNT Common Stock. Each share of IMNT Common Stock that is issued and outstanding immediately before the Effective Time shall remain outstanding as one validly issued, fully-paid and nonassessable share of the same class of common stock of the Surviving Corporation, with identical rights and privileges. From and after the Effective Time, each share certificate of IMNT theretofore evidencing ownership of such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation. (c) USSC Options and USSC Stock Option Plan. All unexpired and unexercised USSC Options, USSC Warrants and USSC Stock Purchase Rights then outstanding, whether vested or unvested, together with the USSC Stock Option Plan, shall be assumed by IMNT in accordance with the following: Each unexpired and unexercised USSC Option, USSC Warrant and USSC Stock Purchase Right then outstanding, whether vested or unvested, shall be, in connection with the Merger, assumed by IMNT, together with the USSC Stock Option Plan, if any. Each USSC Option, USSC Warrant and USSC Stock Purchase Right so assumed by IMNT under this Agreement shall continue to have, and be subject to, the same terms and 3 conditions as were applicable to such USSC Option, USSC Warrant or USSC Stock Purchase Right immediately before the Effective Time (including all repurchase rights or vesting provisions), provided that (A) such USSC Option, USSC Warrant or USSC Stock Purchase Right, as the case may be, shall be exercisable for that number of whole shares of IMNT Common Stock equal to the product of the number of shares of USSC Common Stock that were issuable upon exercise of such USSC Option, USSC Warrant or USSC Stock Purchase Right immediately before the Effective Time (assuming such USSC Option, USSC Warrant or USSC Stock Purchase Right were exercisable in full) multiplied by the Exchange Ratio (rounded down to the nearest whole number of shares of IMNT Common Stock), and (B) the per-share exercise price for the shares of IMNT Common Stock issuable upon exercise of such assumed USSC Option, USSC Warrant or USSC Stock Purchase Right, as the case may be, shall be equal to the quotient determined by dividing the exercise price per share of USSC Common Stock at which such USSC Option, USSC Warrant or USSC Stock Purchase Right was exercisable immediately before the Effective Time by the Exchange Ratio (rounded up to the nearest whole cent). It is the intention of the parties that USSC Options assumed by IMNT shall qualify following the Effective Time as incentive stock options as defined in Section 422 of the Code to the same extent USSC Options qualified as incentive stock options immediately before the Effective Time. The provisions of this Section 1.6(c) shall be applied consistent with the intent described in the preceding sentence. 1.7 Reservation of Shares. IMNT shall reserve sufficient shares of IMNT Common Stock for issuance pursuant to Section 1.6. 1.8 Adjustments to Exchange Ratio. The Exchange Ratio shall be equitably adjusted to accommodate fully the effect of any stock split, reverse split, stock combination, stock dividend (including any dividend or distribution of securities convertible into IMNT Common Stock or USSC Common Stock), reorganization, reclassification, recapitalization or other similar change with respect to IMNT Common Stock or USSC Common Stock the effective date of which occurs after the date of this Agreement and before the Effective Time. 1.9 Fractional Shares. No fraction of a share of IMNT Common Stock will be issued in the Merger, but in lieu thereof each holder of shares of USSC Common Stock who otherwise would be entitled to a fraction of a share of IMNT Common Stock (after aggregating all fractional shares of IMNT Common Stock to be received by such holder) shall be entitled to receive from IMNT an amount of cash (rounded to the nearest whole cent) equal to the product of (a) such fraction multiplied by (b) the Closing Price. 1.10 Dissenting Shares. (a) Notwithstanding any provision of this Agreement to the contrary, shares of USSC Common Stock held by a holder who has demanded and perfected appraisal rights for such shares in accordance with the Nevada Code, and who, as of the Effective Time, has not effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be converted into or represent a right to receive IMNT Common Stock pursuant to Section 1.6, but the holder thereof shall be entitled only to such rights as are granted by the Nevada Code. (b) Notwithstanding the provisions of Section 1.10(a), if any holder of shares of USSC Common Stock who demands appraisal of such shares in accordance with the Nevada Code effectively withdraws or loses (through failure to perfect or otherwise) the right to appraisal, then, as of the later of (i) the Effective Time or (ii) the occurrence of such event, such holder's shares shall be converted automatically into and represent only the right to receive IMNT Common Stock as provided in Section 1.6, without interest thereon, upon surrender to the Surviving Corporation of the certificate representing such shares in accordance with Section 1.11. 4 (c) USSC shall give IMNT (i) prompt notice of its receipt of any written demand for appraisal of shares of USSC Common Stock, withdrawals of such demands and any other instrument relating to the Merger served in accordance with the Nevada Code and received by USSC and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal in accordance with the Nevada Code. USSC shall not, except with the prior written consent of IMNT or as may be required in accordance with applicable law, voluntarily make any payment with respect to any demand for appraisal of USSC Common Stock or offer to settle or settle any such demand. 1.11 Exchange Procedures. (a) IMNT Common Stock. On the Closing Date, IMNT shall issue or cause to be issued for exchange in accordance with Section 1.6(a) the aggregate number of shares of IMNT Common Stock issuable as of the Effective Time in exchange for issued and outstanding shares of USSC Common Stock as of the Effective Time (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause to be mailed to each holder of record of a certificate or certificates that immediately before the Effective Time represented issued and outstanding shares of USSC Common Stock (the "Certificates") and that were converted into the right to receive shares of IMNT Common Stock pursuant to Section 1.6, instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of IMNT Common Stock and cash in lieu of fractional shares. Upon surrender of a Certificate for cancellation to the Surviving Corporation or to such other agent or agents as may be appointed by IMNT, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions contained therein, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing the number of whole shares of IMNT Common Stock to which such holder is entitled pursuant to Section 1.6 and cash in lieu of fractional shares to which such holder is entitled pursuant to Section 1.9, and the Certificate so surrendered shall be canceled. As soon as practicable after the Effective Time IMNT shall cause to be distributed to such holder a certificate or certificates (in such denominations as may be requested by such holder) representing that number of shares of IMNT Common Stock to which such holder shall be entitled in accordance with the Exchange Ratio, which certificate or certificates shall be registered in the name of such holder. (c) Distributions With Respect to Unexchanged Shares of USSC Common Stock. No dividends or other distributions with respect to IMNT Common Stock declared or made after the Effective Time and with a record date after the Effective Time will be paid to the holder of any unsurrendered Certificate with respect to the shares of IMNT Common Stock represented thereby until the holder of record of such Certificate surrenders such Certificate. Subject to applicable law, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of IMNT Common Stock issued in exchange therefor, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore payable (but for the provisions of this Section 1.11(c)) with respect to such whole shares of IMNT Common Stock. 5 (d) Transfers of Ownership. If any certificate for shares of IMNT Common Stock is to be issued pursuant to the Merger in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that (i) the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange shall have paid to IMNT or any agent designated by it all transfer and other taxes required by reason of the issuance of a certificate for shares of IMNT Common Stock in any name other than that of the registered holder of the Certificate surrendered, or it shall have been established to the satisfaction of IMNT or any agent designated by it that such taxes have been paid or are not payable, and (ii) the Person surrendering such Certificate shall provide the Surviving Corporation with an opinion of counsel, acceptable to the Surviving Corporation, that such transfer does not violate state or federal securities laws. (e) No Liability. Notwithstanding anything to the contrary in this Section 1.11, neither USSC, the Surviving Corporation, nor IMNT shall be liable to a holder of shares of USSC Common Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. 1.12 No Further Ownership Rights in USSC Common Stock. All shares of IMNT Common Stock issued upon the surrender for exchange of shares of USSC Common Stock in accordance with the terms of this Agreement (including any cash in lieu of fractional shares) shall be deemed to have been issued in full and complete satisfaction of all rights and privileges pertaining to such shares of USSC Common Stock, and there shall be no additional registration of transfers on the records of USSC of shares of USSC Common Stock that were issued and outstanding immediately before the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, such Certificates shall be canceled and exchanged as provided in this Article 1. 1.13 Lost, Stolen or Destroyed Certificates. In the event that Certificates have been lost, stolen or destroyed, the Surviving Corporation shall issue or cause to be issued Certificates representing such shares of IMNT Common Stock and cash in lieu of fractional shares in exchange for such lost, stolen or destroyed Certificates, upon the execution and delivery of an affidavit of that fact by the holder thereof; provided, however, that IMNT may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to provide an indemnity against any claim that may be made against IMNT with respect to the Certificates alleged to have been lost, stolen or destroyed. 1.14 Tax Consequences. It is intended by the parties that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code. The parties hereto hereby adopt this Agreement as the "plan of reorganization" within the meaning of Sections 354(a) and 361(a) of the Code and as described in Sections 1.368-2(g) and 1.368-3(a) of the Income Tax Regulations. 6 1.15 Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of USSC, or to effect the assignment to the Surviving Corporation of any and all USSC Intellectual Property created by a founder, employee or consultant of USSC, or to complete and prosecute all domestic and foreign patent filings related to such USSC Intellectual Property, the officers and directors of the Surviving Corporation are fully authorized to take, and shall take, all such lawful and necessary action. Article 2 REPRESENTATIONS AND WARRANTIES OF USSC USSC hereby represents and warrants to IMNT, subject to such exceptions as are specifically disclosed with respect to specific numbered and lettered sections and subsections of this Article 2 in the disclosure schedule and schedule of exceptions (the "USSC Disclosure Schedule") delivered herewith and dated as of the date hereof, and numbered with corresponding numbered and lettered sections and subsections, as follows: 2.1 Organization and Qualification. USSC is a corporation duly organized, validly existing and in good standing pursuant to the Laws of the state of its incorporation and has full and complete corporate power and authority to conduct its business as now conducted and as currently proposed to be conducted and to own, use, license and lease its Assets and Properties. USSC is duly qualified, licensed or admitted to do business and is in good standing as a foreign corporation in each jurisdiction in which the ownership, use, licensing or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so duly qualified, licensed or admitted and in good standing that could not reasonably be expected to have a material adverse effect on the Business or Condition of USSC. Section 2.1 of the USSC Disclosure Schedule sets forth each jurisdiction where USSC is so qualified, licensed or admitted to do business and separately lists each other jurisdiction in which USSC owns, uses, licenses or leases its Assets and Properties, or conducts business or has employees or engages independent contractors. 2.2 Authority Relative to this Agreement. Subject only to the requisite approval of the Merger and this Agreement and the transactions contemplated by this Agreement by the stockholders of USSC, USSC has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. USSC's board of directors has approved this Agreement and declared its advisability. The execution and delivery by USSC of this Agreement and the consummation by USSC of the transactions contemplated hereby, and the performance by USSC of its obligations hereunder, have been duly and validly authorized by all necessary action by the Board of Directors of USSC and no other action on the part of the board of directors of USSC is required to authorize the execution, delivery and performance of this Agreement and the consummation by USSC of the transactions contemplated hereby. This Agreement has been or will be, as applicable, duly and validly executed and delivered by USSC and, assuming the due authorization, execution and delivery hereof by IMNT will constitute a legal, valid and binding obligation of USSC, enforceable against USSC in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to the enforcement of creditors' rights generally and by general principles of equity. 7 2.3 Capital Stock. ------------- (a) The authorized capital stock of USSC consists only of the following: (i) 50,000,000 shares of Common Stock, $.001 par value per share (the "USSC Common Stock"), of which 12,292,558 shares of Common Stock are issued and outstanding as of the date hereof; (ii) 10,000,000 shares of Series A Convertible Preferred Stock, $.001 par value per share, of which 7,601,854 shares are issued and outstanding as of the date hereof; and (iii) 4,000,000 shares of Series B Convertible Preferred Stock, $.001 par value per share, of which 3,418,329 shares are issued and outstanding as of the date hereof. The Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock shall collectively be referred to herein as the "USSC Preferred Stock". All of the issued and outstanding shares of USSC Common Stock and USSC Preferred Stock are validly issued, fully-paid and nonassessable and have been issued in compliance with all applicable federal, state and foreign securities Laws. Except as set forth in Section 2.3(a) of the USSC Disclosure Schedule, no shares of USSC Common Stock or USSC Preferred Stock are held in treasury or are authorized or reserved for issuance. (b) Section 2.3(b) of the USSC Disclosure Schedule lists the name, address and state of residence of each holder of USSC Common Stock (as provided by such holder to USSC) and the number of shares of USSC Common Stock held by such holder. Except as disclosed in Section 2.3(b) of the USSC Disclosure Schedule, there are no other shares of USSC Common Stock issued and outstanding. (c) With respect to any USSC Common Stock that has been issued and currently is issued and outstanding subject to a repurchase option on the part of USSC, Section 2.3(c) of the USSC Disclosure Schedule sets forth the holder thereof, the number and type of securities subject thereto and the vesting schedule thereof (including a specific description of the circumstances pursuant to which such vesting schedule for each such security can or will be accelerated). (d) With respect to each USSC Option, USSC Warrant, USSC Stock Purchase Right, Restricted Stock Purchase Agreement or share of USSC Restricted Stock or agreements, arrangements or understandings to which USSC is a party (written or oral) to issue Options or other equity securities with respect to USSC, Section 2.3(d) of the USSC Disclosure Schedule sets forth the holder thereof, the number and type of securities issuable thereunder and, if applicable, the exercise price therefor, the exercise period and vesting schedule thereof (including a specific description of the circumstances under which such vesting schedule for each such security can or will be accelerated). Except as set forth in Section 2.3(d) of the USSC Disclosure Schedule, there are no outstanding USSC Options, USSC Warrants, USSC Stock Purchase Rights, Restricted Stock Purchase Agreements or shares of USSC Restricted Stock or agreements, arrangements or understandings to which USSC is a party (written or oral) to issue Options with respect to USSC. All of the USSC Options, USSC Warrants and USSC Stock Purchase Rights were issued in compliance with all applicable federal, state and foreign securities Laws. 8 (e) Except as set forth in Section 2.3(e) of the USSC Disclosure Schedule, there are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of USSC Common Stock created by statute, the Articles of Incorporation or Bylaws of USSC, or any agreement or other arrangement to which USSC is a party (written or oral) or to which USSC is obligated, and there are no agreements, arrangements or understandings to which USSC is a party (written or oral), pursuant to which USSC has the right to elect to satisfy any Liability by issuing USSC Common Stock or Equity Equivalents. (f) USSC is not a party or subject to any agreement or understanding, and there is no agreement, arrangement or understanding between or among Persons that affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to USSC Common Stock, including any voting trust agreement or proxy. (g) Except as set forth in Section 2.3(g) of the USSC Disclosure Schedule, no debt securities of USSC are issued and outstanding. 2.4 No Subsidiaries. USSC has no (and before the Closing will have no) Subsidiaries and does not (and before the Closing will not) otherwise hold any equity, membership, partnership, joint venture or other ownership interest in any Person. 2.5 Directors and Officers. The names of each director and officer of USSC on the date hereof, and his or her position with USSC, are listed in Section 2.5 of the USSC Disclosure Schedule. 2.6 No Conflicts. The execution and delivery by USSC of this Agreement does not, and the performance by USSC of its obligations pursuant to this Agreement and the consummation of the transactions contemplated hereby do not, and will not: (a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Articles of Incorporation or bylaws of USSC ; (b) subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 2.6(c) of the USSC Disclosure Schedule, if any, conflict with or result in a violation or breach of any Law or Order applicable to USSC or any of its Assets and Properties; or (c) except as disclosed in Section 2.6(c) of the USSC Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) pursuant to, (iii) require USSC to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or pursuant to the terms of (except for (A) the filing of the Nevada and Delaware Certificate of Merger, together with the required officers' certificates; (B) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required pursuant to applicable state or federal securities laws; and (C) such filings as may be required pursuant to the HSR Act), (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional right or entitlement to increased, additional, accelerated or guaranteed payments or performance pursuant to, (vi) result in the creation or imposition of (or the obligation to create or impose) any Lien upon USSC or any of its Assets and Properties pursuant to or (vii) result in the loss of any material benefit pursuant to, any of the terms, conditions or provisions of any Contract or License to which USSC is a party or by which any of USSC' s Assets and Properties is obligated. 9 2.7 Books and Records; Organizational Documents. The minute books and stock record books and other similar records of USSC have been provided or made available to IMNT or its counsel before the execution of this Agreement, are complete and correct in all respects and have been maintained in accordance with reasonable and consistent business practices. Such minute books contain a true and complete record of all actions taken at all meetings and by all written consents in lieu of meetings of the directors, stockholders and committees of the Board of Directors of USSC from the date of USSC's incorporation through the date hereof. USSC has before the execution of this Agreement delivered to IMNT true and complete copies of its Articles of Incorporation and Bylaws, both as amended through the date hereof. USSC is not in violation of any provision of its Articles of Incorporation or Bylaws. 2.8 USSC Financial Statements. (a) Section 2.8(a) of the USSC Disclosure Schedule sets forth the USSC Financials. The USSC Financials delivered to IMNT are correct and complete in all material respects and have been prepared in accordance with GAAP applied on a basis consistent throughout the periods indicated and consistent with each other (except as may be indicated in the notes thereto as delivered to IMNT before the date hereof, and, in the case of the Interim Financial Statements, subject to normal year-end adjustments, which adjustments will not be material in amount or significance). The USSC Financials present fairly and accurately the financial condition and operating results of USSC as of the dates and during the periods indicated therein, subject, in the case of the Interim Financial Statements, to normal year-end adjustments, which adjustments will not be material in amount or significance and except that the Interim Financial Statements may not contain footnotes. (b) Except as set forth in Section 2.8(b) of the USSC Disclosure Schedule, since January 1, 2003, there has been no change in any accounting policy, principle, method or practice, including any change with respect to reserves (whether for bad debts, contingent liabilities or otherwise), of USSC. 2.9 Absence of Changes. Since the Audited Financial Statement Date, except as set forth in Section 2.9 of the USSC Disclosure Schedule, there has not been any material adverse effect on the Business or Condition of USSC or any occurrence or event, which, individually or in the aggregate, could reasonably be expected to have any material adverse effect on the Business or Condition of USSC. Without limiting the generality of the foregoing, except as expressly contemplated by this Agreement and except as disclosed in Section 2.9 of the USSC Disclosure Schedule, since the Audited Financial Statement Date: (a) USSC has not entered into any Contract, commitment or transaction or incurred any Liability outside of the ordinary course of business consistent with past practice; 10 (b) USSC has not entered into any Contract in connection with any transaction involving a Business Combination; (c) there has not been any material amendment or other material modification (or agreement to do so) or violation of the terms of any of the Contracts set forth or described in Section 2.18(a) of the USSC Disclosure Schedule, except as described in Section 2.9(c) of the USSC Disclosure Schedule; (d) USSC has not entered into any transaction with any officer, director, stockholder, Affiliate or Associate of USSC, other than (i) pursuant to any Contract in effect on the Audited Financial Statement Date and disclosed to IMNT pursuant to (and identified in) Section 2.9(d), Section 2.18(a) or Section 2.20 of the USSC Disclosure Schedule or (ii) pursuant to any contract of employment and listed pursuant to Section 2.18(a) of the USSC Disclosure Schedule; (e) no Action or Proceeding has been commenced or, to the knowledge of USSC, threatened by or against USSC ; (f) USSC has not made or agreed to make any disposition or sale of, waiver of rights to, license or lease of, or incurrence of any Lien in an amount exceeding $10,000.00 individually or $25,000.00 in the aggregate, on any of the Assets and Properties of USSC, other than dispositions of inventory, or nonexclusive licenses of products to Persons to whom USSC had granted licenses of its products at the Audited Financial Statement Date, in the ordinary course of business of USSC consistent with past practice; (g) USSC has not made or agreed to make any write-off or write-down, or any determination to write off or write-down, or revalue, any of the Assets and Properties of USSC, or change any reserve or liability associated therewith, individually or in the aggregate in an amount exceeding $10,000.00. (h) USSC has not made or agreed to make payment, discharge or satisfaction, in an amount in excess of $10,000.00, in any one case, or $25,000.00 in the aggregate, of any claim, Liability or obligation, other than the payment, discharge or satisfaction in USSC's ordinary course of business of Liabilities presented or reserved against in the USSC Financials; (i) USSC has not failed to pay or otherwise satisfy any Liability currently due and payable of USSC, except such Liabilities that are being contested in good faith by appropriate means or procedures and that, individually or in the aggregate, are immaterial in amount; (j) USSC has not incurred any Indebtedness or guaranteed any Indebtedness in an aggregate amount exceeding $25,000.00 or issued or sold debt securities of USSC or guarantied debt securities of others; (k) to the knowledge of USSC after consultation with USSC's independent accountants, USSC has not taken or approved any action, including the acceleration of vesting of any USSC Option, USSC Warrant or other right to acquire shares of USSC Common Stock, which could reasonably be expected to jeopardize the status of the Merger as a tax-free reorganization; 11 (l) USSC has not made any change in accounting policies, principles, methods, practices or procedures (including for bad debts, contingent liabilities or otherwise, respecting capitalization or expense of research and development expenditures, depreciation or amortization rates or timing of recognition of income and expense); (m) other than in the ordinary course of business, USSC has not made any representation or proposal to, or engaged in substantive discussions with, any of the holders (or their representatives) of any Indebtedness, or to or with any Person that has issued a letter of credit that benefits USSC ; (n) USSC has not failed to renew any material insurance policy; no material insurance policy of USSC has been cancelled or materially amended; and USSC has given all notices and presented all claims (if any) pursuant to all such policies in a timely fashion; (o) there has been no material amendment or non-renewal of any of USSC's Approvals, and USSC has used commercially reasonable efforts to maintain such Approvals and has observed in all material respects all Laws and Orders applicable to the conduct of USSC's business or USSC's Assets and Properties; (p) USSC has taken all action required to procure, maintain, renew, extend or enforce any USSC Intellectual Property, including submission of required documents or fees during the prosecution of patent, trademark or other applications for Registered Intellectual Property rights; (q) there has been no physical damage, destruction or other casualty loss (whether or not insured) affecting any of the real or personal property or equipment of USSC individually or in the aggregate in an amount exceeding $25,000.00; and (r) USSC has not entered into or approved any contract, arrangement or understanding or acquiesced in respect of any arrangement or understanding to do, engage in or cause or having the effect of any of the foregoing, including with respect to any Business Combination not otherwise restricted by the foregoing paragraphs. 2.10 No Undisclosed Liabilities. Except as presented or reserved against in the USSC Financials (including the notes thereto) or as disclosed in Section 2.10 of the USSC Disclosure Schedule, there are no Liabilities of, relating to or affecting USSC or any of USSC's Assets and Properties, other than Liabilities incurred in the ordinary course of business consistent with past practice since the Audited Financial Statement Date and in accordance with the provisions of this Agreement, which, individually and in the aggregate, are not material to the Business or Condition of USSC and are not for tort or for breach of contract. 2.11 Taxes. Except as set forth in Section 2.11 of the USSC Disclosure Schedule: 12 (a) All Tax Returns required to have been filed by or with respect to USSC or any affiliated, consolidated, combined, unitary or similar group of which USSC is or was a member (a "RELEVANT GROUP") have been duly and timely filed (including all extensions (if any)), and each such Tax Return correctly and completely specifies Tax liability and all other information required to be reported thereon. All such Tax Returns are true, complete and correct in all material respects. All Taxes due and payable by USSC or any member of a Relevant Group, whether or not shown on any Tax Return, or claimed to be due by any Tax Authority, for periods (or portions of periods) contemplated by the USSC Financials have been paid or accrued on the balance sheet included in the USSC Financials. (b) USSC has incurred no material liability for Taxes in the period after the Audited Financial Statement Date. The unpaid Taxes of USSC (i) did not, as of the most recent fiscal year end, exceed by any material amount the reserve for Liability for Income Tax (other than the reserve for deferred taxes established to accommodate timing differences between book and tax income) or Other Tax set forth on the face of the most recent balance sheet included in the USSC Financials and (ii) will not exceed by any material amount such reserve as adjusted for operations and transactions in the ordinary course of business through the Closing Date. (c) USSC is not a party to any agreement extending the time within which to file any Tax Return. No claim ever has been made by a Taxing Authority of any jurisdiction in which USSC or any member of any Relevant Group does not file Tax Returns that USSC or such member is or may be subject to taxation by that jurisdiction. (d) USSC and each member of any Relevant Group has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor or independent contractor. (e) USSC does not have knowledge of any action by any Taxing Authority in connection with assessing additional Taxes against or in respect of USSC or any Relevant Group for any past period. There is no dispute or claim concerning any Tax Liability of USSC either (i) threatened, claimed or raised by any Taxing Authority or (ii) of which USSC otherwise is aware. There are no Liens for Taxes on the Assets and Properties of USSC other than Liens for Taxes not yet due. Section 2.11(e) of the USSC Disclosure Schedule indicates those Tax Returns, if any, of USSC and each member of any Relevant Group that have been audited or examined by Taxing Authorities and indicates those Tax Returns of USSC and each member of any Relevant Group that currently are the subject of audit or examination. USSC has delivered to IMNT complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, USSC and each member of any Relevant Group since the fiscal year ended December 31, 2002. (f) There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any Tax Return that is required to be filed by, or that includes or is treated as including, USSC or with respect to any Tax assessment or deficiency affecting USSC or any Relevant Group. (g) USSC has not received any written ruling related to Taxes or entered into any agreement with a Taxing Authority relating to Taxes. 13 (h) USSC has no liability for the Taxes of any Person other than USSC (i) pursuant to Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign Law), (ii) as a transferee or successor, (iii) by Contract or (iv) otherwise. (i) USSC (i) neither has agreed to make nor is required to make any adjustment pursuant to Section 481 of the Code because of a change in accounting method and (ii) is not a "consenting corporation" within the meaning of Section 341(f)(1) of the Code. (j) USSC is not a party to or obligated by any obligation pursuant to any tax sharing, tax allocation, tax indemnity or similar agreement or arrangement. (k) USSC is not involved in, subject to, or a party to any joint venture, partnership, Contract or other arrangement that is treated as a partnership for federal, state, local or foreign Income Tax purposes. (l) USSC was not included and is not includible in the Tax Return of any Relevant Group with any corporation other than such a return of which USSC is the common parent corporation. (m) USSC has not made any payment, is not obligated to make any payment, nor is a party to any Contract, agreement or arrangement covering any current or former employee or consultant of USSC that pursuant to certain circumstances could require USSC to make or result in any payment that is not deductible as a result of the provisions set forth in Section 280G of the Code or the treasury regulations thereunder or would result in an excise tax to the recipient of any such payment pursuant to Section 4999 of the Code. (n) There currently is no limitation on the utilization of the net operating losses, built-in losses, capital losses, Tax credits or other similar items of USSC pursuant to (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code and (iv) Section 1502 of the Code and Treasury regulations promulgated thereunder. (o) Each material election with respect to income Taxes affecting USSC is set forth in Section 2.11(o) of the USSC Disclosure Schedule. (p) USSC is not nor has it ever been a United States real property holding corporation within the meaning of Section 897(c)(1)(A)(ii) of the Code. (q) None of the assets of USSC constitutes tax-exempt bond financed property or tax-exempt use property, within the meaning of Section 168 of the Code. USSC is not a party to any "safe harbor lease" that is subject to the provisions of Section 168(f)(8) of the Code as in effect before the Tax Reform Act of 1986 or to any "long-term contract" within the meaning of Section 460 of the Code. (r) USSC has substantial authority for the treatment of, or has disclosed (in accordance with Section 6662(d)(2)B)(ii) of the Code) on its federal income Tax Returns, all items specified on USSC's relevant federal income Tax Returns that could result in a substantial understatement of federal income Tax within the meaning of Section 6662(d) of the Code. 14 2.12 Legal Proceedings. (a) Except as set forth in Section 2.12(a) of the USSC Disclosure Schedule: (i) there are no Actions or Proceedings pending or, to the knowledge of USSC, threatened against, relating to or affecting USSC or any of its Assets and Properties; (ii) there are no facts or circumstances known to USSC that could reasonably be expected to result in any Action or Proceeding against, relating to or affecting USSC or any of its Assets and Properties; (iii) USSC has not received notice and otherwise does not have knowledge of any Order outstanding against USSC; and (iv) USSC has not received notice and does not otherwise have knowledge of any defect, dangerous or substandard condition in the products or materials sold, distributed, or currently proposed to be sold or distributed, by USSC that could cause bodily injury, sickness, disease, death or damage to property, or result in loss of use of property, or any claim, litigation, demand for arbitration or notice seeking damages for bodily injury, sickness, disease, death, damage to property or loss of use of property. (b) Before the execution of this Agreement, USSC has delivered to IMNT all responses of counsel for USSC to auditor's requests for information for the preceding three (3) years (together with all updates provided by such counsel (if any)) regarding Actions or Proceedings pending or threatened against, relating to or affecting USSC. Section 2.12(b) of the USSC Disclosure Schedule sets forth all Actions or Proceedings relating to or affecting, or, to the knowledge of USSC, threatened against, USSC or any of its Assets and Properties during the three (3) year period before the date hereof. 2.13 Compliance with Laws and Orders. Neither USSC nor any of its directors, officers, Affiliates, agents or employees has violated in any material respect since the incorporation of USSC, or currently is in default or violation in any material respect pursuant to, any Law or Order applicable to USSC or any of its Assets and Properties, and USSC is not aware of any claim of violation, or of any actual violation, of any of such Laws and Orders by USSC since the incorporation of USSC. 2.14 Employee Benefit Plans and Employee Matters. (a) Section 2.14(a) of the USSC Disclosure Schedule sets forth: (i) the name, current annual compensation amount (including bonus and commissions), title, current salary or wage amount, accrued bonus, accrued sick leave, accrued severance pay and accrued vacation benefits for each present officer, director, employee, independent contractor or consultant of USSC ; (ii) organizational charts of USSC ; 15 (iii) each collective bargaining, union or other employee association agreement to which USSC is party or pursuant to which USSC could have any Liability; (iv) each employee confidentiality and every other agreement protecting proprietary processes, formulae or information; (v) each consulting, independent contractor, employment, managerial, advisory, change in control, retention, incentive, bonus, severance, relocation, expatriation, repatriation, visa and work permit agreement, arrangement and understanding, whether written or oral, between USSC and (i) any current employee, officer or director of, or any independent contractor or advisor to, USSC and (ii) any former employee, officer or director of, or any independent contractor or advisor to, USSC, pursuant to which USSC could have any Liability (collectively, the "Employment Agreements"); (vi) all reports and plans prepared or adopted pursuant to the Equal Employment Opportunity Act of 1972, as amended; and (vii) each Plan. USSC has no plan or commitment to establish any new Plan or Employment Agreement, to modify any Plan or Employment Agreement (except to the extent required by law or to conform any such Plan or Employment Agreement to the requirements of applicable law, in each case as previously disclosed to IMNT in writing, or as required by this Agreement) or to adopt or enter into any Plan or Employment Agreement. (b) For each Plan, except as set forth in Section 2.14(b) of the USSC Disclosure Schedule, each of the following is true: (i) if such Plan is an employee pension benefit plan (as such term is defined in ERISA Section 3(2)) intended to qualify pursuant to the Code, such Plan has received at least one favorable determination, opinion, notification or advisory letter as to its qualification pursuant to the Code (or such a letter has been or will be applied for before expiration of the applicable remedial amendment period) from the IRS, and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification or that would result in material costs to USSC pursuant to the IRS's Employee Plans Compliance Resolution System; (ii) the financial statements of USSC specify all employee liabilities arising pursuant to such Plan in a manner satisfying the applicable requirements of Statement of Financial Accounting Standards Nos. 87, 88, 106, 112, 123 and 132, each as applicable; (iii) none of USSC, the members of the Controlled Group or any other party has, with respect to any Plan, engaged in a non-exempt prohibited transaction, as such term is defined in Code Section 4975 or ERISA Section 406; (iv) no event has occurred and no condition exists that could subject USSC or IMNT to any Tax pursuant to Chapter 43 of the Code or to a fine pursuant to Section 502(c) of ERISA; 16 (v) all contributions, insurance premiums or other payments required as of the Effective Time have been paid; (vi) there are no leased employees (as such term is defined in Section 414(n) of the Code) who must be considered for the requirements of Section 414(n)(3) of the Code; (vii) there are no audits, inquiries or proceedings pending or, to the knowledge of USSC, threatened by the IRS, DOL or other governmental agency with respect to any Plan; and (viii) each Plan (including any plan relating to any former officer, director, employee, independent contractor or consultant of USSC ) can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to USSC or IMNT (other than ordinary administrative expenses). (c) For each Plan and Employment Agreement, each of the following is true and correct: (i) there are no actions, litigation matters or claims (other than routine claims for benefits in the ordinary course) pending, or to the knowledge of USSC, threatened or reasonably anticipated, and to the knowledge of USSC, there are no facts that could result in any such action, litigation matters or claim (other than routine claims for benefits in the ordinary course); (ii) the requirements of ERISA, the Code and all other applicable laws, orders, rules and regulations have been complied with in all material respects; (iii) all forms, documents and other materials have been filed with the SEC or otherwise distributed as required by the Securities Act or the Exchange Act or any regulation or rule promulgated thereunder; (iv) the execution and delivery of this Agreement by USSC and the consummation of the transactions contemplated hereby, either alone or upon the occurrence of any additional or subsequent event, will not constitute an event pursuant to any Plan, Employment Agreement, trust or loan that will or may result in any payment (whether severance pay, a bonus or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee, director or officer of, or consultant or advisor, to USSC, except as expressly required by this Agreement. No payment or benefit that will or may be made by USSC or any member of its Controlled Group with respect to any such employee, director, officer, consultant or advisor will be characterized as a "parachute payment" within the meaning of Section 280G(b)(2) of the Code. (d) Neither USSC nor any other member of the Controlled Group sponsors or maintains (or has ever sponsored or maintained) an "employee pension benefit plan" (within the meaning of Section 3(2) of ERISA) that is subject to Title IV of ERISA or to the minimum funding requirements of Section 412 of the Code or Part 3 of Title I of ERISA. 17 (e) Neither USSC nor any other member of the Controlled Group contributes or is obligated to contribute (or ever has been obligated to contribute) to a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA). (i) No Plan is intended to be an employee stock ownership plan (within the meaning of Section 4975(e)(7) of the Code) or a tax credit employee stock ownership plan (within the meaning of Section 409(a) of the Code). (f) No Plan provides, specifies or represents any liability to provide retiree life insurance, retiree health or other retiree employee welfare benefits to any Person for any reason, except as may be required by COBRA or any other applicable statute, and USSC never has represented, promised or contracted (whether in oral or written form) to any current or former employee, officer or director of, or any advisor or consultant to, USSC, either individually or as a group, or to any other Person that such employee, officer or director of, or any advisor or consultant to, USSC would be provided with retiree health, life or other welfare benefit, except to the extent required by applicable law. 2.15 Real Property. USSC does not own any real property. ------------- 2.16 Tangible Personal Property. USSC is in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights pursuant to Contract to use, all tangible personal property used in the conduct of its business, including all tangible personal property specified on USSC Financials and tangible personal property acquired since the Audited Financial Statement Date, other than property disposed of since such date in the ordinary course of business consistent with past practice. Except as disclosed in Section 2.16 of the USSC Disclosure Schedule, all such tangible personal property (including plant, property and equipment) is free and clear of all Liens and is adequate and suitable in all material respects for the conduct by USSC of its business as currently conducted and is in good working order and condition in all material respects, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws. 2.17 Intellectual Property. (a) Section 2.17(a) of the USSC Disclosure Schedule lists all of the USSC Registered Intellectual Property (including all trademarks and service marks that USSC has used with the intent of creating or benefiting from any common law right relating to such marks) and lists all proceedings or actions pending as of the date hereof before any court or tribunal (including the PTO or equivalent authority anywhere in the world) related to any of the USSC Registered Intellectual Property. (b) USSC has all requisite right, title and interest in or valid and enforceable rights pursuant to Contracts or Licenses to use all USSC Intellectual Property necessary to the conduct of its business as currently conducted. 18 (i) Except as set forth in Section 2.17(b)(i) of the USSC Disclosure Schedule, each item of USSC Intellectual Property, including all USSC Registered Intellectual Property listed in Section 2.17(a) of the USSC Disclosure Schedule, is owned exclusively by USSC (excluding Intellectual Property licensed to USSC under any License disclosed pursuant to Section 2.17(f) of the USSC Disclosure Schedule) and is free and clear of all Liens. Without limiting the generality of the foregoing, USSC owns exclusively all trademarks, service marks and trade names used by USSC in connection with the operation or conduct of the business of USSC as currently conducted or as currently contemplated to be conducted, including the sale of all products or technology or the provision of any service by USSC; provided, however, that USSC may use trademarks, service marks and trade names of third parties that are licensed to USSC, as disclosed in Section 2.17(f) of the USSC Disclosure Schedule, or that are in the public domain. (ii) Without limiting the generality of the foregoing, USSC owns exclusively, and has good title to, each copyrighted work that is a USSC product and each other work of authorship that USSC otherwise purports to own or is used by USSC in connection with the operation or conduct of the business of USSC as currently conducted or provision of services by USSC, other than works disclosed in Section 2.17(f) of the USSC Disclosure Schedule. (c) To the extent that any USSC Intellectual Property has been developed or created by any Person other than USSC, USSC has a written agreement with such Person with respect thereto, and USSC either (i) has obtained ownership of, and is the exclusive owner of, all such Intellectual Property by operation of law or by valid assignment of such rights or (ii) has obtained a License pursuant to or to such Intellectual Property as disclosed in Section 2.17(f) of the USSC Disclosure Schedule. (d) Except pursuant to agreements described in Section 2.17(d) of the USSC Disclosure Schedule, USSC has not transferred ownership of any Intellectual Property that is or was USSC Intellectual Property to any other Person. (e) Except as set forth in Section 2.17(e) of the USSC Disclosure Schedule, the USSC Intellectual Property constitutes all the Intellectual Property used in and/or necessary to the conduct of USSC' s business as it currently is conducted and as is currently contemplated to be conducted, including the design, development, distribution, marketing, manufacture, use, import, license and sale of the products, technology and services of USSC (including products, technology or services currently under development). (f) Section 2.17(f)(i) of the USSC Disclosure Schedule lists all Contracts to which USSC is a party that grant licenses to Intellectual Property, other than Licenses for off-the-shelf, shrink-wrap software or "open source" code that is commercially available on reasonable terms to any Person for a license fee of no more than $5,000.00. Except as set forth in Section 2.17(f)(ii) of the USSC Disclosure Schedule, USSC is not in breach of, nor has it failed to perform pursuant to, any of the foregoing Contracts and Licenses, and, to USSC' s knowledge, no other party to such Contracts and Licenses is in material breach of or has failed materially to perform thereunder. (g) Section 2.17(g)(i) of the USSC Disclosure Schedule lists all Contracts, Licenses and agreements between USSC and any other Person, other than Licenses for off-the-shelf, shrink-wrap software or "open source" code that is commercially available on reasonable terms to any Person for a license fee of no more than $5,000.00, wherein or whereby USSC has agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or Liability or provide a right of rescission with respect to the infringement or misappropriation by USSC or such other Person of the Intellectual Property of any Person other than USSC. Except as set forth in Section 2.17(g)(ii) of the USSC Disclosure Schedule, USSC is not in breach of, nor has it failed to perform pursuant to, any of the foregoing Contracts, Licenses and agreements, and, to USSC's knowledge, no other party to such Contracts, Licenses and agreements is in breach of or has failed to perform thereunder. 19 (h) Except as set forth in Section 2.17(h) of the USSC Disclosure Schedule, the operation of the business of USSC as currently conducted, including USSC's design, development, use, import, manufacture and sale of the products, technology or services (including products, technology or services currently under development) of USSC, does not (A) infringe or misappropriate the Intellectual Property of any Person, (B) violate any term or provision of any License or Contract concerning such Intellectual Property (including any provision required by or imposed pursuant to 35 U.S.C. Sections 200 through 212, inclusive, in any License or Contract to which USSC is a party requiring that products be manufactured substantially in the United States ("Made-in-America Requirements")), (C) violate the rights of any Person (including rights to privacy or publicity), or (D) constitute unfair competition or an unfair trade practice pursuant to any Law; and USSC has not received notice from any Person claiming that such operation or any act, product, technology or service (including products, technology or services currently under development) of USSC infringes or misappropriates the Intellectual Property of any Person or constitutes unfair competition or trade practices pursuant to any Law, including notice of third-party patent or other Intellectual Property rights from a potential licensor of such rights, nor is USSC aware of any basis for any such claim. (i) Each item of USSC Registered Intellectual Property is valid and subsisting, and all necessary registration, maintenance, renewal fees, annuity fees and taxes in connection with such Registered Intellectual Property have been paid, and all necessary documents and certificates in connection with such USSC Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions where USSC has filed documents for such purpose, as the case may be, for the purposes of maintaining such Registered Intellectual Property. Section 2.17(i)(i) of the USSC Disclosure Schedule lists all actions that must be taken by USSC within 180 days from the date hereof, including the payment of any registration, maintenance or renewal fee, annuity fee and tax or the filing of any document, application or certificate for the purposes of maintaining, perfecting or preserving or renewing any USSC Registered Intellectual Property. In each event in which USSC has acquired ownership of any Intellectual Property right from any Person, USSC has obtained a valid and enforceable assignment sufficient to transfer irrevocably all rights in such Intellectual Property (including the right to seek past and future damages with respect to such Intellectual Property) to USSC and, to the maximum extent provided for by and required to protect USSC' s ownership rights in and to such Intellectual Property in accordance with applicable Laws, USSC has recorded each such assignment of Registered Intellectual Property with the relevant Governmental or Regulatory Authority, including the PTO, the U.S. Copyright Office or their respective equivalents in any foreign jurisdiction where USSC has filed documents for such purpose, as the case may be. To USSC' s knowledge, there are no facts or circumstances that would render any USSC Registered Intellectual Property invalid or unenforceable other than as set forth in Section 2.17(i)(ii) of the USSC Disclosure Schedule. Without limiting the foregoing, to USSC' s knowledge, no information, materials, facts or circumstances exist, including any information or fact that would constitute prior art, that would render any of the USSC Registered Intellectual Property invalid or unenforceable, or would affect adversely any pending application for any USSC Registered Intellectual Property. USSC has not misrepresented, or failed to disclose, and is not aware of any misrepresentation or failure to disclose, any fact or circumstance in any application for any USSC Registered Intellectual Property that would constitute fraud or a material misrepresentation with respect to such application or that otherwise would affect the validity or enforceability of any USSC Registered Intellectual Property. 20 (j) Except as set forth in Section 2.17(j) of the USSC Disclosure Schedule, there are no Contracts or Licenses among USSC and any other Person with respect to USSC Intellectual Property pursuant to which there is any dispute (or, to USSC's knowledge, facts that may reasonably result in a dispute) known to USSC, including any dispute or facts that may reasonably result in a dispute regarding the nature of the Intellectual Property Rights granted in such Contract or License, or performance pursuant to such Contract or License, including with respect to any payment to be made or received by USSC thereunder. (k) No Person is infringing or misappropriating any USSC Intellectual Property owned by USSC. (l) Neither this Agreement nor any transaction contemplated by this Agreement will result in IMNT's or the Surviving Corporation's granting any right or license with respect to the Intellectual Property of IMNT or the Surviving Corporation to any Person pursuant to any Contract to which USSC is a party or by which any of USSC's Assets and Properties is obligated. Neither this Agreement nor any transaction contemplated by this Agreement will result in the loss of any ownership or License right of USSC, before the Closing Date, or the Surviving Corporation, from and after the Closing Date, in any of the USSC Intellectual Property or require or obligate IMNT or the Surviving Corporation (i) to grant to any third party any right or license with respect to any USSC Intellectual Property; or (ii) to pay any royalty or other amount. Neither this Agreement nor any transaction contemplated by this Agreement will give to any third party the right to terminate, in whole or in part, any Contract or License to which USSC is a party with respect to any Intellectual Property, except for the Contracts or Licenses set forth in Section 2.17(l) of the USSC Disclosure Schedule. (m) Section 2.17(m) of the USSC Disclosure Schedule sets forth a list of (i) all software that USSC has licensed from any third party that is used by USSC in its products, in providing services or otherwise in its business (other than off-the-shelf, shrink-wrap software that is commercially available on reasonable terms to any Person for a license fee of no more than $5,000.00 and (ii) a list of all "freeware," "shareware" and "open source" code incorporated into any product now or heretofore shipped by USSC. USSC has all rights necessary to the use of such software, "freeware," "shareware" and "open source" code. (n) USSC has taken all necessary and appropriate action to protect and preserve its exclusive ownership of USSC Intellectual Property. USSC has secured valid written assignments from all consultants and employees who contributed to the creation or development of USSC Intellectual Property. In the event that a consultant is or was concurrently employed by USSC and a third party, USSC has taken additional action to ensure that any USSC Intellectual Property developed by such consultant does not belong to such third party or conflict with such third party's employment agreement. 21 2.18 Contracts. (a) Section 2.18(a) of the USSC Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts or other arrangements (true and complete copies of which or, if none, reasonably complete and accurate written descriptions thereof, together with all amendments and supplements thereto and all waivers of any of the terms thereof, have been provided to or made available to IMNT before the execution of this Agreement), to which USSC is a party or by which any of USSC's Assets and Properties is obligated: (i) (A) all Contracts to which USSC is a party (excluding Plans) providing for a commitment of employment or consultant services for a specified or unspecified term, the name, capacity and amount of compensation of each Person party to such a Contract and the expiration date of each such Contract; and (B) all written or unwritten representations, commitments, promises, communications or courses of conduct involving an obligation of USSC to make payments (with or without notice, passage of time or both) to any Person in connection with, or as a consequence of, the transactions contemplated by this Agreement or to any employee whose identity is disclosed in Section Error! Reference source not found.(i) of the USSC Disclosure Schedule, other than with respect to salary or incentive compensation payments in the ordinary course of business consistent with past practice; (ii) all Contracts to which USSC is a party with any Person containing any provision or covenant prohibiting or limiting the ability of USSC to engage in any business activity or compete with any Person or prohibiting or limiting the ability of any Person to compete with USSC or prohibiting or limiting disclosure of confidential or proprietary information; (iii) all partnership, joint venture, stockholders' or other similar Contracts to which USSC is a party with any Person; (iv) all Contracts to which USSC is a party relating to Indebtedness in an amount of $10,000.00 or more of USSC ; (v) any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP; (vi) all Contracts to which USSC is a party entered into outside the ordinary course of business (A) with independent contractors, distributors, dealers, manufacturers' representatives, sales agencies or franchisees; (B) with aggregators, manufacturers and equipment vendors; and (C) with respect to the sale of services, products or both, to customers; 22 (vii) all guaranties of any Indebtedness made by USSC or other obligations of USSC to any Person, including, without limitation, any agreement of guarantie, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the obligations, Liabilities or Indebtedness of any other Person; (viii) all Contracts to which USSC is a party relating to (A) the future disposition or acquisition of any of USSC's Assets and Properties with an aggregate value of $10,000.00 or more and (B) any Business Combination; (ix) all Contracts between or among USSC, on the one hand, and any current or former officer, director, stockholder, Affiliate or Associate of USSC or any Associate of any such officer, director, stockholder or Affiliate, on the other hand, other than Contracts disclosed pursuant to Section 2.20(a)(i); (x) all collective bargaining or similar labor contracts to which USSC is a party; (xi) all Contracts to which USSC is a party that (A) limit or contain restrictions on the ability of USSC to declare or pay dividends on, to make any other distribution in respect of, or to issue or purchase, redeem or otherwise acquire, its capital stock, to incur Indebtedness, to incur or permit to exist any Lien, to purchase or sell any of the Assets and Properties, to change the lines of business in which it participates or engages; (B) require USSC to maintain specified financial ratios or amounts of net worth or other indicia of financial condition; or (C) require USSC to maintain insurance in certain amounts or with certain coverages; (xii) any Contract to which USSC is a party that expires or may be renewed at the option of any Person other than USSC, so as to expire more than one year after the date of this Agreement; (xiii) any Contract to which USSC is a party that is not terminable by USSC upon 30 days (or less) notice by USSC without penalty or obligation to make payments because of such termination and that (i) requires payments by USSC in excess of $10,000.00 (either alone or pursuant to a series of related contracts) or (ii) requires USSC (or the Surviving Corporation) to provide services to any Person after the Closing; (xiv) all powers of attorney and comparable delegations of authority; and (xv) all other Contracts not otherwise required to be disclosed above in Section 2.18(a) of the USSC Disclosure Schedule that are material to the Business or Condition of USSC. (b) Each Contract required to be disclosed in Section 2.18(a) of the USSC Disclosure Schedule is in full force and effect and constitutes a legal, valid and obligating agreement, enforceable in accordance with its terms, and, to the knowledge of USSC, each other party thereto; and, except as disclosed in Section 2.18(b) of the USSC Disclosure Schedule, to the knowledge of USSC, no other party to such Contract is, nor has received notice that it is, in violation or breach of or default pursuant to any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default pursuant to any such Contract). 23 (c) Except as disclosed in Section 2.18(c) of the USSC Disclosure Schedule, USSC is not a party to or obligated by any Contract that has been or could reasonably be expected to be, individually or in the aggregate with any other similar Contract, materially adverse to the Business or Condition of USSC as currently conducted or as currently proposed to be conducted or that has been or could reasonably be expected to result, individually or in the aggregate with any of such other Contracts, in Losses to USSC or be materially adverse to the Business or Condition of USSC as currently conducted or as currently proposed to be conducted. (d) Except as disclosed in Section 2.18(d) of the USSC Disclosure Schedule, USSC is not a party to or obligated by any Contract that (i) automatically terminates or allows termination by the other party thereto upon consummation of the transactions contemplated by this Agreement or (ii) contains any covenant or other provision that limits USSC's ability to compete with any Person in any line of business or in any area or territory. 2.19 Insurance. (a) Section 2.19(a) of the USSC Disclosure Schedule contains a true and complete list (including the names and addresses of the insurers, the expiration dates thereof, the annual premiums and payment terms thereof, the periods of time for which the applicable insurance is provided and a brief description of the interests insured thereby) of all liability, property, workers' compensation, directors' and officers' liability and other insurance policies currently in effect that insure any of the business, operations or employees of USSC or affect or relate to the ownership, use or operation of any of the Assets and Properties of USSC and that (i) have been issued to USSC or (ii) to the knowledge of USSC, have been issued to any Person (other than USSC ) for the benefit of USSC. The insurance provided by the policies set forth in Section 2.19(a) of the USSC Disclosure Schedule will not terminate or lapse by reason of any of the transactions contemplated by this Agreement. Each policy listed in Section 2.19(a) of the USSC Disclosure Schedule is valid and binding and in full force and effect, all premiums due thereunder have been paid when due, and neither USSC nor the Person to whom such policy has been issued has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and USSC has no knowledge of any reason or state of facts that could reasonably be expected to result in the cancellation of such policies or of any threatened termination of, or material premium increase with respect to, any of such policies. The insurance policies listed in Section 2.19(a) of the USSC Disclosure Schedule, (i) considering the business, location, operations and Assets and Properties of USSC, are in amounts and have coverages that are reasonable and customary for Persons engaged in similar businesses and operations and having similar Assets and Properties and (ii) are in amounts and have coverages as required by any Contract to which USSC is a party or by which any of the Assets and Properties of USSC is obligated. (b) Section 2.19(b) of the USSC Disclosure Schedule contains a list of all claims made pursuant to any insurance policy insuring USSC in the last 2 years. USSC has not received notice that any insurer pursuant to any policy listed (or required to be listed) in Section 2.19(b) of the USSC Disclosure Schedule is denying, disputing or questioning liability with respect to a claim thereunder or defending under a reservation of rights clause. USSC has, in the reasonable judgment of USSC, considering its business, location, operations and Assets and Properties, maintained, at all times, without interruption, appropriate insurance, both in nature and amount of coverages. 24 2.20 Affiliate Transactions. (a) Except as disclosed in Section 2.9(d) or Section 2.20(a) of the USSC Disclosure Schedule, (i) there are no Contracts or Liabilities between USSC, on the one hand, and (A) any current or former officer, director, stockholder or, to USSC' s knowledge, any Affiliate or Associate of USSC or (B) any Person who, to USSC's knowledge, is an Associate of any such officer, director, stockholder or Affiliate, on the other hand; (ii) USSC does not provide or cause to be provided any asset, service or facility to any such current or former officer, director, stockholder, Affiliate or Associate; (iii) neither USSC nor any such current or former officer, director, stockholder, Affiliate or Associate provides or causes to be provided any asset, service or facility to USSC; and (iv) USSC does not beneficially own, directly or indirectly, any Investment Asset of any such current or former officer, director, stockholder, Affiliate or Associate. (b) Except as disclosed in Section 2.20(b) of the USSC Disclosure Schedule, each of the Contracts and Liabilities listed in Section 2.20(a) of the USSC Disclosure Schedule was entered into or incurred, as the case may be, on terms no less favorable to USSC (in the reasonable judgment of USSC ) than if such Contract or Liability was entered into or incurred on an arm's length basis on competitive terms. Any Contract to which USSC is a party and in which any director of USSC has a financial interest in such Contract was approved by a majority of the disinterested members of the Board of Directors of USSC or stockholders of USSC, as the case may be, in accordance with Section 310 of the Nevada Code. 2.21 Employees; Labor Relations. (a) USSC is not a party to any collective bargaining agreement, and there is no unfair labor practice or labor arbitration proceeding pending with respect to USSC, or, to the knowledge of USSC, threatened, and there are no facts or circumstances known to USSC that could reasonably be expected to result in any such complaint or claim. To the knowledge of USSC, there are no organizational efforts currently underway or threatened involving any employee of USSC or any of the employees performing work for USSC but provided by an outside employment agency, if any. There has been no work stoppage, strike or other concerted action by employees of USSC. (b) Since January 1, 2003, there have been no federal or state claims based on sex, sexual or other harassment, age, disability, race or other discrimination or common law claims, including claims of wrongful termination, by any employee of USSC or by any of the employees performing work for USSC but provided by an outside employment agency, and there are no facts or circumstances known to USSC that could reasonably be expected to result in any such complaint or claim. USSC has complied in all material respects with all laws related to the employment of employees, and, except as set forth in Section 2.21(b) of the USSC Disclosure Schedule, since January 1, 2003, USSC has not received any notice of any claim that it has not complied in any material respect with any Law relating to the employment of employees, including any provision thereof relating to wages, hours, collective bargaining, the payment of social security and similar taxes, equal employment opportunity, employment discrimination, the WARN Act, employee safety, or that USSC is liable for any arrearage of wages or any tax or penalty for failure to comply with any of the foregoing. 25 (c) USSC has no written policies or employee handbooks or manuals, except as described in Section 2.21(c) of the USSC Disclosure Schedule. True and correct copies of all of such written policies or employee handbooks or manuals have been provided to IMNT. (d) To the knowledge of USSC, no officer, employee or consultant of USSC is obligated pursuant to any Contract or other agreement or subject to any Order or Law that would interfere with USSC's business as currently conducted or as reasonably contemplated to be conducted. Neither the execution nor the delivery of this Agreement nor the conduct of USSC's business as currently conducted or as reasonably contemplated to be conducted, nor any activity of such officers, employees or consultants of USSC in connection with the conduct of USSC's business as currently conducted or as reasonably contemplated to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, constitute a default pursuant to or cause to occur a condition precedent to any right pursuant to any Contract or other agreement under which any of such officers, employees or consultants currently is obligated. (e) Each current and former employee, officer, independent contractor and consultant of USSC has executed a Proprietary Information and Inventions Agreement. No current or former employee, officer, independent contractor or consultant of USSC has excluded works or inventions with USSC from his or her assignment of inventions pursuant to such employee's, officer's or consultant's Proprietary Information and Inventions Agreement. 2.22 Environmental Matters. Except as set forth in Section 2.22 of the USSC Disclosure Schedule: (a) USSC possesses any and all Environmental Permits necessary to or required for the operation of its business as currently conducted or as reasonably contemplated to be conducted. USSC will obtain, before the Closing, any Environmental Permit that must be obtained as of or immediately after the Closing in order for the Surviving Corporation to conduct the business of USSC as it was conducted before the Closing. (b) USSC is in compliance with (i) all terms, conditions and provisions of its Environmental Permits and (ii) all Environmental Laws. (c) Neither USSC nor any predecessor of USSC nor any entity previously owned by USSC has received any notice of alleged, actual or potential responsibility for, or any inquiry regarding, (i) any Release or threatened or suspected Release of any Hazardous Material or (ii) any violation of Environmental Law, and there is no outstanding civil, criminal or administrative investigation, action, litigation, hearing or proceeding pending or threatened against USSC pursuant to any Environmental Law. 26 (d) Neither USSC nor any predecessor of USSC nor any entity previously owned by USSC has any obligation or liability with respect to any Hazardous Material, including any Release or threatened or suspected Release of any Hazardous Material and any violation of Environmental Law, and there have been no events, facts or circumstances that could form the basis of any such obligation or liability. (e) No Releases of Hazardous Materials have occurred at, from, in, to, on or under any Site, and no Hazardous Material is present in, on, about or migrating to or from any Site. (f) Neither USSC, nor any predecessor of USSC, nor any entity previously owned by USSC, has transported or arranged for the treatment, storage, handling, disposal or transportation of any Hazardous Material at, from or to any site or other location. (g) No Site is a current or proposed Environmental Clean-up Site. (h) There are no Liens pursuant to any Environmental Law on any Site. (i) There is no (i) underground storage tank, active or abandoned, (ii) polychlorinated biphenyl containing equipment, (iii) asbestos-containing material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any Site. Each underground storage tank satisfies all current applicable upgrade requirements. (j) There have been no environmental investigations, studies, audits, tests, reviews or other analyses conducted with respect to any Site that have not been delivered to IMNT before execution of this Agreement. (k) USSC is not a party, whether as a direct signatory or as successor, assign, third-party beneficiary, guarantor or otherwise, to, and is not otherwise obligated by, any lease or other contract pursuant to which USSC is obligated or may be obligated by any representation, warranty, covenant, restriction, indemnification or other undertaking regarding Hazardous Materials or pursuant to which any other Person is or has been released regarding Hazardous Materials. (l) USSC and any predecessor of USSC and any entity previously owned by USSC have provided all notifications and warnings, made all reports and kept and maintained all records required pursuant to Environmental Laws. 2.23 Substantial Customers and Suppliers. Section 2.23(a) of the USSC Disclosure Schedule lists the 10 largest customers of USSC, collectively, on the basis of revenues collected or accrued for the most recent complete fiscal year. Section 2.23(b) of the USSC Disclosure Schedule lists the 5 largest suppliers of USSC on the basis of cost of goods or services purchased for the most recent fiscal year. Except as disclosed in Section 2.23(c) of the USSC Disclosure Schedule, no such customer or supplier has ceased or materially reduced its purchases from or sales or provision of services to USSC since January 1, 2003, or, to the knowledge of USSC, has threatened to cease or materially reduce such purchases or sales or provision of services after the date hereof. Except as disclosed in Section 2.23(d) of the USSC Disclosure Schedule, to the knowledge of USSC, no such customer or supplier is threatened with bankruptcy or insolvency. 27 2.24 Accounts Receivable. Except as set forth in Section 2.24 of the USSC Disclosure Schedule, the accounts and notes receivable of USSC specified on the USSC Financials and all accounts and notes receivable accruing after the Financial Statement Date (a) have resulted from bona fide sales transactions in the ordinary course of business, consistent with past practice, and are payable on ordinary trade terms; (b) are legal, valid and binding obligations of the respective debtors, enforceable in accordance with their respective terms; (c) are not subject to any valid set-off or counterclaim; and (d) do not represent obligations for goods sold on consignment, on approval or on a sale-or-return basis or subject to any other repurchase or return arrangement. 2.25 Inventory. All inventory of USSC specified on the balance sheet included in the USSC Financials consisted, and all such inventory acquired since the Audited Financial Statement Date consists, of a quality and quantity usable and salable in the ordinary course of business as currently conducted or as reasonably contemplated to be conducted. Except as disclosed in the notes to the USSC Financials or in Section 2.25 of the USSC Disclosure Schedule, all items included in the inventory of USSC are the property of USSC, free and clear of any Lien, have not been pledged as collateral, are not held by USSC on consignment from others and conform in all material respects to all standards applicable to such inventory or its use or sale imposed by Governmental or Regulatory Authorities. 2.26 Other Negotiations; Brokers; Third Party Expenses. (a) Neither USSC nor any of its officers, directors, employees, agents or, to the knowledge of USSC, any of its stockholders or Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of USSC or any such Affiliate) (i) has entered into any Contract that conflicts with any of the transactions contemplated by this Agreement or (ii) has entered into any Contract or had any discussion with any Person regarding any transaction involving USSC that could result in IMNT, USSC or any general partner, limited partner, manager, officer, director, employee, agent or Affiliate of any of them being subject to any claim for liability to such Person as a result of entering into this Agreement or consummating the transactions contemplated by this Agreement. (b) No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or similar fee or commission in connection with this Agreement and the transactions contemplated by this Agreement based on arrangements made by or on behalf of USSC. (c) Section 2.26 of the USSC Disclosure Schedule sets forth the principal terms and conditions of any Contract with respect to, and a reasonable estimate of, all Third Party Expenses expected to be incurred by USSC in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby ("Estimated Third Party Expenses"). 28 2.27 Banks and Brokerage Accounts. Section 2.27 of the USSC Disclosure Schedule sets forth (a) a true and complete list of the names and locations of all banks, trust companies, securities brokers and other financial institutions at which USSC has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship; (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of the respective officers, employees, agents or other similar representatives of USSC having signatory power with respect thereto; and (c) a list of each Investment Asset, the name of the record and beneficial owner thereof, the location of the certificates therefor, if any, the maturity date, if any, and all stock or bond powers or other authority for transfer granted with respect thereto if any. 2.28 Warranty Obligations. (a) Section 2.28(a) of the USSC Disclosure Schedule sets forth (i) a list of all forms of written warranties, guarantees and written warranty policies of USSC in respect of any of USSC' s products and services, which currently are in effect (the "Warranty Obligations"), and the duration of each such Warranty Obligation; (ii) each of the Warranty Obligations that is subject to any dispute or, to the knowledge of USSC, threatened dispute; and (iii) the experience of USSC with respect to warranties, guarantees and warranty policies of or relating to USSC' s products and services. True and correct copies of the Warranty Obligations have been delivered to IMNT before the execution of this Agreement. (b) Except as disclosed in Section 2.28(b) of the USSC Disclosure Schedule, (i) there has not been any material deviation from the Warranty Obligations, and no salesperson, employee or agent of USSC is authorized to undertake obligations to any customer or other Person in excess of such Warranty Obligations, and (ii) the balance sheet included in the Interim Financial Statements specifies adequate reserves for Warranty Obligations. All products manufactured, designed, licensed, leased, rented or sold by USSC (A) are and were free from material defects in construction and design and (B) satisfy any and all Contract or other specifications related thereto to the extent stated in writing in such Contracts or specifications, in each case, in all material respects. 2.29 Foreign Corrupt Practices Act. Neither USSC nor, to the knowledge of USSC, any agent, employee or other Person associated with or acting on behalf of USSC has, directly or indirectly, used corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment. 2.30 Tax-Free Reorganization. To the knowledge of USSC after consultation with USSC' s tax advisors, neither USSC nor any of its directors, officers or stockholders has taken any action that could reasonably be expected to jeopardize the status of the Merger as a "reorganization" within the meaning of Section 368(a) of the Code. 29 2.31 Financial Projections(a) . USSC has made available to IMNT certain financial projections with respect to USSC's business, which projections were prepared for internal use only. USSC makes no representation or warranty regarding the accuracy of such projections or as to whether such projections will be achieved, except that USSC represents and warrants that such projections were prepared in good faith and are based on assumptions believed by USSC to be reasonable as of the date of preparation of such projections and of this Agreement. 2.32 Approvals. (a) Section 2.32(a) of the USSC Disclosure Schedule contains a list of all material Approvals of Governmental or Regulatory Authorities relating to the business conducted by USSC that are required to be given to or obtained by USSC from any and all Governmental or Regulatory Authorities in connection with the consummation of the transactions contemplated by this Agreement (other than the filing of the Delaware and Nevada Certificate of Merger, together with the required officers' certificates, and such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under state or federal securities laws). (b) Section 2.32(b) of the USSC Disclosure Schedule contains a list of all material Approvals that are required to be given to or obtained by USSC from any and all third parties other than Governmental or Regulatory Authorities in connection with the consummation of the transactions contemplated by this Agreement. (c) All material Approvals from Governmental or Regulatory Authorities necessary to conduct the business conducted by USSC as such business is being conducted currently are set forth in Section 2.32(c)(1) of the USSC Disclosure Schedule. Except as set forth in Section 2.32(c)(2) of the USSC Disclosure Schedule, USSC has obtained all material Approvals from Governmental or Regulatory Authorities necessary to conduct the business conducted by USSC in the manner as such business is being conducted currently, and there has been no written notice received by USSC of any material violation or material non-compliance with any of such Approvals. (d) Assuming all the currently issued and outstanding USSC Preferred Stock is converted into USSC Common Stock prior to the Closing, the affirmative vote or consent of the holders of a majority of the shares of USSC Common Stock issued and outstanding as of the applicable record date, voting separately as a class, are the only votes of the holders of any of USSC Capital Stock necessary to approve this Agreement, the Merger and the transactions contemplated by this Agreement. 2.33 Information Statement. The information supplied by USSC for inclusion in the information statement to be sent to the stockholders of USSC in connection with USSC stockholders' consideration of the Merger (the "USSC Stockholder Action") (such information statement as amended or supplemented is referred to herein as the "Information Statement") shall not, on the date on which the Information Statement first is mailed to USSC's stockholders, at the time of the USSC Stockholder Action and at the Effective Time contain any information that, at such time, is false or misleading with respect to any 30 material fact, or omit to specify any material fact necessary in order to make the information specified therein, considering the circumstances pursuant to which that information is furnished, not false or misleading; or omit to specify any material fact necessary to correct any information in any earlier communication with respect to the solicitation of proxies or written consents for the USSC Stockholder Action that has become false or misleading. Notwithstanding the foregoing, USSC makes no representation, warranty or covenant with respect to any information supplied by IMNT that is contained in the Information Statement. 2.34 No Solicitation. Since January 1, 2003, USSC has not taken, nor has USSC permitted any of USSC's officers, directors, employees, stockholders, attorneys, investment advisors, agents, representatives, Affiliates or Associates (collectively, "Representatives") to take (directly or indirectly), any of the actions prohibited from being taken on or after the date of this Agreement by Section 4.2 with any Person other than IMNT and its designees. 2.35 Disclosure. No representation or warranty made by USSC contained in this Agreement, and no information contained in the USSC Disclosure Schedule or in any certificate, list or other writing furnished to IMNT pursuant to any provision of this Agreement (including the USSC Financials and the notes thereto) contains any untrue information or fails to specify any information necessary in order to make the information herein or therein, considering the circumstances pursuant to which such information was furnished, not misleading. USSC has provided IMNT with all of the Contracts and Licenses heretofore requested on behalf of IMNT in writing and all other material information concerning USSC in the possession, custody or control of USSC. Article 3 REPRESENTATIONS AND WARRANTIES OF IMNT IMNT hereby represents and warrants to USSC, subject to such exceptions as are specifically disclosed with respect to specific numbered and lettered sections and subsections of this Article 3 in the disclosure schedule and schedule of exceptions (the "IMNT Disclosure Schedule") delivered herewith and dated as of the date hereof, and numbered with corresponding numbered and lettered sections and subsections. 3.1 Organization. IMNT is a corporation duly organized, validly existing and in good standing pursuant to the Laws of the state of its incorporation and has full and complete corporate power and authority to conduct its business as now conducted and as currently proposed to be conducted and to own, use, license and lease its Assets and Properties. IMNT is duly qualified, licensed or admitted to do business and is in good standing as a foreign corporation in each jurisdiction in which the ownership, use, licensing or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so duly qualified, licensed or admitted and in good standing that could not reasonably be expected to have a material adverse effect on the Business or Condition of IMNT. Section 2.1 of the IMNT Disclosure Schedule sets forth each jurisdiction where IMNT is so qualified, licensed or admitted to do business and separately lists each other jurisdiction in which IMNT owns, uses, licenses or leases its Assets and Properties, or conducts business or has employees or engages independent contractors. 31 3.2 Authority Relative to this Agreement. Subject only to the requisite approval of the merger and this Agreement and the transactions contemplated by this Agreement by the stock- holders of IMNT, IMNT has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by IMNT of this Agreement and the consummation by IMNT of the transactions contemplated hereby have been duly and validly authorized by all necessary action by the board of directors of IMNT, and no other action on the part of the Board of Directors of IMNT is required to authorize the execution, delivery and performance of this Agreement and the consummation by IMNT of the transactions contemplated hereby. This Agreement has been or will be, as applicable, duly and validly executed and delivered by IMNT and, assuming the due authorization, execution and delivery hereof by USSC constitutes or will constitute, as applicable, a legal, valid and binding obligation of IMNT enforceable against IMNT in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to the enforcement of creditors' rights generally and by general principles of equity. 3.3 Issuance of IMNT Common Stock(a) . (a) The authorized capital stock of IMNT consists only of 50,000,000 shares of Common Stock, par value $.00001 per share (the "IMNT Common Stock"), of which 10,000,000 shares of Common Stock are issued and outstanding as of the date hereof and 5,000,0000 shres of Preferred Stock, par value $.00001 per share, of which none are issued and outstanding as of the date hereof. All of the issued and outstanding shares of IMNT Common Stock and IMNT Preferred Stock are validly issued, fully-paid and nonassessable and have been issued in compliance with all applicable federal, state and foreign securities Laws. Except as set forth in Section 2.3(a) of the IMNT Disclosure Schedule, no shares of IMNT Common Stock or IMNT Preferred Stock are held in treasury or are authorized or reserved for issuance. (b) Section 2.3(b) of the IMNT Disclosure Schedule lists the name, address and state of residence of each holder of IMNT Common Stock (as provided by such holder to IMNT) and the number of shares of IMNT Common Stock held by such holder. Except as disclosed in Section 2.32.3(b) of the IMNT Disclosure Schedule, there are no other shares of IMNT Common Stock issued and outstanding. (c) With respect to any IMNT Common Stock that has been issued and currently is issued and outstanding subject to a repurchase option on the part of IMNT, Section 2.3(c) of the IMNT Disclosure Schedule sets forth the holder thereof, the number and type of securities subject thereto and the vesting schedule thereof (including a specific description of the circumstances pursuant to which such vesting schedule for each such security can or will be accelerated). (d) With respect to each IMNT Option, IMNT Warrant, IMNT Stock Purchase Right, Restricted Stock Purchase Agreement or share of IMNT Restricted Stock or agreements, arrangements or understandings to which IMNT is a party (written or oral) to issue Options or other equity securities with respect to IMNT, Section 2.3(d) of the IMNT Disclosure Schedule sets forth the holder thereof, the number and type of securities issuable thereunder and, if applicable, the exercise price therefor, the exercise period and vesting schedule thereof (including a specific description of the circumstances under which such vesting schedule for each such security can or will be accelerated). 32 Except as set forth in Section 2.3(d) of the IMNT Disclosure Schedule, there are no outstanding IMNT Options, IMNT Warrants, IMNT Stock Purchase Rights, Restricted Stock Purchase Agreements or shares of IMNT Restricted Stock or agreements, arrangements or understandings to which IMNT is a party (written or oral) to issue Options with respect to IMNT. All of the IMNT Options, IMNT Warrants and IMNT Stock Purchase Rights were issued in compliance with all applicable federal, state and foreign securities Laws. (e) Except as set forth in Section 2.3(e) of the IMNT Disclosure Schedule, there are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of IMNT Common Stock created by statute, the Articles of Incorporation or Bylaws of IMNT, or any agreement or other arrangement to which IMNT is a party (written or oral) or to which IMNT is obligated, and there are no agreements, arrangements or understandings to which IMNT is a party (written or oral), pursuant to which IMNT has the right to elect to satisfy any Liability by issuing IMNT Common Stock or Equity Equivalents. (f) The terms of the IMNT Stock Option Plan and the applicable stock option agreements related to the outstanding IMNT Options permit the assumption or substitution of options to purchase IMNT Common Stock as provided in this Agreement, without the consent or approval of the holders of such securities, IMNT Stockholder Action or otherwise and without any acceleration of the exercise schedule or vesting provisions in effect for those IMNT Options. True and complete copies of all agreements and instruments relating to or issued under the IMNT Stock Option Plan have been provided to IMNT, and such agreements and instruments have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form provided to IMNT. (g) Except for the Support Agreements, IMNT is not a party or subject to any agreement or understanding, and there is no agreement, arrangement or understanding between or among Persons that affects, restricts or relates to voting, giving of written consents, dividend rights or transferability of shares with respect to IMNT Common Stock, including any voting trust agreement or proxy. (h) Except as set forth in Section 2.32.3(g) of the IMNT Disclosure Schedule, no debt securities of IMNT are issued and outstanding. 3.4 Subsidiaries and Equity Investments. IMNT has no (and before the Closing will have no) Subsidiaries and does not (and before the Closing will not) otherwise hold any equity, membership, partnership, joint venture or other ownership interest in any Person. 3.5 No Conflicts. The execution and delivery by IMNT of this Agreement does not, and the performance by IMNT of its obligations under this Agreement and the consummation of the transactions contemplated by this Agreement do not and will not: 33 (a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Certificate of Incorporation or Bylaws of IMNT; (b) conflict with or result in a violation or breach of any Law or Order applicable to IMNT or its Assets or Properties; or (c) except as would not have a material adverse effect on the Business or Condition of IMNT, (i) conflict with or result in a violation or breach of, (ii) constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default)pursuant to, (iii) require IMNT to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result of the terms of (except for (A) the filing of the Delaware Certificate of Merger and the Nevada Certificate of Merger, together with the required officers' certificates; (B) such consents approvals, orders, authorizations, registrations, declarations and filings as may be required pursuant to applicable state or federal securities laws; and (C) such filings as may be required pursuant to the HSR Act), (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any person any additional right or entitlement to increased, additional, accelerated or guaranteed payments or performance pursuant to, (vi) result in the creation or imposition of (or the obligation to create or impose) any Lien upon IMNT or any of its Assets or Properties, or (vii) result in the loss of a material benefit pursuant to , any of the terms, conditions or provisions of any Contract or License to which IMNT is a party or by which any of its Assets and Properties is obligated. 3.6 Books and Records; Organizational Documents. The minute books and stock record books and other similar records of IMNT have been provided or made available to IMNT or its counsel before the execution of this Agreement, are complete and correct in all respects and have been maintained in accordance with reasonable and consistent business practices. Such minute books contain a true and complete record of all actions taken at all meetings and by all written consents in lieu of meetings of the directors, stockholders and committees of the Board of Directors of IMNT from the date of IMNT's incorporation through the date hereof. IMNT has before the execution of this Agreement delivered to IMNT true and complete copies of its Articles of Incorporation and Bylaws, both as amended through the date hereof. IMNT is not in violation of any provision of its Articles of Incorporation or Bylaws. 3.7 Legal Proceedings. (a) Except as set forth in Section 2.12(a) of the IMNT Disclosure Schedule: (i) there are no Actions or Proceedings pending or, to the knowledge of IMNT, threatened against, relating to or affecting IMNT or any of its Assets and Properties; (ii) there are no facts or circumstances known to IMNT that could reasonably be expected to result in any Action or Proceeding against, relating to or affecting IMNT or any of its Assets and Properties; (iii) IMNT has not received notice and otherwise does not have knowledge of any Order outstanding against IMNT; and 34 (iv) IMNT has not received notice and does not otherwise have knowledge of any defect, dangerous or substandard condition in the products or materials sold, distributed, or currently proposed to be sold or distributed, by IMNT that could cause bodily injury, sickness, disease, death or damage to property, or result in loss of use of property, or any claim, litigation, demand for arbitration or notice seeking damages for bodily injury, sickness, disease, death, damage to property or loss of use of property. (b) Before the execution of this Agreement, IMNT has delivered to IMNT all responses of counsel for IMNT to auditor's requests for information for the preceding three (3) years (together with all updates provided by such counsel (if any)) regarding Actions or Proceedings pending or threatened against, relating to or affecting IMNT. Section 2.12(b) of the IMNT Disclosure Schedule sets forth all Actions or Proceedings relating to or affecting, or, to the knowledge of IMNT, threatened against, IMNT or any of its Assets and Properties during the three (3) year period before the date hereof. 3.8 Compliance with Laws and Orders. Neither IMNT nor any of its directors, officers, Affiliates, agents or employees has violated in any material respect since the incorporation of IMNT, or currently is in default or violation in any material respect pursuant to, any Law or Order applicable to IMNT or any of its Assets and Properties, and IMNT is not aware of any claim of violation, or of any actual violation, of any of such Laws and Orders by IMNT since the incorporation of IMNT. 3.9 Banks and Brokerage Accounts. Section 2.27 of the IMNT Disclosure Schedule sets forth (a) a true and complete list of the names and locations of all banks, trust companies, securities brokers and other financial institutions at which IMNT has an account or safe deposit box or maintains a banking, custodial, trading or other similar relationship; (b) a true and complete list and description of each such account, box and relationship, indicating in each case the account number and the names of the respective officers, employees, agents or other similar representatives of IMNT having signatory power with respect thereto; and (c) a list of each Investment Asset, the name of the record and beneficial owner thereof, the location of the certificates therefor, if any, the maturity date, if any, and all stock or bond powers or other authority for transfer granted with respect thereto if any. 3.10 Other Negotiations; Brokers; Third Party Expenses. (a) Neither IMNT nor any of its officers, directors, employees, agents or, to the knowledge of IMNT, any of its stockholders or Affiliates (nor any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of IMNT or any such Affiliate) (i) has entered into any Contract that conflicts with any of the transactions contemplated by this Agreement or (ii) has entered into any Contract or had any discussion with any Person regarding any transaction involving IMNT that could result in IMNT, USSC or any general partner, limited partner, manager, officer, director, employee, agent or Affiliate of any of them being subject to any claim for liability to such Person as a result of entering into this Agreement or consummating the transactions contemplated by this Agreement. (b) No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or similar fee or commission in connection with this Agreement and the transactions contemplated by this Agreement based on arrangements made by or on behalf of IMNT. 35 (c) Section 2.26 of the IMNT Disclosure Schedule sets forth the principal terms and conditions of any Contract with respect to, and a reasonable estimate of, all Third Party Expenses expected to be incurred by IMNT in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby ("Estimated Third Party Expenses"). 3.11 Foreign Corrupt Practices Act. Neither IMNT nor, to the knowledge of IMNT, any agent, employee or other Person associated with or acting on behalf of IMNT has, directly or indirectly, used corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment. 3.12 Approvals. (a) Section 2.32(a) of the IMNT Disclosure Schedule contains a list of all material Approvals of Governmental or Regulatory Authorities relating to the business conducted by IMNT that are required to be given to or obtained by IMNT from any and all Governmental or Regulatory Authorities in connection with the consummation of the transactions contemplated by this Agreement (other than the filing of the Delaware Certificate of Merger and the Nevada Certificate of Merger, together with the required officers' certificates, and such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under state or federal securities laws). (b) Section 2.32(b) of the IMNT Disclosure Schedule contains a list of all material Approvals that are required to be given to or obtained by IMNT from any and all third parties other than Governmental or Regulatory Authorities in connection with the consummation of the transactions contemplated by this Agreement. (c) All material Approvals from Governmental or Regulatory Authorities necessary to conduct the business conducted by IMNT as such business is being conducted currently are set forth in Section 2.32(c)(1) of the IMNT Disclosure Schedule. Except as set forth in Section 2.32(c)(2) of the IMNT Disclosure Schedule, IMNT has obtained all material Approvals from Governmental or Regulatory Authorities necessary to conduct the business conducted by IMNT in the manner as such business is being conducted currently, and there has been no written notice received by IMNT of any material violation or material non-compliance with any of such Approvals. (d) The affirmative vote or consent of the holders of a majority of the shares of IMNT Common Stock issued and outstanding as of the applicable record date, voting separately as a class, are the only votes of the holders of any of IMNT Capital Stock necessary to approve this Agreement, the Merger and the transactions contemplated by this Agreement. 36 3.13 Information Statement. The information supplied by IMNT for inclusion in the information statement to be sent to the stockholders of IMNT in connection with IMNT stockholders' consideration of the Merger (the "IMNT Stockholder Action") (such information statement as amended or supplemented is referred to herein as the "Information Statement") shall not, on the date on which the Information Statement first is mailed to IMNT's stockholders, at the time of the IMNT Stockholder Action and at the Effective Time contain any information that, at such time, is false or misleading with respect to any material fact, or omit to specify any material fact necessary in order to make the information specified therein, considering the circumstances pursuant to which that information is furnished, not false or misleading; or omit to specify any material fact necessary to correct any information in any earlier communication with respect to the solicitation of proxies or written consents for the IMNT Stockholder Action that has become false or misleading. Notwithstanding the foregoing, IMNT makes no representation, warranty or covenant with respect to any information supplied by IMNT that is contained in the Information Statement. 3.14 Disclosure. No representation or warranty made by IMNT contained in this Agreement, and no information contained in the IMNT Disclosure Schedule or in any certificate, list or other writing furnished to IMNT pursuant to any provision of this Agreement (including the IMNT Financials and the notes thereto) contains any untrue information or fails to specify any information necessary in order to make the information herein or therein, considering the circumstances pursuant to which such information was furnished, not misleading. IMNT has provided IMNT with all of the Contracts and Licenses heretofore requested on behalf of IMNT in writing and all other material information concerning IMNT in the possession, custody or control of IMNT. 3.15 Information to be Supplied by IMNT. The information supplied by IMNT for inclusion in the Information Statement shall not, on the date the Information Statement first is mailed to USSC' s stockholders, at the time of the USSC Stockholder Action and at the Effective Time contain any statement that, at such time, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which it is made, not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies or written consents for the USSC Stockholder Action that has become false or misleading. Notwithstanding the foregoing, IMNT makes no representation, warranty or covenant with respect to any information supplied by USSC that is contained in any of the foregoing documents. 3.16 Investment Advisors. No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or similar fee or commission in connection with this Agreement and the transactions contemplated hereby based on arrangements made by or on behalf of IMNT. 3.17 Tax-Free Reorganization. To the knowledge of IMNT after consultation with IMNT's tax advisors, neither IMNT nor any of its directors, officers or stockholders has taken any action that could reasonably be expected to jeopardize the status of the Merger as a "reorganization" within the meaning of section 368(a) of the Code. 37 ARTICLE 4 CONDUCT BEFORE THE EFFECTIVE TIME 4.1 Conduct of Business of USSC(a) . During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement and the Effective Time, USSC agrees (unless USSC is required to take such action pursuant to this Agreement or IMNT gives its prior consent in writing) to carry on its business in the usual, regular and ordinary course consistent with past practice, to pay its Liabilities and Taxes consistent with USSC' s past practices (and in any event when due), to pay or perform other obligations when due consistent with USSC' s past practices (other than Liabilities, Taxes and other obligations, if any, contested in good faith through appropriate proceedings) and, to the extent consistent with such business, to use all commercially reasonable efforts and institute all policies required to preserve intact its present business organization, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, independent contractors and other Persons having business dealings with it, all with the express purpose and intent of preserving unimpaired USSC' s goodwill and ongoing business at the Effective Time. Except as expressly contemplated by this Agreement, USSC shall not, without the prior written consent of IMNT, take or agree in writing or otherwise to take, any action that would make any of its representations or warranties contained in this Agreement untrue or incorrect in any material respect or prevent USSC from performing or cause USSC not to perform its agreements and covenants specified in this Agreement or knowingly cause any condition to IMNT's closing obligations in Section 6.3 not to be satisfied. 4.2 No Solicitation. Until the earlier of the Effective Time and the date of termination of this Agreement pursuant to the provisions of Section 8.1, USSC shall not take (and since January 1, 2003, has not taken), nor will USSC (and since January 1, 2003, has not permitted) permit any of USSC' s Representatives to take (directly or indirectly) any of the following actions with any Person other than IMNT and its designees: (a) solicit, encourage, initiate, entertain, review or encourage any proposal or offer from, or participate in or conduct discussions with or engage in negotiations with, any Person relating to any offer, indication of interest or proposal, oral, written or otherwise, formal or informal (a "Competing Proposed Transaction"), with respect to any possible Business Combination with USSC, (b) provide information not customarily disclosed consistent with USSC' s past practices with respect to USSC to any Person, other than IMNT, relating to (or which USSC believes or should reasonably know would be used for the purpose of formulating an offer, indication of interest or proposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, any possible Business Combination with USSC, (c) agree to, or enter into a Contract with any Person, other than IMNT, providing for, or approving a Business Combination with USSC, (d) make or authorize any statement, recommendation, solicitation or endorsement in support of any possible Business Combination with USSC other than by IMNT, or (e) authorize or permit any of USSC' s Representatives to take any such action. USSC shall immediately cease and cause to be terminated any such contact or negotiation with any Person relating to any such transaction or Business Combination. In addition to the foregoing, if USSC receives before the Effective Time or the termination of this Agreement any offer, indication of interest or proposal (formal or informal, oral, written or otherwise) relating to, or any inquiry or contact from any Person with respect to, a Competing Proposed Transaction, USSC shall immediately notify IMNT thereof, such notice to include the identity of the Person or Persons making such offer, indication of interest or proposal and the terms thereof, and shall keep IMNT apprised on a current basis of the status of any such offer, indication of interest or proposal and of any modification to the terms thereof; provided, however, that this provision shall not in any way be deemed to limit the obligations of USSC and its Representatives set forth in the first sentence of this Section 4.2. Each of USSC and IMNT acknowledges that this Section 4.2 was a significant inducement for IMNT to enter into this Agreement and that the absence of such provision would have resulted in either (i) a material reduction in the consideration to be paid to the stockholders of USSC in the Merger or (ii) a failure to induce IMNT to enter into this Agreement. 38 ARTICLE 5 ADDITIONAL AGREEMENTS 5.1 Proxy Statement. As soon as reasonably practicable after the execution of this Agreement, USSC shall prepare, with the full cooperation of IMNT, a Proxy Statement for the stockholders of USSC noticing a special meeting at which USSC will ask its Common Stock Shareholders as well as its Preferred Stock Shareholders to approve this Agreement, the Agreement of Merger and the transactions contemplated hereby. IMNT and USSC each shall use commercially reasonable efforts to cause the Proxy Statement to comply with applicable federal and state securities laws requirements. Each of IMNT and USSC agrees to provide promptly to the other such information concerning its business and financial statements and affairs as, in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the Proxy Statement, or in any amendment or supplement thereto, and to cause its counsel and auditors to cooperate with the other's counsel and auditors in the preparation of the Proxy Statement. USSC shall promptly advise IMNT, and IMNT shall promptly advise USSC, in writing, if at any time before the Effective Time either USSC or IMNT, as applicable, obtains knowledge of any fact that might make it necessary or appropriate to amend or supplement the Proxy Statement in order to make the statements contained or incorporated by reference therein not misleading or to comply with applicable law. The Proxy Statement shall contain the unanimous recommendation of the board of directors of USSC that USSC's stockholders approve the Merger and this Agreement and the conclusion of the board of directors of USSC that the terms and conditions of the Merger are advisable and fair and reasonable to, and in the best interests of, the stockholders of USSC. Anything to the contrary contained herein notwithstanding, USSC shall not include in the Proxy Statement any information with respect to IMNT or its affiliates or associates, the form and content of which information has not been approved by IMNT before such inclusion. 5.2 Stockholder Approval. As soon as reasonably practicable following the execution and delivery of this Agreement, USSC shall give written notice of this Agreement and the proposed Merger to all USSC stockholders and shall use commercially reasonable efforts to take all other actions necessary in accordance with the Nevada Code and USSC's articles of incorporation and bylaws to convene a meeting of the stockholders of USSC or to secure the required written consent of its stockholders, both Common Stock Shareholders and Preferred Stock Shareholders (the "USSC Stockholder Action"). USSC shall submit this Agreement and the Agreement of Merger to its stockholders for adoption whether or not USSC's board of directors determines at any time after declaring its advisability that this Agreement no longer is advisable and recommends that its stockholders reject it. USSC shall use all commercially reasonable efforts required to solicit and obtain from stockholders of USSC proxies or written consents in favor of the Merger and this Agreement and shall take all other actions necessary or advisable to secure the vote or written consent of stockholders required to effect the Merger. 39 5.3 Access to Information. Between the date of this Agreement and the earlier of the Effective Time or the termination of this Agreement, upon reasonable notice USSC shall (a) give IMNT and its officers, employees, accountants, counsel, financing sources and other agents and representatives reasonable access to all buildings, offices and other facilities and to all Books and Records of USSC, whether located on the premises of USSC or at another location; (b) permit IMNT to make such inspections as it may require; (c) cause its officers to furnish IMNT such financial, operating, technical and product data and other information with respect to the business and Assets and Properties of USSC as IMNT from time to time may request, including financial statements and schedules; (d) allow IMNT the opportunity to interview such employees and other personnel and Affiliates of USSC with USSC' s prior written consent, which consent shall not be unreasonably withheld or delayed; and (e) assist and cooperate with IMNT in the development of integration plans for implementation by IMNT and the Surviving Corporation following the Effective Time; provided, however, that no investigation pursuant to this Section 5.3 shall affect or be deemed to modify any representation or warranty made by USSC herein. 5.4 Confidentiality. The parties acknowledge that IMNT and USSC previously executed a Letter of Intent, dated as of March __, 2003 and all valid amendments thereto, which contains, among other provisions, confidentiality provisions (the "Confidentiality Provisions"), which Confidentiality Provisions shall continue in full force and effect as of the date hereof. Without limiting the foregoing, all information furnished to IMNT and its officers, employees, accountants and counsel by USSC, and all information furnished to USSC by IMNT and its officers, employees, accountants and counsel, shall be covered by the Confidentiality Provisions, and IMNT and USSC shall be fully liable and responsible under the Confidentiality Provisions for any breach of the terms and conditions thereof by their respective subsidiaries, officers, employees, accountants, counsel and other Representatives. Furthermore, without limiting the foregoing, each of the parties hereto hereby agrees to keep the terms of this Agreement (except to the extent contemplated hereby) and such information or knowledge obtained in any investigation pursuant to Section 5.33, or pursuant to the negotiation and execution of this Agreement or the effectuation of the transactions contemplated hereby, confidential; provided, however, that the foregoing shall not apply to information or knowledge that (a) a party can demonstrate was already lawfully in its possession before the disclosure thereof by the other party, (b) is generally known to the public and did not become so known through any violation of Law, (c) became known to the public through no fault of such party, (d) is later lawfully acquired by such party without confidentiality restrictions from other sources not bound by applicable confidentiality restrictions, (e) is required to be disclosed by order of court or Governmental or Regulatory Authority with subpoena powers (provided that such party shall have provided the other party with prior notice of such order and an opportunity to object or seek a protective order and take any other available action) or (f) that is disclosed in the course of any Action or Proceeding between any of the parties hereto. 40 5.5 Expenses. Whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger, including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties ("Third Party Expenses") incurred by a party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby shall be the obligation of the respective party incurring such fees and expenses. In the event the Merger is consummated, the Surviving Corporation shall be responsible for the payment of all reasonable Third Party Expenses, including reasonable Third Party Expenses incurred by USSC. Notwithstanding anything to the contrary contained in this Agreement, to the extent that Third Party Expenses incurred by USSC exceed $20,000 in the aggregate, such excess shall be deemed a Loss for the purposes of Article 7 and shall be immediately reimbursable to IMNT in accordance with Article 7 (without regard to the Basket and without counting toward the Basket). 5.6 Public Disclosure. Unless otherwise required by Law (including federal and state securities laws) or, as to IMNT, by the rules and regulations of the NASD, before the Effective Time, no public disclosure (whether or not in response to any inquiry) of the existence of any subject matter of, or the terms and conditions of, this Agreement shall be made by any party hereto unless approved by IMNT and USSC before release; provided, however, that such approval shall not be unreasonably withheld or delayed. 5.7 Approvals. USSC shall use commercially reasonable efforts to obtain all Approvals from Governmental or Regulatory Authorities or under any of the Contracts, Licenses or other agreements as may be required in connection with the Merger (all of which Approvals are set forth in the USSC Disclosure Schedule) so as to preserve all rights of and benefits to USSC thereunder, and IMNT shall provide USSC with such assistance and information as is reasonably required to obtain such Approvals. 5.8 Notification of Certain Matters. USSC shall give prompt notice to IMNT, and IMNT shall give prompt notice to USSC, of (a) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which likely is to cause any representation or warranty of USSC or IMNT, respectively, contained in this Agreement to be untrue or inaccurate at or before the Closing Date and (b) any failure of USSC or IMNT, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise affect any remedy available to the party receiving such notice. 5.9 Additional Documents and Further Assurances; Cooperation. Each party hereto, at the request of the other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things (including all action reasonably necessary to seek and obtain any and all consents, waivers and approvals of any Governmental or Regulatory Authority or Person required in connection with the Merger; provided, however, that IMNT shall not be obligated to consent to any divestiture or operational limitation or activity in connection therewith, and no party shall be obligated to make a payment of money as a condition to obtaining any such consent, waiver or approval) as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. Each party agrees to use commercially reasonable efforts to cause the conditions set forth in Article 6 to be satisfied, where the satisfaction of such conditions depends on action or forbearance from action by such party. 41 5.10 USSC' s Auditors. USSC shall cause its management and its independent auditors to facilitate on a timely basis (a) the preparation of financial statements (including pro forma financial statements if required) as required by IMNT to comply with applicable SEC regulations, (b) the review of any USSC audit or review work papers, including the examination of selected interim financial statements and data and (c) the delivery of such representations from USSC' s independent accountants as may be reasonably requested by IMNT or its accountants. 5.11 Takeover Statutes. If any Takeover Statute is or may become applicable to the transactions contemplated hereby, the board of directors of USSC shall grant such approvals and take such actions as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate the effects of any Takeover Statute on any of the transactions contemplated hereby. 5.12 Treatment as Reorganization. Neither IMNT nor USSC shall take any action before or following the Closing that would cause the Merger to fail to qualify as a "reorganization" within the meaning of section 368(a) of the Code. 5.13 Intellectual Property. USSC shall give IMNT prompt notice of any Person that has (a) commenced, or has notified USSC that it intends to commence, an Action or Proceeding or (b) provided USSC with notice, in either case that alleges that any of the Intellectual Property, including USSC Intellectual Property, currently embodied, or proposed to be embodied, in USSC' s products or services, infringes or otherwise violates the intellectual property rights of such Person or otherwise alleges that USSC does not otherwise own or have the right to exploit such Intellectual Property, including USSC Intellectual Property. USSC shall cooperate with IMNT in making arrangements, before the Closing Date, satisfactory to IMNT in its sole discretion, to effect the assignment to USSC of all Intellectual Property created by USSC' s founders, employees and consultants and to obtain the cooperation of such Persons to complete all appropriate patent filings related thereto. USSC shall take commercially reasonable actions to maintain, perfect, preserve or renew USSC Registered Intellectual Property, including the payment of registration fees, maintenance fees, renewal fees, annuity fees and taxes or the filing of documents, applications or certificates related thereto, and to promptly respond and prepare to respond to all requests, related to USSC Registered Intellectual Property, received from Governmental or Regulatory Authorities. ARTICLE 6 CONDITIONS TO THE MERGER 6.1 Conditions to Obligations of Each Party Under This Agreement. The respective obligations of each party to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law: 42 (a)......Either: (i) A Registration Statement on Form S-4 (the "Registration Statement") shall have been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceedings for that purpose shall have been initiated or, to the knowledge of IMNT or USSC, threatened by the SEC; or (ii) USSC provides written confirmation that there are no more than 35 non-accredited shareholders which are entitled to receive IMNT Common Stock upon consummation of the Merger. (b)......This Agreement and the Merger and the other transactions contemplated hereby shall have been approved and adopted by the requisite vote of the stockholders of IMNT and USSC, to the extent, in each case, that stockholder approval is required under applicable law and governing documents. Each party acknowledges that at least sixty-six and two-thirds percent (66 2/3%) of the USSC Preferred Stock must vote in favor of the Merger in order for the Merger to be consummated. (c)......All holders of USSC Preferred Stock must agree, in writing, to convert all accrued but unpaid dividends into shares of IMNT Common Stock in lieu of receiving cash. (c)......No Governmental Entity, nor any federal or state court of competent jurisdiction or arbitrator shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction or arbitration award or finding or other order (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the Merger or any other transactions contemplated in this Agreement or any Ancillary Agreement. (d) All consents, approvals and authorizations of any Governmental Entity required to be set forth in the related sections of the IMNT Disclosure Schedule or the USSC Disclosure Schedule shall have been obtained, in each case, without (i) the imposition of conditions, (ii) the requirement of divestiture of assets or property or (iii) the requirement of expenditure of money by IMNT or USSC to a third party in exchange for any such consent. 6.2 Additional Conditions to Obligations of USSC . The obligations of USSC to consummate the Merger and the other transactions contemplated by this Agreement shall be subject to the satisfaction at or before the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by USSC : (a) Representations and Warranties. The representations and warranties of IMNT contained in this Agreement shall be accurate in all respects as of the date of this Agreement and shall be accurate in all respects as of the Closing Date as if made on and as of the Closing Date (other than representations and warranties that by their express terms are made solely as of a specified earlier date, which shall be accurate as of such specified earlier date), except that any inaccuracy in such representations and warranties shall be disregarded if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and would not reasonably be expected to have, a material adverse change on the Business or Condition of IMNT. 43 (b) Performance. IMNT shall have performed and complied with in all material respects each agreement, covenant and obligation required by this Agreement to be so performed or complied with by IMNT at or before the Closing. (c) Officers' Certificates. IMNT shall have delivered to USSC a certificate, dated the Closing Date and executed by IMNT's President, Chief Executive Officer and Secretary substantially in the form set forth in Exhibit C hereto. 6.3 Additional Conditions to the Obligations of IMNT. The obligations of IMNT to consummate the Merger and the other transactions contemplated by this Agreement shall be subject to the satisfaction at or before the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by IMNT: (a) Representations and Warranties. The representations and warranties of USSC contained in this Agreement shall be accurate in all respects as of the date of this Agreement and shall be accurate in all respects as of the Closing Date as if made on and as of the Closing Date (other than representations and warranties that by their express terms are made solely as of a specified earlier date, which shall be accurate as of such specified earlier date), except that any inaccuracy in such representations and warranties will be disregarded if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and would not reasonably be expected to have, a material adverse change on the Business or Condition of USSC. (b) Performance. USSC shall have performed and complied with in all material respects each agreement, covenant and obligation required by this Agreement to be so performed or complied with by USSC on or before the Closing Date. (c) Officers' Certificates. USSC shall have delivered to IMNT a certificate, dated the Closing Date and executed by the President and Chief Executive Officer of USSC, substantially in the form set forth in Exhibit D hereto. (d) Third Party Consents. IMNT shall have been furnished with evidence satisfactory to it that USSC has obtained the consents, approvals and waivers listed (or required to be listed) in Section 2.6 of the USSC Disclosure Schedule (except for such consents, approvals and waivers the absence of which, in the aggregate, could not reasonably be expected to have a material adverse effect on USSC ) and that all such consents, approvals and waivers are in full force and effect. (e) Legal Proceedings. No Governmental or Regulatory Authority shall have notified either party to this Agreement that such Governmental or Regulatory Authority intends to commence proceedings to restrain or prohibit the transactions contemplated hereby or force rescission, unless such Governmental or Regulatory Authority has withdrawn such notice and abandoned any such proceeding before the time that otherwise would have been the Closing Date. 44 (f) Reporting Costs Pending Closing. During the period of time that the Securities and Exchange Commission is reviewing the Registration Statement on Form S-4 and prior to the "effective" date of such Registration Statement, USSC shall pay the following costs, on behalf of IMNT, associated with complying with IMNT's reporting obligations ("Reporting Costs): (i) SEC filing fees, in any; (ii) auditing fees; (iii) attorneys' fees; and (iii) EDGARizing fees. Prior to the execution of this Agreement, IMNT has provided USSC with a written estimation, based on historical costs, of the Reporting Costs. USSC shall not be obligated to pay Reporting Costs which exceed IMNT's estimation by greater than ten percent (10%). ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS 7.1 Survival of Representations, Warranties, Covenants and Agreements(a) . Notwithstanding any right of IMNT or USSC (whether or not exercised) to investigate the affairs of IMNT or USSC (whether pursuant to Section 5.3 or otherwise) or a waiver by IMNT or USSC of any condition to Closing set forth in Article 6, each party shall have the right to rely fully on the representations, warranties, covenants and agreements of the other party contained in this Agreement or in any instrument delivered pursuant to this Agreement. Except for (i) the representation and warranties of USSC contained in Section 2.3 (which shall survive as set forth in the last sentence of this Section 7.1) and (ii) Article 7 (which shall survive until the satisfaction of all other obligations described therein), all of the representations, warranties, covenants and agreements of USSC and IMNT contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger and continue until the date that is 18 months following the Closing Date (the "Expiration Date"). The representations and warranties of USSC made in Section 2.3, as well as claims by IMNT based on fraud, shall survive and continue in full force and effect until expiration of the statutes of limitations applicable to the underlying claim. ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER 8.1 Termination. Except as provided in Section 8.2, this Agreement may be terminated and the Merger abandoned at any time before the Effective Time: (a) by mutual agreement of USSC and IMNT; (b) by IMNT or USSC if: (i) there shall be a final nonappealable order of a federal or state court in effect preventing consummation of the Merger; or (ii) there shall be any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger by any Governmental or Regulatory Authority that would make consummation of the Merger illegal; 45 (c) by IMNT if there shall be any action taken, or any Law or Order enacted, promulgated or issued or deemed applicable to the Merger, by any Governmental or Regulatory Authority, which would: (i) prohibit IMNT's ownership or operation of all or any portion of the business of USSC or (ii) compel IMNT to dispose of or hold separate all or any portion of the Assets and Properties of USSC as a result of the Merger; (d) by IMNT if it is not in material breach of its representations, warranties, covenants and agreements under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of USSC and (i) USSC is not using its reasonable efforts to cure such breach, or has not cured such breach within thirty (30) days, after notice of such breach to USSC (provided, however, that no cure period shall be required for a breach that by its nature cannot be cured), and (ii) as a result of such breach any of the conditions set forth in Section Error! Reference source not found. or Section 6.3, as the case may be, would not be satisfied before the Closing Date; (e) by USSC if it is not in material breach of its representations, warranties, covenants and agreements under this Agreement, and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of IMNT and (i) IMNT is not using its reasonable efforts to cure such breach, or has not cured such breach within thirty (30) days, after notice of such breach to IMNT (provided, however, that no cure period shall be required for a breach that by its nature cannot be cured), and (ii) as a result of such breach any of the conditions set forth in Section 6.2 or Section 6.3, as the case may be, would not be satisfied as of the Closing Date; or (f) by IMNT, if the Merger shall not have been approved by the requisite votes or consents, as applicable, of USSC's stockholders in accordance with the Nevada Code and applicable governing documents at any meeting (or any adjournment thereof) convened for the purpose of taking a vote with respect to the Merger or, in any solicitation of stockholder written consents with respect to the Merger, within twenty (20) days after the record date established for determining the stockholders of USSC entitled to consent. 8.2 Effect of Termination. In the event of a valid termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void, and there shall be no liability or obligation on the part of IMNT or USSC, or their respective officers, directors or stockholders or Affiliates or Associates; provided, however, that each party shall remain liable for all breaches of this Agreement before its termination; and provided, further, that, the provisions of Sections 5.4, 5.5 and 8.2, Article 9 (exclusive of Section 9.4) and the applicable definitions set forth in Article 10 shall remain in full force and effect and survive any termination of this Agreement. 8.3 Amendment. Except as is otherwise required by applicable law after the stockholders of USSC approve the Merger and this Agreement, this Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of the parties hereto. 46 8.4 Extension; Waiver. At any time before the Effective Time, IMNT and USSC may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations of the other party hereto, (b) waive any inaccuracy in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements, covenants or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE 9 MISCELLANEOUS PROVISIONS 9.1 Notices. All notices, requests and other communications hereunder must be in writing and shall be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission against facsimile confirmation or mailed by internationally recognized overnight courier prepaid to the parties at the following addresses or facsimile numbers: If to IMNT to: Immunotechnology, Inc. Attention: Mark Scharmann, president 1661 Lakeview Circle Ogden, Utah 84403 with a copy (which shall not John C. Thompson & Associates, LLC constitute notice) to: Attention: John Thompson, Esq. 22 East 100 South #403 Salt Lake City, Utah 84111 Facsimile No.: 801.606.2855 If to USSC to: Ultimate Security Systems Corporation Attention: James Cooper, president 18271 West McDurmott, Suite F Irvine, California 92612 with a copy (which shall not MC Law Group constitute notice) to: Attn: Deron M. Colby, Esq. 4100 Newport Place, Suite 830 Newport Beach, CA 92660 Facsimile No.: 949.250.8656 All such notices, requests and other communications shall (a) if delivered personally to the address as provided in this Section 9.1, be deemed given upon delivery, (b) if delivered by facsimile transmission to the facsimile number as provided for in this Section 9.1, be deemed given upon facsimile confirmation, and (c) if delivered by overnight courier to the address as provided in this Section 9.1, be deemed given on the earlier of the first Business Day following the date sent by such overnight courier or upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 9.1). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto. 47 9.2 Entire Agreement. This Agreement and the Exhibits and Schedules hereto, including the USSC Disclosure Schedule and the IMNT Disclosure Schedule, constitute the entire Agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, except for the Confidentiality Provisions, which shall continue in full force and effect and shall survive any termination of this Agreement or the Closing in accordance with their terms. 9.3 Amendment. This Agreement may be amended only in accordance with the provisions of Section 8.3. 9.4 Further Assurances; Post-Closing Cooperation. At any time or from time to time after the Closing, the parties shall execute and deliver to the other party such other documents and instruments, provide such materials and information and take such other actions as the other party may reasonably request to consummate the transactions contemplated by this Agreement and otherwise to cause the other party to fulfill its obligations under this Agreement and the transactions contemplated hereby. Each party agrees to use commercially reasonable efforts to cause the conditions to its obligations to consummate the Merger to be satisfied. 9.5 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. 9.6 Remedies. All remedies, either under this Agreement or by Law or otherwise afforded, shall be cumulative and not alternative. 9.7 Third Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights, and this Agreement does not confer any such right, upon any other Person other than any Person entitled to indemnity under Article 7. 9.8 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned (by operation of law or otherwise) by any party without the prior written consent of the other party, and any attempt to do so shall be void. Subject to the preceding sentence, this Agreement is binding on, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 9.9 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never had comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. 48 9.10 Governing Law. This Agreement and all other closing documents shall be governed by and construed in accordance with the domestic laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. 9.11 Waiver of Trial by Jury. IN ANY ACTION OR PROCEEDING ARISING HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING. 9.12 Costs and Expenses. Except as otherwise provided herein, each of the parties shall bear all costs and expenses incurred by it in connection with this Agreement and in the consummation of the transactions contemplated hereby and in preparation therefor. 9.13 Construction. The parties hereto agree that this Agreement is the product of negotiation between sophisticated parties and individuals, all of whom were represented by counsel, and each of whom had an opportunity to participate in and did participate in the drafting of each provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party hereto but rather shall be given a fair and reasonable construction without regard to the rule of contra proferentem. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.14 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.15 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or otherwise were breached. Except where this Agreement specifically provides for arbitration, it is agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Except as otherwise provided herein (including as set forth in Article 7), any and all remedies herein expressly conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 49 ARTICLE 10 DEFINITIONS 10.1 Definitions. As used in this Agreement, the following defined terms shall have the meanings indicated below: "Actions or Proceedings" means any action, suit, complaint, petition, investigation, proceeding, arbitration, litigation or Governmental or Regulatory Authority investigation, audit or other proceeding, whether civil or criminal, in law or in equity, or before any arbitrator or Governmental or Regulatory Authority. "Affiliate" means, as applied to any Person, (a) any other Person directly or indirectly controlling, controlled by or under common control with that Person, (b) any other Person that owns or controls (i) ten percent (10%) or more of any class of equity securities of that Person or any of its Affiliates or (ii) ten percent (10%) or more of any class of equity securities (including any equity securities issuable upon the exercise of any option or convertible security) of that Person or any of its Affiliates or (c) as to a corporation, each director and officer thereof, and as to a partnership, each general partner thereof, and as to a limited-liability company, each managing member or similarly authorized person thereof (including officers), and as to any other entity, each Person exercising similar authority to those of a director or officer of a corporation. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling," "controlled by" and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise. "Aggregate Common Number" means the aggregate number of shares of USSC Common Stock that are (or would be) outstanding immediately before the Effective Time (including all shares of USSC Common Stock issued or issuable upon conversion of all shares of USSC Preferred Stock and upon exercise, conversion or exchange in full of all unvested and vested USSC Options, USSC Warrants and USSC Stock Purchase Rights that remain outstanding and are not exercised, converted, exchanged or expired as of the Effective Time). "Aggregate Share Number" means approximately 35,000,000 shares of IMNT Common Stock and approximately 15,000,000 warrants to purchase IMNT Common Stock, subject to adjustment pursuant to Section 1.8. "Agreement" means this Agreement and Plan of Merger, including (unless the context otherwise requires) the Exhibits and the Disclosure Schedules and the certificates and instruments delivered in connection herewith, or incorporated by reference, as the same may be amended or supplemented from time to time in accordance with the terms hereof. 50 "Approval" means any approval, authorization, consent, permit, qualification or registration, or any waiver of any of the foregoing, required to be obtained from or made with, or any notice, statement or other communication required to be filed with or delivered to, any Governmental or Regulatory Authority or any other Person. "Assets and Properties" of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, whether absolute, accrued, contingent, fixed or otherwise and wherever situated), including the goodwill related thereto, operated, owned, licensed or leased by such Person, including cash, cash equivalents, Investment Assets, accounts and notes receivable, chattel paper, documents, instruments, general intangibles, real estate, equipment, inventory, goods and Intellectual Property. "Associate" means, with respect to any Person, any corporation or other business organization of which such Person is an executive officer or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar capacity and any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person. "Audited Financial Statement Date" means December 31, 2002. "Audited Financial Statements" means the audited balance sheet of USSC as of the fiscal year ended December 31, 2002 and the related audited statements of operations, stockholders' equity and cash flows for the fiscal year then ended, including the notes thereto together with the unqualified report of USSC's independent accountants with respect thereto. "Basket" has the meaning set forth in Section Error! Reference source not found.. "USSC" means Ultimate Security Systems Corporation, a Nevada corporation. "USSC Capital Stock" means USSC Common Stock and USSC Preferred Stock. "USSC Common Stock" has the meaning set forth in Section 2.3(a). "USSC Disclosure Schedule" means the schedules delivered to IMNT by or on behalf of USSC, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein in connection with the representations and warranties made by USSC in Article 2 or otherwise. "USSC Financials" means the Audited Financial Statements and the Interim Financial Statements. "USSC Intellectual Property" shall mean any Intellectual Property that (a) is owned by; (b) is licensed to; (c) was developed or created by or for USSC or (d) is used in or necessary for the conduct of the business of USSC as currently or heretofore conducted, including any Intellectual Property created by any of USSC's founders, employees, independent contractors or consultants for or on behalf of USSC. 51 "USSC Option(s)" means any Option to purchase USSC Common Stock, excluding USSC Preferred Stock and USSC Warrants. "USSC Preferred Stock" has the meaning set forth in Section 2.3(a). "USSC Registered Intellectual Property" means all Registered Intellectual Property owned by, filed in the name of, assigned to or applied for by, USSC. "USSC Restricted Stock" means shares of USSC Common Stock purchased pursuant to an exercise of a USSC Stock Purchase Right which are subject to a repurchase option by USSC. "USSC Series A Preferred Stock" has the meaning set forth in Section 2.3(a). "USSC Series B Preferred Stock" has the meaning set forth in Section 2.3(a). "USSC Stock Option Plan" has the meaning set forth in Section 1.6(c)(ii). "USSC Stock Purchase Right" means a right to purchase USSC Restricted Stock granted pursuant to the USSC Stock Option Plan or otherwise. "USSC Stockholder Action" has the meaning set forth in Section 2.33. "USSC Warrants" means any and all warrants to purchase USSC Common Stock, including the warrants listed in Section 2.3 of the USSC Disclosure Schedule. "IMNT" has the meaning set forth in the forepart of this Agreement. "IMNT Common Stock" has the meaning set forth in Recital C to this Agreement. "IMNT Disclosure Schedule" has the meaning set forth in the forepart of Article 3. "IMNT Indemnitees" has the meaning set forth in Section Error! Reference source not found.. "Books and Records" means all files, documents, instruments, papers, books and records relating to the Business or Condition of a Person, including financial statements, internal reports, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs (including data processing files and records), retrieval programs, operating data and plans and environmental studies and plans. "Business Combination" means, with respect to any Person, (a) any merger, consolidation, share exchange reorganization or other business combination transaction to which such Person is a party, (b) any sale, dividend, split or other disposition of any capital stock or other equity interest of such Person (except for issuances of common stock upon conversion of preferred stock outstanding on the date hereof or upon the exercise of options or warrants 52 outstanding on the date hereof or issued in accordance with the covenants of this Agreement), (c) any tender offer (including a self tender), exchange offer, recapitalization, restructuring, liquidation, dissolution or similar or extraordinary transaction, (d) any sale, dividend or other disposition of all or a material or significant portion of the Assets and Properties of such Person (including by way of exclusive license or joint venture formation but excluding non-exclusive licenses in connection with the sale of USSC products in the ordinary course of business consistent with past practice) or (e) the entering into of any agreement or understanding, the granting of any right or option, with respect to any of the foregoing. "Business Day" means a day other than Saturday, Sunday or any day on which banks located in Orange County, California are authorized or obligated to close. "Business or Condition of USSC" means the business, condition (financial or otherwise), results of operations or Assets and Properties of USSC. "Business or Condition of IMNT" means the business, condition (financial or otherwise), results of operations or Assets and Properties of IMNT and its Subsidiaries, considered in the aggregate. "Nevada Code" means the Nevada Corporations Code and all amendments and additions thereto. "Cause" means (a) conviction (whether by plea of guilty or nolo contendere or otherwise) of the employee in a court of law of any felony or of any crime involving dishonesty; (b) participation by the employee in any fraud against USSC, the Surviving Corporation or any of their respective Subsidiaries; (c) willful violation of specific and lawful directions from USSC or the Surviving Corporation or, if applicable, any of its Subsidiaries or excessive absenteeism that continues after USSC or the Surviving Corporation or, if applicable, any of its Subsidiaries has provided the employee with written notice of the violation or absenteeism and given the employee a period of thirty (30) days following the receipt of notice to correct the violation or absenteeism problem; (d) a material breach by the employee of the provisions of such employee's non-competition or non-disclosure agreements with USSC or the Surviving Corporation or, if applicable, any of its Subsidiaries; or (e) unsatisfactory performance of job duties, which is not corrected or continues after USSC or the Surviving Corporation or, if applicable, any of its Subsidiaries has provided the employee with written notice and given the employee a period of thirty (30) days following receipt of the notice to correct the breach. "Certificates" has the meaning set forth in Section 1.11(b). "Closing" means the closing of the transactions contemplated by Section 1.2. "Closing Date" has the meaning set forth in Section 1.2. "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. "Code" means the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. 53 "Competing Proposed Transaction" has the meaning set forth in Section 4.2. "Confidentiality Provisions" has the meaning set forth in Section 5.4. "Contract" means any legally binding agreement, lease, evidence of Indebtedness, mortgage, indenture, security agreement or other contract or business arrangement (whether written or oral). "Controlled Group" has the meaning set forth under the term "Plan" in this Section 10.1. "Delaware Certificate of Merger" has the meaning set forth in Section 1.2. "Delaware Law" means the Delaware General Corporation Law and all amendments and additions thereto. "Disclosure Schedules" means the USSC Disclosure Schedule and the IMNT Disclosure Schedule. "Dissenting Shares" has the meaning set forth in Section 1.10(a). "DOL" means the United States Department of Labor. "Effective Time" has the meaning set forth Section 1.2. "Employment Agreement" has the meaning set forth in Section 2.14(a). "Encumbrance" has the meaning set forth in Section 3.4. "Environment" means air, surface water, ground water or land, including land surface or subsurface, and any receptor, such as persons, wildlife, fish, biota or other natural resources. "Environmental Clean-up Site" means any location that is listed or proposed for listing on the National Priorities List, the Comprehensive Environmental Response, Compensation and Liability Information System, or on any similar state list of sites relating to investigation or cleanup, or that is the subject of any pending or threatened action, suit, proceeding or investigation, formal or informal, related to or arising from any location at which there has been a Release or threatened or suspected Release of a Hazardous Material. "Environmental Law" means any federal, state, local or foreign environmental, health and safety or other Law relating to Hazardous Materials, including the Comprehensive, Environmental Response Compensation and Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide Act and the California Safe Drinking Water and Toxic Enforcement Act. "Environmental Permit" means any permit, license, approval, consent or authorization required under or in connection with any Environmental Law and includes any and all orders, consent orders or binding agreements issued by or entered into with a Governmental or Regulatory Authority. 54 "Equity Equivalents" means securities (including Options to purchase shares of USSC Common Stock) that, by their terms, are or may be exercisable, convertible or exchangeable for or into common stock, preferred stock or other securities at the election of the holder thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. "Estimated Third Party Expenses" has the meaning set forth in Section 2.26. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder. "Exchange Ratio" means the quotient obtained by dividing (a) the Aggregate Share Number by (b) the Aggregate Common Number. "Expiration Date" has the meaning set forth in Section 7.1. "Financial Statement Date" means December 31, 2002. "GAAP" means generally accepted accounting principles in the United States, as in effect from time to time. "Governmental or Regulatory Authority" means any court, tribunal, arbitrator, authority, agency, bureau, board, commission, department, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision, and shall include any stock exchange, quotation service and the NASD. "Grossed-Up Basis" means, when used to describe the basis on which the payment of a specified sum is to be made, a basis such that the amount of such payment, after being reduced by the amount of all Taxes imposed on the recipient of such payment as a result of the receipt or accrual of such payment, will equal the specified sum. "Hazardous Material" means (a) any chemical, material, substance or waste including, containing or constituting petroleum or petroleum products, solvents (including chlorinated solvents), nuclear or radioactive materials, asbestos in any form that is or could become friable, radon, lead-based paint, urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any chemical, material, substance or waste that is now defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import under any Environmental Law; or (c) any other chemical, material, substance, pollutant or waste that is regulated by any Governmental or Regulatory Authority or that could constitute a nuisance. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 55 "Income Tax" means (a) any income, alternative or add-on minimum tax, gross income, gross receipts, franchise, profits, including estimated taxes relating to any of the foregoing, or other similar tax or other like assessment or charge of similar kind whatsoever, excluding any Other Tax, together with any interest and any penalty, addition to tax or additional amount imposed by any Taxing Authority responsible for the imposition of any such Tax (domestic or foreign); or (b) any liability of a Person for the payment of any tax, interest, penalty, addition to tax or like additional amount resulting from the application of Treas. Reg. ss. 1.1502-6 or comparable provisions of any Taxing Authority in respect of a Tax Return of a Relevant Group or any Contract. "Income Tax Regulations" means Part 1 of Title 26 of the United States Code of Federal Regulation, promulgated under the Code. "Indebtedness" of any Person means all obligations of such Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar instruments, (c) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (d) under capital leases or (e) in the nature of guarantees of the obligations described in clauses (a) through (d) above of any other Person. "Information Statement" has the meaning set forth in Section 2.33. "Intellectual Property" means all trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, patents and patent rights, utility models and utility model rights, copyrights, mask work rights, brand names, trade dress, product designs, product packaging, business and product names, logos, slogans, rights of publicity, trade secrets, inventions (whether patentable or not), invention disclosures, improvements, processes, formulae, industrial models, processes, designs, specifications, technology, methodologies, computer software (including all source code and object code), firmware, development tools, flow charts, annotations, all Web addresses, sites and domain names, all data bases and data collections and all rights therein, any other confidential and proprietary right or information, whether or not subject to statutory registration, and all related technical information, manufacturing, engineering and technical drawings, know-how and all pending applications for and registrations of patents, utility models, trademarks, service marks and copyrights, and the right to sue for past infringement, if any, in connection with any of the foregoing, and all documents, disks, records, files and other media on which any of the foregoing is stored. "Interim Financial Statements" means the unaudited balance sheet of USSC as of March 31, 2003, and the related unaudited statement of operations and statement of cash flows for the three (3) month period ended on such date. "Investment Assets" means all debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets owned of record or beneficially by USSC. "IRS" means the United States Internal Revenue Service or any successor entity. 56 "Law" or "Laws" means any law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law, whether in the United States, any foreign country, or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority. "Liabilities" means all Indebtedness, obligations and other liabilities of a Person, whether absolute, accrued, asserted or unasserted, contingent (or based upon any contingency), known or unknown, fixed or otherwise, or whether due or to become due. "License" means any Contract that grants a Person the right to use or otherwise enjoy the benefits of any Intellectual Property (including any covenant not to sue with respect to any Intellectual Property). "Liens" means any mortgage, pledge, assessment, security interest, lease, lien, easement, license, covenant, condition, restriction, adverse claim, levy, charge, option, equity, adverse claim or restriction or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing, except for any restriction on transfer generally arising under any applicable federal or state securities law. "Loss(es)" means any and all damages, fines, fees, Taxes, penalties, deficiencies, losses (including lost profits or diminution in value) and expenses, including interest, reasonable expenses of investigation, court costs, reasonable fees and expenses of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment (such fees and expenses to include all fees and expenses, including fees and expenses of attorneys, incurred in connection with (a) the investigation or defense of any Third Party Claim or (b) asserting or disputing any right under this Agreement against any party hereto or otherwise), net of insurance proceeds actually received (without any adverse effect on the premiums paid for such insurance) or proceeds received by virtue of third party indemnification. "Made-in-America Requirements" has the meaning set forth in Section 2.17(h). "Merger" has the meaning set forth in Recital A of this Agreement. "NASD" means the National Association of Securities Dealers, Inc. "New Shares" has the meaning set forth in Section Error! Reference source not found.. "Non-Prevailing Party" has the meaning set forth in Section Error! Reference source not found.(iii). "Officer's Certificate" has the meaning set forth in Section Error! Reference source not found.. "Option" with respect to any Person means any security, right, subscription, warrant, option, "phantom" stock right or other Contract (other than USSC Preferred Stock) that gives the right to (a) purchase or otherwise receive or be issued shares of capital stock or other equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for shares of capital stock or other equity interests of such Person or (b) receive any benefit or right similar to any right enjoyed by or accruing to the holder of shares of capital stock or other equity interests of such Person, including any right to participate in the equity, income or election of directors or officers of such Person. 57 "Order" means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final). "Other Tax" means any sales, use, ad valorem, business license, withholding, payroll, employment, excise, stamp, transfer, recording, occupation, premium, property, value added, custom duty, severance, windfall profit or license tax, governmental fee or other similar assessment or charge, together with any interest and any penalty, addition to tax or additional amount imposed by any Taxing Authority responsible for the imposition of any such tax (domestic or foreign). "Permit" means any license, permit, franchise or authorization. "Permitted Grants" means grants of USSC Options in the ordinary course of business, consistent in amount and terms with USSC' s past practice with the advance written approval of IMNT after the date of this Agreement. "Person" means any natural person, corporation, general partnership, limited partnership, limited-liability company or partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority. "Plan" means each employee benefit or compensation plan, agreement, policy, program or arrangement covering present or former employees, officers and directors of, and advisors and consultants to, USSC, including, without limitation, "employee benefit plans" within the meaning of section 3(3) of ERISA, stock purchase, stock option or any other stock-based award, profit sharing, fringe benefit, post-retirement health, health, life, vision and/or dental insurance coverage (including any self-insured arrangement), disability benefit, supplemental unemployment benefit, vacation benefit, change in control, retention, severance, termination pay, bonus and deferred compensation plans, agreements or funding arrangements (collectively, the "Plans"), whether written or oral and whether sponsored, maintained or contributed to by (i) USSC or (ii) any other organization that is a member of a controlled group of organizations (within the meaning of sections 414(b), (c), (m) or (o) of the Code) of which USSC is a member (the "Controlled Group"). "Post-Closing Directors" has the meaning set forth in Section 1.5. "PTO" means the United States Patent and Trademark Office. "Registered Intellectual Property" shall mean all United States, international and foreign: (a) patents and patent applications (including provisional applications); (b) registered trademarks and service marks, applications to register trademarks and service marks, intent-to-use applications, other registrations or applications to trademarks or service marks or trademarks or service marks in which common law rights are owned or otherwise controlled; (c) registered copyrights and applications for copyright registration; (d) any mask work registration and application to register mask works; and (e) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued by, filed with or recorded by any state, government or other public legal authority. 58 "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of a Hazardous Material into the Environment. "Relevant Group" has the meaning set forth in Section 2.11(a). "Representatives" has the meaning set forth in Section 2.34. "Restricted Stock Purchase Agreement" means a Restricted Stock Purchase Agreement in the form attached to the USSC Stock Option Plan pursuant to which USSC has sold USSC Restricted Stock or issued USSC Stock Purchase Rights or as otherwise may have been entered into by USSC before the date of this Agreement. "SEC" means the Securities and Exchange Commission or any successor entity. "SEC Documents" means, with respect to any Person, each report, schedule, form, statement or other document filed or required to be filed with the SEC by such Person pursuant to section 13(a) of the Exchange Act. "Securities Act" has the meaning set forth in Section 1.15. "Site" means any of the real properties currently or previously owned, leased, occupied, used or operated by USSC, any predecessor of USSC or any entity previously owned by USSC, including all soil, subsoil, surface waters and groundwater. "Subsidiary" means any Person in which USSC or IMNT, as the context requires, directly or indirectly through Subsidiaries or otherwise, beneficially owns at least twenty percent (20%) of either the equity interest in, or the voting control of, such Person, whether or not existing on the date hereof. "Surviving Corporation" has the meaning set forth in Section 1.1. "Takeover Statute" means a "fair price," "moratorium," "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States, including section 203 of the Delaware Law. "Tax" or "Taxes" means Income Taxes, Other Taxes or both, as the context requires. "Tax Laws" means the Code, federal, state, county, local or foreign laws relating to Taxes and all regulations or other official administrative pronouncements released thereunder. "Tax Returns" means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with, or, where none is required to be filed with a Taxing Authority, the statement or other document issued by, a Taxing Authority in connection with any Tax. 59 "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. "Third Party Claim" has the meaning set forth in Section Error! Reference source not found.. "Third Party Expenses" has the meaning set forth in Section 5.5. "Warranty Obligations" has the meaning set forth in Section 2.28. 10.2 Construction. (a) Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender and the neuter, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement as a whole and not to any particular Article, Section or other subdivision, (iv) the terms "Article" or "Section" or other subdivision refer to the specified Article, Section or other subdivision of the body of this Agreement, (v) the phrases "ordinary course of business" and "ordinary course of business consistent with past practice" refer to the business and practice of USSC, (vi) the words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation," and (vii) when a reference is made in this Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement unless otherwise indicated. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. When used herein, the terms "party" or "parties" refer to IMNT, on the one hand, and USSC, on the other, and the terms "third party" or "third parties" refers to Persons other than IMNT or USSC. (b) When used herein, the phrase "to the knowledge of" any Person, "to the best knowledge of" any Person, "known to" any Person or any similar phrase means (i) with respect to any Person who is an individual, the actual knowledge of such Person, (ii) with respect to any other Person, the actual knowledge of the directors and officers of such Person and other individuals that have a similar position or have similar powers and duties as the officers and directors of such Person, and (iii) in the case of each of (i) and (ii), the knowledge of facts that such individuals should have after due inquiry. For this purpose, "due inquiry" with respect to any matter means inquiry of and consultations with (a) the directors and officers of such Person and other individuals that have a similar position or have similar powers and duties as such officers and directors, (b) other employees of and the advisors to such Person, including legal counsel and outside auditors, who have principal responsibility for the matter in question or otherwise are likely to have information relevant to the matter and (c) the stockholders owning more than twenty percent (20%) of the equity interests, by vote or value, of such Person. 60 IN WITNESS WHEREOF, IMNT and USSC have caused this Agreement to be signed by their duly authorized representatives, all as of the date first written above. ULTIMATE SECURITY SYSTEMS CORPORATION IMMUNOTECHNOLOGY, INC. By: By: ------------------------------------ ----------------------------- Name: James Cooper Name: Mark Scharmann Title: president, chief executive Title: president, chief executive officer, secretary officer 62 EX-3.(I) 4 ex3-1.txt 3.1 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATES OF NEVADA ARTICLES OF INCORPORATION (PUSUANT TO NRS 78) STATE OF NEVADA (Graphic Omitted) AUG 18, 1994 12839-94 CHERYL A. LAU SECRETARY of STATE (inelgible) (for filing office use) No. (For filing office use) - ------------------------------------------------------------------------------- IMPORTANT: Read instructions on reverse side before completing this form. TYPE OR PRINT (BLACK INK ONLY) NAME OF CORPORATION: Ultimate Security Systems Corporation ------------------------------------------------------------ RESIDENT AGENT: (designated resident agent and his STREET ADDRESS in Nevada where process may be served) --------------- Name of Resident Agent: Laughlin Associates, Inc. - ------------------------------------------------------------------------------- Street Address: 2533 North Carson Street Carson City NV 89706-0147 - ------------------------------------------------------------------------------- Street No. Street Name city SHARES: (number of shares the corporation is authorized to issue) Number of shares with par value: Par value: ------------------ ------------------ Number of shares without par value: 100,000 -------------------------------------------- GOVERNING BOARD: shall be styled as (check one): X Directors Trustees ------ ------ The FIRST BOARD OF DIRECTORS shall consist of one members and the names ----------- and addresses are as follows: John Kinross-Kennedy 18662 MacArthur Blvd, Ste 290, Irvine CA 92715 - ---------------------------- ---------------------------------------------- Name Address City/State/Zip - ---------------------------- ---------------------------------------------- Name Address City/State/Zip - ---------------------------- ---------------------------------------------- Name Address City/State/Zip PURPOSE (optional-see reverse side): The purpose of the corporation shall be: to engage in any lawful act or activity for which a corporation may be organized in the State of Nevada other than insurance, engineering, banking, or gaming. - ------------------------------------------------------------------------------- NRS 78.037: States that the articles of incorporation may also contain a provision eliminating or limiting the personal liability of a director or officer of the corporation or its stockholders for damages for breach of fiduciary duty as a director or officer except acts or ommissions which include misconduct or fraud. Do you want this provision to be part of your articles? Please check one of the following: YES X NO . ---- ---- OTHER MATTERS: This form includes the minimal statutory requirements to incorporate under NRS 78. You may attach additional information noted on seperate pages. But, if any of the additional information is contradictory to this form it cannot be filed and will be returned to you for correction. Number of pages attached one . ---------- SIGNATURES OF INCORPORATORS: The names and addresses of each of the incorporators signing the articles: (signatures must be notorized) /s/ John Kinross-Kennedy - --------------------------------------- ------------------------------------- Name (print) Name (print) 18662 MacArthur Blvd, #290, Irvine CA 92715 - --------------------------------------- ------------------------------------- Address City/State/Zip Address City/State/Zip - --------------------------------------- ------------------------------------- Name (print) Signature - --------------------------------------- Subscribed and sworn to before me this Address 29th day of July, 1994 ----- ----------- /s/ Jeanet Dickerson - -------------------------------------- ------------------------------------- Signature Notary Public CERTIFICATE OF ACCEPTANCE OF APPOINTMENT (NOTARY STAMP) OF RESIDENT AGENT Laughlin Associates, Inc. hereby accept appointment as a - --------------------------------------- Resident Agent for the above named corporation. ineligible) August 8, 1994 - --------------------------------------- ------------------------------------- EX-3.(II) 5 exx3-2.txt 3.2 CERTIFICATE AMENDING ARTICLES OF INCORPORATION OF ULTIMATE SECURITY SYSTEMS CORPORATION The undersigned, being the President and Secretary of ULTIMATE SECURITY SYSTEMS CORPORATION, a Nevada Corporation, herby certify that by majority vote of the Board of Directors and majority vote of the stockholders at a meeting held on April 7, 1997 , it was agreed by unanimous vote that this CERTIFICATE AMENDING ARTICLES OF INCORPORATION be filed. The undersigned further certifies that the original Articles of Incorporation of ULTIMATE SECURITY SYSTEMS CORPORATION were filed with the Secretary of State of Nevada on the 18th day of August, 1994. The undersigned further certifies that ARTICLES FOURTH of the original Articles of Incorporation filed on the 18th day of August, 1994, herein is amended to read as follows: ARTICLE FOURTH That the total number of stock authorized that may be issued by the Corporation is TWENTY-FIVE MILLION (25,000,000) shares @ $.01 par value. There shall be two classes of stock authorized, of the said shares, TWENTY MILLION (20.000,000) shall be designated as common shares and FIVE MILLION (5,000;000) shall be designated as preferred . Said shares may be issued by the corporation from time to time for such considerations as may be fixed from time to time by the Board of Directors.. CERTIFICATE AMENDING ARTICLES OF INCORPORATION OF ULTIMATE SECURITY SYSTEMS CORPORATION The undersigned hereby certify that they have on this 12th say of May, 1997, executed this Certificate Amending the original Articles of Incorporation heretofore fled with the Secretary of State of Nevada. ------------------------- President ------------------------- Secretary STATE OF CALIFORNIA )SS: COUNTY OF ORANGE on this 14th day of May, 1997, before me, the undersigned, a Notary Public in and for the County of ORANGE, State of CALIFORNIA personally appeared: Known to me to be the person(s) whose name(s) are subscribed to the foregoing Certificate Amending Articles of Incorporation and acknowledged to me that they executed the same. ---------------------------------------- Notary Public [GRAPHIC OMITTED] EX-3 6 ex3-3.txt 3.3 FILED # C12839-94 DEC 20, 2000 In the office of /s/ Dean Heller Dean Heller Secretary of State CERTIFICATE OF AMENDMENT TO TIE ARTICLES OF INCORPORATION OF ULTIMATE SECURITY SYSTEMS CORPORATION a Nevada corporation Pursuant to the provisions of the Nevada Revised Statutes, Ultimate Security Systems Corporation, a Nevada corporation, adopts the following amendment to its Articles of Incorporation. 1. The undersigned hereby certifies that on the 9th day of September, 2000, a Special Meeting of the Board of Directors was duly held and convened at which there was present a quorum of the Board of Directors acting throughout all proceedings, and at which time the following resolution was duly adopted by the Board of Directors: BE IT RESOLVED, that the Secretary of the corporation is hereby ordered and directed to obtain at least a majority of the voting power of the outstanding stock of the corporation for the following purpose. To amend Article Fourth to provide that the authorized common stock be increased from twenty million (20,000,000) common shares with a par value of $.01 to fifty million (50,000,000) shares with a par value of $.01 and the preferred stock of the corporation be changed from five million (5,000,000) shares with a $.01 par value to six million (6,000,000) shares of preferred stock with a $.01 par value. 2. Pursuant to the provisions of the Nevada Revised Statutes, a majority of the stockholders holding issued and outstanding shares of the corporation entitled to vote gave their written consent to the adoption of the Amendment to Article Fourth of the Articles of Incorporation as follows: ARTICLE FOURTH. That the total number of stock authorized that may be issued by the Corporation is FIFTY SIX MILLON (56,000,000) shares of stock with a $.01 par value. There shall be two classes of stock authorized, of the said shares, FIFTY MILLION (50,000,000) shall be designated as common shares and SIX MILLION (6,000,000) shall be designated as preferred shares. Said shares may be issued by the Corporation from time to time for such consideration as rnay be fixed from time to time by the Corporation's Board of Directors. In witness whereof, the undersigned being the President and Secretary of Ultimate Security Systems Corporation, a Nevada corporation, hereunto affix their signatures this 30th day of November, 2000. Ultimate Security Systems Corporation By: By: ---------------------------------- ------------------------------ Its: Secretary Its: President This certificate is attached to a 2 page Certificate of amendment documctit for Ultimate Security Systems Corporation dated Novernber 30, 2000 State of California County of Orange On November :30, 2000, before me, Krystal L. Rivas Notary Public, pcrwnally appeared James K. Cooper, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person (s) whose name (s) is/tire subscribed to the within instrument and ocknowlcdgc to me that he/slic/they executed the same in his/hci/tlicir authorized capacity (its), and that by his/leer/their sit;natttre (s) on the instrument the person (s), or entity upon behalf of which the person (s) acted, executed the instrun lent. Witness m~ hand and official Witness my hand and offical seal. (Notary-California) - --------------------------------- Krystal L. Rivas, Notary Public EX-3.(I) 7 ex3-4.txt 3.4 CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF ULTIMATE SECURITY SYSTEMS CORPORATION, a Nevada corporation Pursuant to the provisions of the Nevada Revised Statutes, Ultimate Security Systems Corporation, a Nevada corporation, adopts the following amendment to its Articles of Incorporation. 1. The undersigned hereby certifies that on the - day of June, 2001, a Special Meeting of the Board of Directors was duly held and convened at which there was present a quorum of the Board of Directors acting throughout all proceedings, and at which time the following resolution was duly adopted by the Board of Directors: BE IT RESOLVED, that the Secretary of the corporation is hereby ordered and directed to obtain at least a majority of the voting power of the outstandin stock of the corporation for the following purpose: To amend Article Fourth to provide that the authorized preferred stock of the corporation be changed from six million (6,000,000) shares with a $.O1 par value to twelve million (12,000,000) shares of preferred stock with a $.01 par value. 2. Pursuant to the provisions of the Nevada Revised Statutes, a majority of the stockholders holding issued and outstanding shares of the corporation entitled to vote gave their written consent to the adoption of the Amendment to Article Fourth of the Articles of Incorporation as follows: ARTICLE FOURTH. That the total number of stock authorized that may be issued by the Corporation is SIXTY-TWO MILLION (62,000,000) shares of stock with a $.O1 par value. There shall be two classes of stock authorized, of the said shares, FIFTY MILLION (50,000,000) shall be designated as common shares and TWELVE MILLION (12,000,000) shall be designated as preferred shares. Said shares may be issued by the Corporation from time to time for such consideration as may be fixed from time to time by the Corporation's Board of Directors. In witness whereof, the undersigned being the President and Secretary of Ultimate Security Corporation, a Nevada corporation, hereunto affix their signatures this 15th day of June, 2001. Ultimiate Security Systems Corporation, a Nevada corporation By: By: ------------------------------- ---------------------------- Its: President Its: Secretary EX-3.(I) 8 ex3-5.txt 3.5 CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF ULTIMATE SECURITY SYSTEMS CORPORATION, a Nevada corporation Pursuant to the provisions of the Nevada Revised Statutes, Ultimate Security Systems Corporation, a Nevada corporation, adopts the following amendment to its Articles of Incorporation. 1. The undersigned hereby certifies that on the __ day of _________, 2002, a Special Meeting of the Board of Directors was duly held and convened at which there was present a quorum of the Board of Directors acting throughout all proceedings, and at which time the following resolution was duly adopted by the Board of Directors: BE IT RESOLVED, that the Secretary of the corporation is hereby ordered and directed to obtain at least a majority of the voting power of the outstanding stock of the corporation for the following purpose: To amend Article Fourth to provide that the authorized preferred stock of the corporation be changed from twelve million (12,000,000) shares with a $.01 par value to fifteen million (15,000,000) shares of preferred stock with a $.01 par value. 2. Pursuant to the provisions of the Nevada Revised Statutes, a majority of the stockholders holding issued and outstanding shares of the corporation entitled to vote gave their written consent to the adoption of the Amendment to Article Fourth of the Articles of Incorporation as follows: ARTICLE FOURTH. That the total number of stock authorized that may be issued by the Corporation is SIXTY-FIVE MILLION (65,000,000) shares of stock with a $.01 par value. There shall be two classes of stock authorized, of the said shares, FIFTY MILLION (50,000,000) shall be designated as common shares and FIFTEEN MILLION (15,000,000) shall be designated as preferred shares. Said shares may be issued by the Corporation from time to time for such consideration as may be fixed from time to time by the Corporation's Board of Directors. In witness whereof, the undersigned being the Chief Executive Officer and Secretary of Ultimate Security Systems Corporation, a Nevada corporation, hereunto affix their signatures this ___ day of __________________, 2002. Ultimate Security Systems Corporation, a Nevada corporation By: By: ---------------------------------- ----------------------------- Its: Chief Executive Officer Its: Secretary ACKNOWLEDGEMENT EX-3.(II) 9 exh3-6.txt 3.6 ULTIMATE SECURITY SYSTEMS CORPORATION Bylaws Article I: Stockholders SECTION 1.1. ANNUAL MEETING. There shall be an annual meeting of the stockholders of ULTIMATE SECURITY SYSTEMS CORPORATION (the "Corporation") on the second Tuesday in May of each year at 10:00 a.m. local time, or at such other date or time as shall be designated from time to time by the board of directors of the Corporation (the "Board of Director.") and stated in the notice of the meeting, for the election of directors and for the of such other business as may come before the meeting. SECTION 1.2. SPECIAL MEETINGS. A special meeting of the stockholders of the Corporation may be called at anytime the written resolution or other request of a majority of the members of the Board of Directors. Such written resolution or request shall specify, the purpose or purposes for which such meeting shall be called. SECTION 1.3. NOTICE OF MEETINGS. Written notice of each meeting of stockholders, whether annual or special, stating the date, hour and place thereof, shall be served either personally or by mail, not less then ten nor more than sixty days before the meeting, upon each stockholder of record entitled to vote at such meeting and upon any other stockholder to whom the giving of notice of such a meeting may be required by law. Notice of a special Meeting shall also state the purpose or purposes for which the meeting is called and shall indicate that such notice is being issued by or at the direction Of the Board of Directors. If, at any meeting, action is proposed to be taken that would, if taken, entitle stockholders to receive payment for their stock pursuant to the General Corporation Law of the State of Nevada, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, notice shall be deemed to be delivered when deposited in the United States mail or with any private express mail service postage or delivery fee prepaid, and shall be directed to each such stockholder at its address as it appears on the records of the Corporation, unless such stockholder shall have previously filed with the secretary of the Corporation a written request that notices such stockholders be mailed to some other address, in which case, it shall be mailed to the address designated in such request. SECTION 1.4. PLACE OF MEETING. The Board of Directors may designate any place, either in the 5tate of Nevada or outside the State of Nevada, as the place a stockholder meeting shall be held for any annual meeting or any special meeting called by the Board of Directors. If no designation is made, the place of such meeting shall be the principal office of the Corporation. Section 1.5. Fixing Date of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date which: (a) shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and shall not be less than ten nor more than sixty days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 2 entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date which: (a) shall not precede the date upon which the resolution fixing the record date is adopted, and (b) shall be not more than sixty days prior to such action. If no record date is fixed the Board of Directors, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 1.6. INSPECTORS. At each meeting of the stockholders, the polls shall be opened and closed, the proxies and ballots shall be received and be taken in charge, and all questions touching the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by one, or more inspectors. Such inspectors shall be appointed by the Board of Directors before or at such meeting or, if no such appointment shall have been made, then by the presiding corporate officer at the meeting. If for any reason any of the inspectors previously appointed shall fail to attend the meeting or shall refuse or be unable to serve, inspectors in place of any inspectors so failing to attend or refusing or being unable to serve shall be appointed in like manner. SECTION 1.7. QUORUM. At any meeting of the stockholders, the holders of one-third of the outstanding shares of each class and series, if any, of the capital stock of the Corporation present in person Or represented by proxy, shall constitute a quorum of the stockholders for all purposes, unless the representation of a larger number shall be required by law, in which case, the representation of the number so required shall constitute a quorum. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend in person or by proxy at the time and place fixed in accordance with these Bylaws for an annual or special meeting, a majority in interest of the stockholders present in person or by proxy may adjourn, from time to time, without notice other than by announcement at the meeting, until the requisite holders of the amount of stock necessary to constitute a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted. at the meeting as originally notified. SECTION I.8. BUSINESS. The chairman, if any, of the Board of Directors, the president of the Corporation or, in his absence the vice-chairman. if any, of the Board of Directors or an executive vice-president of the Corporation, inn the order named, shall call meetings of the stockholders to Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 3 order and shall act as the chairman of such meeting; provided, however that the Board of Directors or the executive committee, if any, may appoint any stockholder to act as the chairman of any meeting in the absence of the chairman of the Board of Directors. The secretary of the Corporation shall act as secretary at all the meetings of the stockholders, but in the absence of the secretary at any meeting of the stockholders, the presiding corporate officer may appoint any person to act as the secretary of the meeting, SECTION 1.9. STOCKHOLDER PROPOSALS. No proposal by a stockholder shall be presented for vote at an annual meeting of 'stockholders unless such stockholder shall, not Later than the close of business on the last business day of the month of January, provide the Board of Directors or the secretary of the Corporation with written notice of its intention to present a proposal for action at the forth coming meeting of stockholders. No proposal by a stockholder shall be presented for vote at a special meeting of stockholders unless such stockholder shall, not later than the close of business on the tenth calendar day following the date on which notice of' such meeting is first given to stockholder provide the Board of directors or the secretary of the Corporation with written notice of its intention to present a proposal for action at the forthcoming special meeting of stockholders. Any such notice shall be given by personal delivery or shall be sent via first class certified mail, return receipt requested, postage prepaid and shall include the name and address of such stockholder, the number of voting securities that such stockholder holds of record and a statement that such stockholders holds beneficially (or if such stockholder of record does not own such shares beneficially, including the executed consent and authorization of the beneficial stockholder), the text of the proposal to be presented for vote at the meeting and a statement in support of the proposal. Any stockholder who was a stockholder of record on the applicable record date may make any other proposal at an annual or special meeting of stockholders and the same may be discussed and considered; provided however, that unless stated in writing and filed with the Board of Directors or the secretary prior to the date set forth herein above such proposal shall be laid over for action at and adjourned, special, or annual meeting of the stockholders taking place sixty days or more thereafter, at a time place and date to be determined by the Board of Directors. This provision shall not prevent the consideration and approval or disapproval at an annual meeting of reports of officers, directors, and committees, but in connection with such reports, no new business proposed by a stockholder, qua stockholder, shall be acted upon at such annual meeting unless stated and filed as herein provided. Not with standing, any other provision of these Bylaws, the Corporation shall be under no obligation to include any stockholder proposal in its proxy statement materials or otherwise present any such proposal to stockholders at a special or annual meeting of stockholders if the Board of Directors reasonably believes the, proponents thereof have not complied with Sections 13 mid 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder; nor shall the Corporation be required to include any stockholder proposal not required to be included in its proxy materials to stockholders in accordance with any such section, rule or regulation. Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 4 SECTION 1.10. VOTING; PROXIES. At all meetings of stockholders, a stockholder entitled to vote may vote either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact, Such proxy shall be filed with the secretary of the Corporation at or before the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 1.11. VOTING BY BALLOT. The votes for directors, and upon the demand of any stockholder or when required by law, the votes upon any question before the meeting, shall be by ballot. SECTION 1.12. VOTING LISTS. The corporate officer who has, charged of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing, the address of each stockholder and the number of shares of stock registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to such meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city in which such meeting is to be held, which place, shall be specified in the notice of the meeting, or if not so specified, at the place where such meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. SECTION 1.13. Voting of Stock of Certain Holders. Shares of capital stock of the Corporation standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or in the absence of such provision, as the board of directors of such corporation may determine. Shares of capital stock of the Corporation standing in the name of a deceased person, a minor ward or an incompetent person may be voted by such person's administrator, executor, court-appointed guardian or conservator, either in person or by proxy, without a transfer of such stock into the name of such administrator, executor, court-appointed guardian or conservator. Shares of capital stock of the Corporation standing in the name of the trustee may be voted by such trustee, either in person or by proxy. Shares of capital stock of the Corporation standing in the name of a receiver may be voted by such receiver, either in person or by proxy, and stock held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in any appropriate order of the court by which such receiver was appointed. Bylaws of ULTIMATE SECURITY CORP0RATION (as adopted May 10, 1997) Page 5 A stockholder whose stock is pledged shall be entitled to vote such stock, either in person or by proxy, until the stock has been transferred into the name of the pledgee; thereafter, the pledgee shall be entitled to vote, either in person or by proxy, the stock so transferred. Shares of its own capital stock belonging to the Corporation shall not be voted, directly or indirectly at any meeting and shall not be counted in determining the total number of 'outstanding shares of capital stock at any given time; however, shares of the Corporation's own capital stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of shares of outstanding capital stock at any given time. SECTION 1.14. PROHIBITION AGAINST STOCKHOLDER ACTION BY CONSENT. Effective January 1, 1998, the stockholders of the Corporation may only take action by vote at an annual or special meeting of the stockholders. The stockholders of the Corporation may not take any action by consent (written or otherwise) in lieu of taking action at an annual or special meeting of stockholders. ARTICLE II: BOARD OF DIRECTORS SECTION 2.1. NUMBER AND TERM OF OFFICE. The business and the property of the Corporation shall be managed and (controlled by the Board of Directors. The Board of Directors shall consist of no fewer than two directors (one if there is one stockholder) and no more than twelve directors. Within the limits above specified, the number of directors shall be determined by the Board of Directors pursuant to a resolution adopted by a majority of the directors then in office. Each director shall hold office for the term for which elected and until his or her successor shah be elected and shall qualify. Directors need not be stockholders. Section 2.2. Classification. If there shall be more than one director, the directors be classified, in respect solely to the time for which they shall severally hold by dividing them into three classes (two classes if there are only two directors), each such class to be as nearly as possible equal in number of directors to each other class. If there ate three or more directors: (i) the first terra of office of directors of the first class shall expire at the first annual meeting after their election, and thereafter such terms shall expire on each three year anniversary of such date; (ii) the of office of the directors of the second class shall expire on the one year anniversary of the first annual meeting after Their election, and thereafter such tennis shall expire on each three year anniversary of such one year anniversary; and (iii) the term of office of the, directors of the third class shall expire on the two year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each three year anniversary of such two year anniversary. If there are two directors: (i) the first term of office of Directors of the first class shall expire at the first annual meeting after their election, and thereafter such terms shall expire on each two year anniversary of such date; and (ii) the term of office of the directors of the second class shall expire an the one year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each two Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 6, year anniversary of such one year anniversary. If there is one director, the term of office such director shall expire at the first annual meeting after his election. At each succeeding annual meeting, the stockholders of the Corporation shall elect directors for a full term or the remainder thereof, as the, case may be, to succeed those whose terms have expired, Each director shall hold office for the term for which elected and until his Or her successor shall be elected and shall qualify, or until he or she shall resign or be removed as set forth below. SECTION 2.3. REMOVAL. Any director, any class of directors or the entire Board of Directors may be removed at any time, with or without cause, but only by the affirmative vote of the holders of two-thirds (2/3) or more of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors cast at a meeting of the stockholders called for that purpose. Section 2.4. Vacancies. Vacancies in the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled only by the affirmative vote a majority of the remaining directors then in office, although the same may represent less than a quorum; except that vacancies resulting from removal from office by a vote of the stockholders may be filled by the stockholders at the same meeting at which removed occurs; provided however, that the holders of not less than two-thirds (2/3) of the outstanding shares of each class and series, if any, of the, capital stock of the Corporation entitled to vote upon the election of directors shall vote for each replacement direction, All directors elected to fill vacancies shall hold office for a term expiring at the time at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the terra of an incumbent director. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at any time of filling any vacancy or any newt), created directorship, the directors then in office shall constitute less than a majority of the Board of Directors (as constituted immediately prior to any applicable increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares of capital stock, at the time outstanding, taken together as a class, having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. SECTION 2.5. PLACE OF MEETINGS, ETC. The Board of Directors ay hold its meetings, and may have an office and keep the books of the Corporation (except as otherwise may be provided by law), in such place or places in the State of Nevada or outside of the State of Nevada, as the Board of Directors may determine from time to time. Any director may participate telephonically in any meeting of the Board of Directors, and such participation shall be considered to be the same as his physical presence thereat. SECTION 2.6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held on the day of the annual meeting of stockholders after the adjournment thereof and at such other Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 7 times and places as the Board of Directors may fix, No notice shall be required for any such regular meeting of the Board of Directors. SECTION 2.7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by direction of the chairman of the Board of Directors, the president of the Corporation, an executive vice-president of the Corporation or two thirds (2/3) of the directors then in office. The secretary of the Corporation shall give notice of each special meeting, stating the date, hour and place then of by delivering the same personally or by mail, at least five days before such meeting, to each director; however, such notice may be waived by any director. If mailed, notice shall be deemed to be delivered when deposited in the Unites States mail or with any private express document delivery service, postage or delivery fee prepaid. Unless otherwise indicated in the notice thereof any and all business may be transacted at a special meeting. At any meeting at which every director shall be present, even though without any notice, any business may be transacted. SECTION 2.8. QUORUM; ACTIONS BY BOARD. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business; however, if at any meeting of the Board of Directors there be less than quorum present, a majority of those present may adjourn the meeting adjourn the meeting from time to time. At any meeting of the Board of Directors at which a quorum is present, action may be taken by the affirmative vote of at least a majority of the members of the Board of Directors in attendance at such meeting, unless other wise set forth herein. SECTION 2.9. BUSINESS. Business shall be transacted at meetings of the Board of Directors in such Order as; the Board of Directors may determine. At all meetings of the Board of Directors, the chairman, if any, of the Board of Directors, the president of the Corporation, or in his absence the vice-chairman, if any, of the Board of' Directors, or an executive vice-president of the Corporation, in the order named, shall preside. SECTION 2.10, CONTRACTS. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one Or more of the Corporation's directors or officers have a financial interest or are directors or officers, shall be void or voidable solely for this reason or solely because such director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes such contract or transaction or solely because his or their votes are counted for such purpose, if: (A) The material facts relating to such officer's or director's relationship or interest and relating to the contract or transaction are disclosed or are known to the Board of Directors or committee thereof, and the Board of Directors or committee thereof, and the Board of Directors or committee thereof in good faith authorizes the contract or transaction by the affirmative vote of a majority of the although the disinterested directors may represent less than a quorum; or Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 8 (B) The material facts relating to such officer's Or director's relationship or interest and relating to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved, in good faith by vote of' the stockholders; or (C) The contract or transaction is fair with respect to the corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. For purposes of the foregoing provisions, interested directors may be counted in determining the presence of a quorum at, a meeting of the Board of Directors or of a Committee thereof which authorizes such a contract or transaction. SECTION 2.11. COMPENSATION OF DIRECTORS. Each director of the Corporation who is not a salaried officer or employee of the Corporation or of a subsidiary of the Corporation shall receive such allowances for as a director and such fees for attendance at meetings of the Board of Directors, the executive committee or any other committee appointed by the Board of Directors as the Board of Directors may from time to time determine. SECTION 2.12. ELECTION OF OFFICERS AND COMMITTEES. At the first repair meeting, of the Board of 'Directors in each year (at which a quorum shall be present) held next after the annual meeting of stockholders, the Board of Directors shall elect the principal) officers of the Corporation and members of the executive committee, if any, to be elected by the Mud of Directors under the provisions of Article III and Article IV of these Bylaws. The Board of Directors may designate such other committees with such power and authority (to the extent permitted by the Corporation's Certificate of Incorporation, as in effect, and these Bylaws), as may be provided by resolution of the Board of Directors, SECTION 2.13. NOMINATION. Subject to the rights of holders of any class or series of stock having a preference over the common stock of the Corporation as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or by any stock holder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder's intention to make such nomination or nominations has been given, either by personal delivery or by United States first class certified mail, postage prepaid, return receipt requested and to the secretary of the Corporation not later than: (a) With respect to an election to be held at an annual meeting of stockholders, the close of business on the last day of the month of January, and (b) with respect to an election to beheld at a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (i) the name and address of the stockholder who intends to make the nomination and of the Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10., 1997) Page 9 person or persons to be nominated; (ii) a representation that the stockholder is a holder of record of capital stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholders; (iv) such other information regarding each such nominee as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated by the Board of Directors; and (v) the consent of each such nominee to serve as a director of the Corporation if so elected. The presiding corporate officer at the meeting may refuse to acknowledge the nomination of any person not trade in compliance with the foregoing procedure. SECTION 2.14 ACTION BY WRITTEN CONSENT. Any action required or, permitted to be taken at any meeting of the Board of Directors, or of any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing and such writing is filed with the minutes of the proceedings of the Board of Directors or the committee. SECTION 2.15. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of Directors or any committee thereof may participate in a regular or special meeting of the Board of Directors or committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in such meeting can hear one another and such participation shall constitute presence in person at such meeting. ARTICLE III: EXECUTIVE COMMITTEE SECTION 3.1. NUMBER AND TERM OF OFFICE. The Board of Directors, by resolution adopted by the affirmative vote of a majority of the members of the Board of Directors, create an executive committee and elect die members thereof from among the, directors then in office. The executive committee shall consist of such number of members as may be fixed, from time to time by resolution of the Board of Directors in accordance with and as permitted by applicable law. Those directors who serve as officers of the Corporation, by virtue of their officers, shall be members of the executive committee. Unless otherwise ordered by the Board of Directors, each elected member of the executive committee shall continue to be a member thereof until the expiration of his term of service as a director. SECTION 3.2. POWERS. The executive committee may, while the Board of Directors is not in session, exercise, all or airy of the powers of the Board of Directors in all cases in which specific directions shall not have been given by the Board of Directors; provided however, that the executive committee shall not have the power or authority of the Board of Directors with respect to amending Bylaws of ULTIMATE SECURITY CORPOR.ATION (as adopted May 10, 1997) Page 10 the Corporation's Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property ,and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, amending the Bylaws, declaring a dividend, authorizing the issuance of stock or adopting a certificate of ownership and merger. SECTION 3.3. MEETINGS. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon delivery of not less than five days notice, given in person, by mail, by telegraph or by facsimile (if allowed by law), stating the place, date and hour of the meeting, but such notice may he waived by any member of the executive committee, If mailed, notice shall be deemed to be delivered when deposited in the United States mail or with any private express mail service, postage or delivery fee prepaid. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. At any meeting at which every member of the executive committee shall be present, in person or by telephone, even though without any notice, my business may be transacted. SECTION 3.4. PRESIDING OFFICER. At all of the executive committee the chairman of the executive committee, who shall be designated by the Board of Directors from among the members of the committee, shall preside, and the Board of directors shall designate a member of such committee to preside in the absence of the chairman thereof. The Board of Directors may also similarly elect from its members one or more alternate members of the executive committee to serve at the meeting; of such committee in the absence or disqualification of the regular member or members, and, in case more than one alternate is elected, shall designate at the time of election the priorities as between them. SECTION 3.5. VACANCIES. The Board of Directors by the affirmative vote of a majority of the members of the Board of Directors then in office, shall fill vacancies in the executive committee by election from the directors. SECTION 3.6. RULES OF PROCEDURE; QUORUM. All action by the executive committee shall be reported to the Board of Directors at the next succeeding meeting of the Board of Directors after such action has been taken and shall be subject to revision or alteration by the Board of Directors; provided, however, or acts of third parties shall be affected by an such revision or alteration. The executive committee shall fix its own rules of procedure, mid shall meet where and as provided by such rules or by resolution of the Board of Directors, but in every case the presence of a majority of the total number of members of the executive committee shall be necessary to constitute a quorum. In every case the affirmative vote of a majority of all the members of the executive committee present at the meeting shall be necessary for the adoption of any resolution. Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 11 Article IV. Officers SECTION 4.1. NUMBER AND TERM OF OFFICE. The officers of the Corporation shall be a president, a chief executive officer, one or more vice-presidents, a secretary, a treasurer, and such other officers as may be elected or appointed from time to time by the Board of Directors, including such additional vice-presidents with such designations, if any, as may be determined by the Board of Directors and such assistant secretaries and assistant treasurers as may be determined by the Board of Directors. In addition, the Board of Directors may elect a chairman thereof and may also elect a vice-chairman as officers of the Corporation (each of whom shall be a director). Any two or more offices may be held by the same person, except that the offices of president and secretary may not be held by the same person. In its discretion, the Board of Directors may leave unfilled an), office except those of president, treasurer and secretary. The officers of the Corporation shall be elected or appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of stockholders. Each officer shall hold office until his or her successor shall have been duly elected or appointed, until his or her death or until he or she shall resign or shall have been removed by the Board of Directors. SECTION 4.2. VACANCIES. Vacancies or new offices may be filled at any time by the affirmative vote of a majority of the Board of Directors. Each of the salaried officers of the Corporation shall devote his entire time and energy to the Corporation, unless the is expressly consented to by the Board of Directors or the executive committee, if any. SECTION 4.3. REMOVAL. Any officer may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation would be served thereby. SECTION 4.4. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman, if any, of the Board of Directors shall preside at all meetings of stockholders and of the Board of Directors and shall have such other authority and perform such other duties as are prescribed by law, by these Bylaws and by the Board of Directors. The Board of Directors may designate the chairman thereof as chief executive officer, in which case he shall have such authority and perform such duties as are prescribed by these Bylaws and the Board of Directors for the chief executive officer. SECTION 4.5. THE VICE-CHAIRMAN OF THE BOARD OF DIRECTORS. The vice-chairman if any, of the Board of Directors shall have such authority and perform such other duties as are prescribed by these Bylaws and by the Board of Directors, In the absence or inability to act of the chairman of the Board of Directors and of the president of the Corporation, the vice-chairman shall preside at the Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 12 meetings of the stockholders and of the Board of Directors and shall have and exercise all of the powers and duties of the chairman of the Board of Directors. The Board of Directors may designate the vice-chairman as chief executive officer, in which case he shall have such authority and perform such duties as are prescribed by these Bylaws and the Board of Directors for the chief executive officer. SECTION 4.6. THE PRESIDENT. The president of the Corporation shall have such authority and perform such duties as are prescribed by law, by these Bylaws, by the Board of Directors and by the chief executive officer (if the president is riot the chief executive officer). If there is no chairman of the Board of Directors, or in the chairman's absence or the chairman's inability to not a, the, chairman of the Board of Directors, the president shall preside at all meetings of stockholders and of the Board of Directors. Unless the Board of Director designates the chairman of the Board of Directors or the vice-chairman as chief executive officer, the president shall be the chief executive officer, in which case he shall have such authority and perform such duties as are prescribed by these Bylaws and the Board of Directors for the chief executive officer. SECTION 4.7. THE CHIEF EXECUTIVE OFFICER. Unless the Board of Directors designates the chairman of the Board of Directors or the vice-chairman as chief executive officer, the president shall be the chief executive officer of the Corporation. Subject to the supervision and direction of the Board of Directors, the, chief executive officer of the Corporation shall have general supervision of the business, property and affairs of The Corporation including the power to appoint and discharge agents and employees, and the powers vested in him or her by the Board of Directors, by law or by these Bylaws or which usul1y attach or pertain to such office. SECTION 4.8. THE EXECUTIVE VICE-PRESIDENTS. In the absence of the chairman of the Board of Directors, if any, vice-president of the Corporation, and in the event of the inability or refusal of the president of the Corporation to act, the vice-chairman, if any, the Board of Directors, or in the event of the inability or refusal of either of them to act, the executive vice-president of the Corporation (or in the even there is more than one executive vice-president of the Corporation, the executive vice-presidents thereof in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the chairman of the Board of Directors, of the president of the Corporation and of the vice-chairman of the Board of Directors, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chairman of the Board of Directors, the president of the Corporation and the vice-chairman of the Corporation. Any executive vice-president of the Corporation may sign, with the Secretary of the Corporation or an authorized assistant secretary, certificates for stock of the corporation and shall perform such other duties as from time to time may be assigned lo him or her by the chairman of the Board of Directors, the president of the Corporation, the vice-chairman of the Board of Directors the Board of Directors or these Bylaws. Bylaws of ULTIMATE SEC"U'RITY CORPQRATION (as adopted May 10, 1997 )) Page 13 SECTION 4.9. THE VICE-PRESIDENTS. The vice-presidents of the Corporation if any, shall perform such duties as may be assigned to them from time to time by the chairman of the Board of Directors, the president, the vice-chairman the Board of Directors or these Bylaws. SECTION 4.10. THE TREASURER. Subject to the direction of the chief executive officer of the Corporation and the Board of Directors, the treasurer of the Corporation shall, (a) have charge and custody of all the funds and securities of the Corporation, (b) when necessary or proper, endorse for collection or cause to be endorsed on behalf of the Corporation, checks, nots and other obligations, and cause the deposit of the same to the credit of the Corporation in such bank or banks or depository as the Board of Directors may designate or as the Board of Directors by resolution may authorize; (c) sign all receipts and vouchers for payments made to the Corporation other than routine receipts and vouchers, the signing of which he or she may delegate; (d) sign all checks made by the Corporation (provided, however, that the Board of Directors may authorize and prescribe by resolution the manner in which checks drawn on banks or depositories shall be signed, including the use of facsimile signatures, and the manner in which officers, agents or employees shall be authorized to sign) (e) unless otherwise provided by resolution of the Board of Directors, sign with an officer-director all bills of exchange and promissory notes of the Corporation, (P) sign with the president or are executive vice-president all certificates representing shares of the capital stock, (g) whenever required by the Board of Directors, render a statement of his or her rash account; (h.) enter regularly full and accurate account of the Corporation in books of the Corporation to be kept by the treasurer for that purpose; (i) exhibit, at all reasonable times, his or her books and accounts to any director of the Corporation upon application at the treasurer's office during regular business hours; and (j) perform all acts incident to the position of treasurer. If required by the Board of Directors, the treasurer of the Corporation shall give a bond for the faithful discharge of his or her duties in such sum as the Board of Directors may require. SECTION 4.11. THE SECRETARY. The secretary of the Corporation shall: (a) keep the minutes of all meetings of the Board of Directors, the minutes of all meetings of the stockholders and (unless otherwise directed by the Board of Directors) the minutes of all committees, in books provided for that purpose; (b) attend to the giving and Serving of all notices of the Corporation; (c) sign with an officer-director or any other duly authorized person, in the name of the Corporation, all contracts authorized by the Board of Directors Or by the executive committee, and, when so ordered by the Board of Directors or the executive committee, affix the seal of the Corporation thereto; (d) have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors or the executive committee may direct, all of which shall, at all reasonable times, be open to the examination of any director, upon application at, the secretary's office during regular business hours; and (e) in general, perform all of the duties incident to the office of the secretary, subject to the control of the chief executive officer and the Board of Directors. Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 14 SECTION 4.12. THE ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant, treasurers of the Corporation shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors may determine. The assistant secretaries of the "Corporation as thereunto authorized by the Board of Directors may sign with the chairman of the Board of Directors, The president of the Corporation, the vice-chairman of the Board of Directors or an executive vice-president of the Corporation, certificates for stock of the Corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The assistant treasurers and assistant secretaries, in general, shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or chief executive officer, the Board of Directors, or these Bylaws. SECTION 4.13. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he or she is also a director of the Corporation. SECTION 4.14. VOTING UPON STOCKS. Unless otherwise ordered by the Board of Directors or by the executive committee, any officer-director or any person or persons appointed in writing by any of them, shall have full power and authority or behalf of the Corporation to attend, to act and to vote at any meetings of stockholders of any Corporation in which the Corporation may hold stock, and at any such meeting shall possess and may exercise any and all the rights and powers incident to the ownership (if such stock, and which, as the owner thereof, the Corporation might have possessed and exercised if present. The Board of Directors may confer like powers upon any other person or persons. ARTICLE V: CONTRACTS AND LOANS SECTION 5.1. CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 5.2. LOANS. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name less authorized by a resolution of the Board of Directors such authority may be general or confined to specific instances. ARTICLE VI. CERTIFICATES FOR STOCK AND THEIR TRANSFER SECTION 6.1. CERTIFICATES FOR STOCK. Certificates representing shares of capital stock of the Corporation shall be in such form as may be determined by the Board of Directors. Such certificates shall be signed by the chairman of the Board of Directors, the president of the Corporation, the vice-chairman of the Board of Directors or an executive vice-president of the Corporation and by the Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 15 Secretary or an authorized assistant secretary and shall be sealed with the seal of the Corporation. The seal may be a facsimile. If a stock certificate is countersigned: (i) by a transfer agent other than the Corporation or its employee, or (ii) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In the event that any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate's issued, it may be issued by the Corporation with the same effect as if he, were such officer, transfer agent or registrar, at the date of issue. All certificates for capital stock shall be consecutively numbered or otherwise identified. The name of the person to whom the shares of capital stock represented thereby are issued, with the number of shares of capital stock and date of issue shall be entered on the books of the Corporation. All certificates surrendered to the Corporation for transfer shall be canceled and no new certificates shall be issued with the former certificate for a like number of shares of capital stock shall have been surrendered and canceled, except that in the event of a lost, destroyed or mutilated certificate, a new one may be issued therefor upon such terns and indemnity to the Corporation as the Board of Directors may prescribe. SECTION 6.2. TRANSFERS OF STOCK. Transfers of capital stock of the Corporation shall be made only on the books of the Corporation by the holder of record thereof of or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the Corporation, and on surrender for cancellation of the certificate for such capital stock. The person in whose name capital stock stands; on the books of the Corporation shall be deemed to be the owner thereof for all purposes as regards the Corporation. ARTICLE VII. FISCAL YEAR SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall begin can the first day of January in each year and end on the last day of December in each year. ARTICLE VIII. SEAL SECTION 8.1 SEAT. The Board of Directors shall approve a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the Corporation. ARTICLE IX. WAIVER OF NOTICE SECTION 9.1. WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of these Bylaws or under the provisions of the Certificate of Incorporation or under the provisions of the General Corporation Law of the State of Nevada, waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall Bylaws of ULTIMATE SECURITY CORPORATION (as adopted May 10, 1997) Page 16 be deemed equivalent to the giving of such notice. Attendance of any person at a meeting for which any notice is required to be given under the provisions of these Bylaws, the Certificate of Incorporation or the General Corporation Law of the State of Nevada shall constitute a waiver of notice of such meeting except when the person attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any businesses because the meeting is not lawfully called or convened. ARTICLE X: AMENDMENTS SECTION 10.1. AMENDMENTS. These Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any meeting of the Board of Directors by the affirmative vote of at least two-thirds (2/3) of the members of the Board of Directors or by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of each class and series, if any, of capital stock of the Corporation entitled to vote in the election of directors cast at a meeting of the stockholders called for that purpose. ARTICLE XI: INDEMNIFICATION AND ADVANCEMENT OF COSTS SECTION 11.1 INDEMNIFICATION AND ADVANCEMENT OF COSTS. The Corporation shall identify its officers, directors, employees and agents to the fullest extent permitted by the Certificate of Incorporation consistent with General Corporation Law of the State of Nevada, as amended from time to time; and the Corporation may advance costs incurred by officers, directors, employees and agents of the Corporation or another corporation partnership, joint venture, trust or other enterprise, in their defenses of any civil, criminal, administrative or investigative action or proceeding asserted against one or more Of them by reason of the fact of his, her, or their serving or having served in such capacity or capacities at the request of the Corporation and in advance of a final disposition of such action, suit or proceeding to the fullest extent permitted by the Certificate of Incorporation consistent with the General Corporation Law of the State of Nevada, as amended from time To time, provided that the terms and conditions of such advancement of costs is approved by the Board of Directors. Nothing herein is intended to limit the Corporation's authority to indemnify its officers, directors, employees and agents or to advance funds in connection therewith, under the General Corporation Law of the State of Nevada, as amended from time to time. EX-4 10 exh4-1.txt 4.1 AMENDMENT NO. 3 TO CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RELATIVE RIGHTS, QUALIFICATIONS AND RESTRICTIONS OF THE SERIES A 14% CONVERTIBLE PREFERRED STOCK OF ULTIMATE SECURITY SYSTEMS CORPORATION -------------- Pursuant to Section 78.195 of the General Corporation Law of the State of Nevada ------------- Ultimate Security Systems Corporation, a corporation organized and existing pursuant to, and by virtue of, the provisions of the General Corporation Law of the State of Nevada ("Corporation"), certifies as follows: The undersigned hereby certify that: 1. They are the duly elected and acting President and Secretary, respectively, of the Corporation. 2. WHEREAS, the Articles of Incorporation of the Corporation, as amended, authorizes the issuance of 15,000,000 shares of preferred stock, par value $.01 per share ("Preferred Shares") and, additionally, authorizes the issuance of Preferred Stock from time to time in one or more series as may from time to time be determined by the Board of Directors of the Corporation, each of those series to be distinctly designated, and on such terms and for such consideration as shall be determined by the Board of Directors of the Corporation, and, additionally, grants to the Board of Directors of the Corporation the authority to determine by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers, if any, and the designations, privileges, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof; and 3. WHEREAS, the Board of Directors of the Corporation, pursuant to action taken by written consent in lieu of a meeting of that Board of Directors, has duly adopted the following resolutions authorizing the creation of and issuance of a series of that Preferred Stock to be known as Series A 14%Convertible Preferred Stock; 4. WHEREAS, pursuant to the provisions of the Nevada Revised Statutes, a majority of the stockholders holding issued and outstanding shares of the stock of the corporation entitled to vote gave their written consent to the adoption of the Amendment to the Certificate of Designations, Preferences and Relative Rights, Qualifications and Restrictions of the Series A 14% Convertible Preferred Stock; 1 NOW, THEREFORE, IT IS: RESOLVED, the Board of Directors of the Corporation hereby determines and fixes the number, designations, preferences, privileges, rights and limitations of that series of the Preferred Shares on the terms and with the provisions herein specified: 1. Designation. A series of Preferred Stock of the Corporation is hereby designated "Series A 14% Convertible Preferred Stock" ("Series A Preferred Stock"), consisting of 10,000,000 shares. 2. Priority. Shares of the Series A Preferred Stock shall rank prior to the Corporation's Common Stock, $.01 par value per share ("Common Stock"), with respect to the payment of dividends and upon liquidation. Other classes of preferred stock shall be subordinated to and shall rank junior to the Series A Preferred Stock with respect thereto; provided, however, that holders of Series A Preferred Stock, by vote or written consent of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the then outstanding Series A Preferred Stock, may elect from time to time to allow other series or classes of preferred stock to rank senior to the Series A Preferred Stock with respect to dividends, assets or liquidation. The Corporation may create additional classes of capital stock, increase the authorized number of shares of preferred stock or issue series of preferred stock which rank on a parity with the Series A Preferred Stock with respect, in each case, to the payment of dividends and amounts upon liquidation, dissolution or winding up of the Corporation ("Parity Stock") without the consent of any holder of Series A Preferred Stock. 3. Dividends. (a) Dividend rates on the shares of Series A Preferred Stock shall be at an annual rate of fourteen percent (14%) annually. Dividends shall be cumulative (but not compounded) and accrue annually from the date of original issue of the Series A Preferred Stock and shall be payable, if, when, and as declared by the Board of Directors of the Corporation. Each dividend shall be paid to the holders of record of the Series A Preferred Stock as they shall appear on the stock register of the Corporation on such record date, not exceeding sixty (60) days nor less than ten (10) days preceding the payment date thereof, as shall be fixed by the Board of Directors of the Corporation or a duly authorized committee thereof. If declared, dividends shall be payable in cash. 2 (b) No dividends shall be payable on any shares of any class of the Corporation's capital stock ranking junior and subordinate to the Series A Preferred Stock as to the payment of dividends, unless all accrued dividends on the Series A Preferred Stock to the record date of the proposed dividends on the junior and subordinate class shall have been paid or have been declared and an amount sufficient for the payment of those dividends reserved. (c) Upon any conversion of any shares of Series A Preferred Stock, as described in Section 6 hereof, the holders thereof shall be entitled to receive in cash any accumulated, accrued or unpaid dividends in respect of such shares of the Series A Preferred Stock. 4. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of the Series A Preferred Stock shall be entitled to receive, out of the assets of the Corporation, whether such assets are capital or surplus and whether or not any dividends as such are declared, $2.00 per share plus an amount equal to all accrued and unpaid dividends thereon to the date fixed for distribution, and no more, before any distribution shall be made to the holders of the Common Stock or any other class of shares or series thereof ranking junior and subordinate to the Series A Preferred Stock with respect to the distribution of assets. (b) For purposes of this Section 4, a merger or consolidation of the Corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations with or into the Corporation, or the sale of all or substantially all of the assets of the Corporation, or any other corporate reorganization, in which consolidation, merger, sale of assets or reorganization the stockholders of the Corporation receive distributions in cash or securities of another corporation or corporations as a result of such consolidation, merger, sale of assets or reorganization, shall be treated as a liquidation, dissolution or winding up of the Corporation, unless the stockholders of the Corporation hold more than fifty percent (50%) of the voting equity securities of the successor or surviving corporation immediately following such consolidation, merger, sale of assets or reorganization, in which case such consolidation, merger, sale of assets or reorganization shall not be treated as a liquidation, dissolution, or winding up within the meaning of this Section 4. (c) Written notice of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, specifying a payment date and the place where the distributive amounts shall be payable, shall be given by mail, postage prepaid, not less than thirty (30) days prior to the payment date elected therein, to the holders of record of the Series A Preferred Stock at their respective addresses as the same shall appear on the books of the Corporation. 3 (d) No payment on account of such liquidation, dissolution or winding up of the affairs of the Corporation shall be made to the holders of any class or series of capital stock ranking on a parity with the Series A Preferred Stock in respect of the distribution of assets, unless there shall also be paid at the same time to the holders of the Series A Preferred Stock similar proportionate distributive amounts, ratably, in proportion to the fully distributive amounts to which they and the holders of such parity stock are respectively entitled with respect to such preferential distribution. 5. Voting Rights. Except as specified in Sections 2 and 8 hereof, the holders of Series A Preferred stock shall not have any voting powers, either general or special. 6. Redemption and Conversion. The Corporation will have the right to redeem the Series A Preferred Stock at any time within three years from the date of purchase for cash at a redemption price of $2.00 per Series A Preferred Share, plus an amount equal to accumulated, accrued and unpaid dividends. In the event the Corporation redeems any Series A Preferred Shares, the warrants appurtenant to those shares shall be immediately cancelled. The Corporation will be required to redeem any outstanding Series A Preferred Shares on a date three years from the date of purchase at a redemption price of $2.00 per share unless the Corporation's Common Stock is quoted on the Over-The-Counter Bulletin Board or a similar electronic quotation system or stock exchange, in which event the Corporation may, at its sole discretion, convert each outstanding share of Series A Preferred Stock into two (2) shares of the Corporation's $.01 par value Common Stock. If the outstanding shares of Common Stock are subdivided (by stock split, stock dividend or otherwise), into a greater number of shares of Common Stock, the number of shares of Common Stock into which each share of Series A Preferred Stock may be converted, shall, concurrently with the effectiveness of such subdivision, be proportionately increased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the number of shares of Common Stock which each share of Series A Preferred Stock may be converted into shall, concurrently with the effectiveness of such combination or consolidation, be proportionately decreased. Except as provided in Section 4, upon any liquidation, dissolution or winding up of the Corporation, if the Common Stock issuable upon conversion of the Series A Preferred Stock is changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), the number of shares of Common Stock 4 into which each share of Series A Preferred Stock may be converted shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted such that the Series A Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series A Preferred Stock immediately before the change. If at any time or from time to time there is a capital reorganization of the Common Stock (other than subdivision, combination, consolidation, reclassification, substitution, or exchange of shares provided for elsewhere in this Section 6), or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all of the Corporation's properties and assets to any other person, then, as part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of Series A Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the holders of the Series A Preferred Stock after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 6 shall be applicable after that event as nearly equivalent as may be practicable. 7. Status of Converted Stock. If any shares of Series A Preferred Stock are repurchased or converted pursuant to Section 6, the shares so repurchased or converted shall be retired and shall thereafter have the status of authorized and unissued shares of Preferred Shares which may be reissued by the Corporation at any time as shares of any series of Preferred Shares. 8. Restrictions and Limitations (a) At such time as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least sixty-six and two-thirds percent (66 2/3 %) of the then outstanding shares of Series A Preferred Stock: 5 (i) Redeem, purchase or otherwise acquire for value, any share or shares of Series A Preferred Stock, otherwise than by conversion in accordance with Section 6; (ii) Redeem, purchase or otherwise acquire any of the Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of Common Stock from employees, officers, directors, consultants or other person performing services for the Corporation or any subsidiary of the Corporation pursuant to agreements pursuant to which the Corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment. (iii) Authorize or issue, or obligate itself to issue, any other equity security (including any security convertible into or exercisable for any equity security) senior to the Series A Preferred Stock as to dividend or conversion rights and liquidation preferences; (iv) Effect any sale, lease, assignment, transfer, or other conveyance of all or substantially all of the assets of the Corporation or any of its subsidiaries, or any consolidation or merger involving the Corporation or any of its subsidiaries, or any reclassification or other change of any stock, or any recapitalization of the Corporation; or (v) Increase or decrease (other than by conversion) the total number of authorized shares of Series A Preferred Stock. (b) The Corporation shall not amend its Articles of Incorporation without the approval, by vote or written consent, by the holders of sixty-six and two-thirds percent (66 2/3%) of the Series A Preferred Stock, if such amendment would amend, modify, annul, supersede, or otherwise change any of the rights, preferences, privileges of, or limitations provided for herein for the benefit of any shares of the Series A Preferred Stock. Without limiting the generality of the preceding sentence, the Corporation will not amend its Articles of Incorporation without the approval by the holders of sixty-six and two-thirds percent (66 2/3%) of the Series A Preferred Stock, if such amendment would: (i) Reduce the dividend rate on the Series A Preferred Stock provided for herein, or make such dividends noncumulative, or defer the date from which dividends will accrue, or cancel accrued and unpaid dividends, or change the relative seniority rights of the holders of the Series A Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the Corporation; (ii) Reduce the amount payable to the holders of the Series A Preferred Stock upon the voluntary or involuntary liquidation, dissolution, or winding up the Corporation, or change the relative seniority of the liquidation preferences of the holders of the Series A Preferred Stock to the rights upon liquidation of the holders of any other capital stock of the Corporation; or 6 (iii) Cancel or modify the conversion rights of the Series A Preferred Stock provided for in Section 6. IN WITNESS WHEREOF, the Corporation has caused this Amendment No. 3 to Certificate of Designations, Preferences and Relative Rights, Qualifications and Restrictions of the Series A Preferred Stock to be duly executed by its Chief Executive Officer and President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this ________day of November, 2002. (Corporate Seal) ----------------------------- Chief Executive Officer ATTEST: ---------------------------------- Secretary The undersigned President and Secretary, respectively, of Ultimate Security Systems Corporation, a Nevada corporation, each declares under penalty of perjury under the laws of the State of California that the matters set out in the foregoing Certificate are true of his or her own knowledge. Executed at _________________, California on November ______, 2002. ----------------------------- Chief Executive Officer ----------------------------- Secretary 7 EX-4 11 ex4-2.txt 4.2 CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND RELATIVE RIGHTS, QUALIFICATIONS AND RESTRICTIONS OF THE SERIES B 14% CONVERTIBLE PREFERRED STOCK OF ULTIMATE SECURITY SYSTEMS CORPORATION -------------- Pursuant to Section 78.195 of the Nevada Revised Statutes ------------- Ultimate Security Systems Corporation, a corporation organized and existing pursuant to, and by virtue of, the provisions of the Nevada Revised Statutes ("Corporation"), certifies as follows: The undersigned hereby certify that: 1. They are the duly elected and acting Chief Executive Officer and Secretary, respectively, of the Corporation. 2. WHEREAS, the Articles of Incorporation of the Corporation, as amended, authorizes the issuance of 12,000,000 shares of preferred stock, par value $.01 per share ("Preferred Shares") and, additionally, authorizes the issuance of Preferred Stock from time to time in one or more series as may from time to time be determined by the Board of Directors of the Corporation, each of those series to be distinctly designated, and on such terms and for such consideration as shall be determined by the Board of Directors of the Corporation, and, additionally, grants to the Board of Directors of the Corporation the authority to determine by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers, if any, and the designations, privileges, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof; and 3. WHEREAS, the Board of Directors of the Corporation, pursuant to action taken by written consent in lieu of a meeting of that Board of Directors, has duly adopted the following resolutions authorizing the creation of and issuance of a series of that Preferred Stock to be known as Series B 14%Convertible Preferred Stock. NOW, THEREFORE, IT IS: RESOLVED, the Board of Directors of the Corporation hereby determines and fixes the number, designations, preferences, privileges, rights and limitations of the Series B 14% Convertible Preferred Stock on the terms and with the provisions herein specified: 1 1. DESIGNATION. A series of Preferred Stock of the Corporation is hereby designated "Series B 14% Convertible Preferred Stock" ("Series B Preferred Stock"), consisting of 4,000,000 shares. 2. PRIORITY. Shares of the Series B Preferred Stock shall rank prior to the Corporation's Common Stock, $.01 par value per share ("Common Stock"), and junior to the Corporation's Series A Convertible Preferred Stock, $.01 par value per share ("Series A Preferred Stock"), with respect to the payment of dividends and upon liquidation. Other classes of preferred stock, other than the Series A Preferred Stock, shall be subordinated to and shall rank junior to the Series B Preferred Stock with respect thereto; provided, however, that holders of Series B Preferred Stock, by vote or written consent of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the then outstanding Series B Preferred Stock, may elect from time to time to allow other series or classes of preferred stock to rank senior to the Series B Preferred Stock with respect to dividends, assets or liquidation. The Corporation may create additional classes of capital stock, increase the authorized number of shares of preferred stock or issue series of preferred stock which rank on a parity with the Series B Preferred Stock with respect, in each case, to the payment of dividends and amounts upon liquidation, dissolution or winding up of the Corporation ("Parity Stock") without the consent of any holder of Series B Preferred Stock. 3. Dividends. (a) Dividend rates on the shares of Series B Preferred Stock shall be a rate of fourteen percent (14%) annually. Dividends shall be cumulative (but not compounded) and accrue annually from the date of original issue of the Series B Preferred Stock and shall be payable, if, when, and as declared by the Board of Directors of the Corporation. Each dividend shall be paid to the holders of record of the Series B Preferred Stock as they shall appear on the stock register of the Corporation on such record date, not exceeding sixty (60) days nor less than ten (10) days preceding the payment date thereof, as shall be fixed by the Board of Directors of the Corporation or a duly authorized committee thereof. If declared, dividends shall be payable in cash. (b) No dividends shall be payable on any shares of any class of the Corporation's capital stock ranking junior and subordinate to the Series B Preferred Stock as to the payment of dividends, unless all accrued dividends on the Series B Preferred Stock to the record date of the proposed dividends on the junior and subordinate class shall have been paid or have been declared and an amount sufficient for the payment of those dividends reserved. 2 (c) Upon any conversion of any shares of Series B Preferred Stock, as described in Section 6 hereof, the holders thereof shall be entitled to receive in cash any accumulated, accrued or unpaid dividends in respect of such shares of the Series B Preferred Stock. 4. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of the Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation, whether such assets are capital or surplus and whether or not any dividends as such are declared, $2.00 per share plus an amount equal to all accrued and unpaid dividends thereon to the date fixed for distribution, and no more, before any distribution shall be made to the holders of the Common Stock or any other class of shares or series thereof ranking junior and subordinate to the Series B Preferred Stock with respect to the distribution of assets. (b) For purposes of this Section 4, a merger or consolidation of the Corporation with or into any other corporation or corporations, or the merger of any other corporation or corporations with or into the Corporation, or the sale of all or substantially all of the assets of the Corporation, or any other corporate reorganization, in which consolidation, merger, sale of assets or reorganization the stockholders of the Corporation receive distributions in cash or securities of another corporation or corporations as a result of such consolidation, merger, sale of assets or reorganization, shall be treated as a liquidation, dissolution or winding up of the Corporation, unless the stockholders of the Corporation hold more than fifty percent (50%) of the voting equity securities of the successor or surviving corporation immediately following such consolidation, merger, sale of assets or reorganization, in which case such consolidation, merger, sale of assets or reorganization shall not be treated as a liquidation, dissolution, or winding up within the meaning of this Section 4. (c) Written notice of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, specifying a payment date and the place where the distributive amounts shall be payable, shall be given by mail, postage prepaid, not less than thirty (30) days prior to the payment date elected therein, to the holders of record of the Series B Preferred Stock at their respective addresses as the same shall appear on the books of the Corporation. (d) No payment on account of such liquidation, dissolution or winding up of the affairs of the Corporation shall be made to the holders of any class or series of capital stock ranking on a parity with the Series B Preferred Stock in respect of the distribution of assets, unless there shall also be paid at the same time to the holders of the Series B Preferred Stock similar proportionate distributive amounts, ratably, in proportion to the fully distributive amounts to which they and the holders of such parity stock are respectively entitled with respect to such preferential distribution. 3 5. VOTING RIGHTS. Except as specified in Sections 2 and 8 hereof, the holders of Series B Preferred stock shall not have any voting powers, either general or special. 6. REDEMPTION AND CONVERSION. The Corporation will have the right to redeem the Series B Preferred Stock at any time within three years from the date of purchase for cash at a redemption price of $2.00 per Series B Preferred Share, plus an amount equal to accumulated, accrued and unpaid dividends. In the event the Corporation redeems any Series B Preferred Shares, the warrants appurtenant to those shares shall be immediately cancelled. Each share of Series B Preferred Stock will automatically convert to two (2) shares of the Corporation's Common Stock upon either: (i) a purchase of the Corporation; (ii) a merger of the Corporation into another company; or (iii) the Common Stock of the Corporation being quoted on the Over-the-Counter Bulletin Board or similar electronic quotation system or stock exchange. If the outstanding shares of Common Stock are subdivided (by stock split, stock dividend or otherwise), into a greater number of shares of Common Stock, the number of shares of Common Stock into which each share of Series B Preferred Stock may be converted, shall, concurrently with the effectiveness of such subdivision, be proportionately increased. In the event the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the number of shares of Common Stock which each share of Series B Preferred Stock may be converted into shall, concurrently with the effectiveness of such combination or consolidation, be proportionately decreased. Except as provided in Section 4, upon any liquidation, dissolution or winding up of the Corporation, if the Common Stock issuable upon conversion of the Series B Preferred Stock is changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), the number of shares of Common Stock into which each share of Series B Preferred Stock may be converted shall, concurrently with the effectiveness of such reorganization or reclassification, be proportionately adjusted such that the Series B Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of the Series B Preferred Stock immediately before the change. 4 If at any time or from time to time there is a capital reorganization of the Common Stock (other than subdivision, combination, consolidation, reclassification, substitution, or exchange of shares provided for elsewhere in this Section 6), or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all of the Corporation's properties and assets to any other person, then, as part of such reorganization, merger, consolidation, or sale, provision shall be made so that the holders of Series B Preferred Stock shall thereafter be entitled to receive upon conversion of the Series B Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the holders of the Series B Preferred Stock after the reorganization, merger, consolidation, or sale to the end that the provisions of this Section 6 shall be applicable after that event as nearly equivalent as may be practicable. 7. Status of Converted Stock. If any shares of Series B Preferred Stock are repurchased or converted pursuant to Section 6, the shares so repurchased or converted shall be retired and shall thereafter have the status of authorized and unissued shares of Preferred Shares which may be reissued by the Corporation at any time as shares of any series of Preferred Shares. 8. Restrictions and Limitations (a) At such time as any shares of Series B Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least sixty-six and two-thirds percent (66 2/3 %) of the then outstanding shares of Series B Preferred Stock: (i) Redeem, purchase or otherwise acquire for value, any share or shares of Series B Preferred Stock, otherwise than by conversion in accordance with Section 6; (ii) Authorize or issue, or obligate itself to issue, any other equity security (including any security convertible into or exercisable for any equity security) senior to the Series B Preferred Stock as to dividend or conversion rights and liquidation preferences; or (iii) Increase or decrease (other than by conversion) the total number of authorized shares of Series B Preferred Stock. 5 (b) The Corporation shall not amend its Articles of Incorporation without the approval, by vote or written consent, by the holders of sixty-six and two-thirds percent (66 2/3%) of the Series B Preferred Stock, if such amendment would amend, modify, annul, supersede, or otherwise change any of the rights, preferences, privileges of, or limitations provided for herein for the benefit of any shares of the Series B Preferred Stock. Without limiting the generality of the preceding sentence, the Corporation will not amend its Articles of Incorporation without the approval by the holders of sixty-six and two-thirds percent (66 2/3%) of the Series B Preferred Stock, if such amendment would: (i) Reduce the dividend rate on the Series B Preferred Stock provided for herein, or make such dividends noncumulative, or defer the date from which dividends will accrue, or cancel accrued and unpaid dividends, or change the relative seniority rights of the holders of the Series B Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the Corporation; (ii) Reduce the amount payable to the holders of the Series B Preferred Stock upon the voluntary or involuntary liquidation, dissolution, or winding up the Corporation, or change the relative seniority of the liquidation preferences of the holders of the Series B Preferred Stock to the rights upon liquidation of the holders of any other capital stock of the Corporation; or (iii) Cancel or modify the conversion rights of the Series B Preferred Stock provided for in Section 6. 6 IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations, Preferences and Relative Rights, Qualifications and Restrictions of the Series B Preferred Stock to be duly executed by its Chief Executive Officer and President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this ________day of December, 2002. (Corporate Seal) ----------------------------------- James Cooper Chief Executive Officer, President ATTEST: --------------------------------- Secretary The undersigned Chief Executive Officer and Secretary, respectively, of Ultimate Security Systems Corporation, a Nevada corporation, each declares under penalty of perjury under the laws of the State of California that the matters set out in the foregoing Certificate are true of his or her own knowledge. Executed at _________________, California on December ___, 2002. ----------------------------- James Cooper President ----------------------------- Secretary EX-5 12 ex51.txt 5.1 JOHN C. THOMPSON, LLC 22 EAST 100 SOUTH, #403 SALT LAKE CITY, UT 84111 August 7, 2003 Immunotechnology Corporation Board of Directors 1661 Lakeview Circle Ogden, Utah 84403 Re: Registration Statement on Form S-4 Ladies and Gentlemen: I refer to the above-captioned registration statement on Form SB-2 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), to be filed on August 8, 2003 by Immunotechnology Corporation, a Delaware corporation (the "Company"), with the Securities and Exchange Commission. I have examined the originals, photocopies, certified copies or other evidence of such records of the Company, certificates of officers of the Company and public officials, and other documents as I have deemed relevant and necessary as a basis for the opinion hereinafter expressed. In such examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as certified copies or photocopies and the authenticity of the originals of such latter documents. In rendering this opinion, as to all matters of fact relevant to this opinion, I have assumed the completeness and accuracy of, and am relying solely upon, the representations, warranties and agreements of the Company and Ultimate Security Systems Corporation ("USSC") set forth in the Registration Statement, including the exhibits thereto, and the statements set forth in certificates of public officials and officers of the Company and of USSC, without making any independent investigation or inquiry with respect to the completeness or accuracy of such representations, warranties, agreements or statements. I assume that each agreement, document or obligation referred to herein has been duly authorized, executed and delivered by all parties (other than the Company) thereto and that each such party (other than the Company) has all requisite legal capacity, power and authority and have taken all necessary action to effect the transactions contemplated by each such agreement, document or obligation to which it is a party. The opinion expressed herein is qualified to the extent that the validity, binding effect or enforceability of any provision of any of the agreements, documents or obligations referred to herein may be subject to or affected by (i) applicable bankruptcy, insolvency, equitable subordination, preference, fraudulent conveyance or transfer, reorganization, moratorium, debt recharacterization or other laws relating to or affecting the rights and remedies of creditors generally or (ii) general equitable principals. I do not express any opinion herein as to the availability of any equitable or other specific remedy or of injunctive relief upon breach of any of the agreements, documents or obligations referred to herein. I express no opinion as to the validity, binding effect or enforceability of any provision of any of the agreements, documents or obligations referred to herein relating to (i) choice of law; (ii) the agreement to submit to the jurisdiction of any court to the extent that any court has the discretion to assume or decline such jurisdiction; or (iii) the enforceability of any provision regarding non_competition or other matters determined to be contrary to public policy. Furthermore, I express no opinion as to the validity, binding effect or enforceability of the indemnification and contribution provisions contained in any such agreement, document or obligation. I express no opinion as to compliance with applicable anti_fraud statutes, rules or regulations of applicable state or federal law. I express no opinion as to, or as to any matter subject to, the laws of any state or jurisdiction other than the federal laws of the United States and, to the extent necessary for this opinion, the Delaware General Corporation Law. Based on my examination mentioned above, I am of the opinion that the securities to be sold pursuant to the Registration Statement, including 366,666,667 shares of common stock of Immunotechnology Corporation to be issued to the shareholders of Ultimate Security Systems Corporation, and up to 3,600,000 shares of common stock underlying options for the purchase of common stock granted to Dollars and Sterling Corporation d/b/a Shulman & Associates (1,600,000 options) and Stenton Leigh Business Resources, Inc. (2,000,000 options), are duly authorized and will be, upon consummation of the merger and when issued in the manner described, respectively, in the Registration Statement, and according to the provisions of the Consulting and Acquisition Management Agreement, as amended, between USSC and Shulman & Associates, and the Advisory Services Agreement between USSC and Stenton Leigh Business Resources, Inc., legally and validly issued, fully paid and non-assessable under the applicable provisions of the Delaware General Corporation Law. I hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to me under "Legal Matters" in the related Prospectus. In giving the foregoing consent, I do not hereby admit that I am in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations of the Securities and Exchange Commission. /s/ John C. Thompson John C. Thompson, Esq. EX-10 13 exh10-1.txt 10.1 CONSULTING AND ACQUISTION MANAGEMENT AGREEMENT This Consulting and Acquisition Management Agreement effective the 1st day of July, 2003 by and between Ultimate Security Systems Corporation ("USSC"), a Nevada corporation (the "Company") Dollars and Sterling Corporation D/B/A Shulman & Associates ("S&A"), a Florida corporation. WHEREAS, the Company desires to engage the services of S&A (the "Services") to identify and evaluate merger or acquisition candidates for the Company as well as to assist the Company in the identification, evaluation and structure mergers, consolidations, acquisitions, joint ventures and strategic alliances (hereinafter collectively referred to as "Acquisitions") and to provide certain financial public relations services for Company. WHEREAS, S&A, has represented to the Company that it has expertise in such areas and has successfully performed such services for other private and publicly-traded companies in the past. WHEREAS, S&A, desires to perform the Services on behalf of the Company. WHEREAS, the parties hereto desire to set forth the terms and conditions of the agreement of S&A, to perform the services. NOW THEREFORE, in consideration of the mutual promises contained herein and intending to be legally binding hereby, the parties hereto agree as follows: 1. RECITALS. The foregoing recitals are true and correct. 2. CONSULTING SERVICES. 2.1. S&A, agrees to assist and advise the Company in its financial public relations by working with outside entities as directed by the Company. 2.2. The preparation of an acceptable executive summary (if needed) for financing in the form of but not limited to, Equity placement, sale lease-back of assets, leverage leasing of capital equipment and Joint Ventures or Strategic Partners; 2.3. Distribution of publicly available corporate materials on USSC to the brokerage community, institutional and individual investors, and other interested parties (upon request, or as instructed by USSC); 90 2.4. Telephone and personal meetings with individual investor groups, regional brokerage firms, and/or institutional investors, when appropriate; 2.5. Arrangement of management presentations to stockbroker groups, research analysts, and/or portfolio managers, in various cities around the U.S. and Canada; 2.6. Services involving investor relations, corporate finance or introductions to funding and banking sources and S&A will consult with the Company's management and provide recommendations concerning financial and related matters including: a. Changes in the capitalization of USSC; b. Changes in USSC corporate structure; c. Redistribution of shareholdings of USSC stock d. Offerings of securities in public transactions; e. Sales of securities in private transactions; f. Alternative uses of corporate assets; g. Structure and use of debt; and h. Sale of stock by insiders pursuant to Rule 144 or otherwise. 3. TERM. This agreement shall be for a term ("Term") of two (2) years from the date hereof. However, the Agreement may be terminated by either party upon thirty (30) days prior written notice. 4. COMPENSATION. The Company shall pay the following compensation to S&A in consideration of the Services to be rendered hereunder: 4.1. A one time, up front payment of five thousand dollars ($5,000) followed by a monthly fee of five thousand dollars ($ 5,000.00) during the term of this Agreement. Such fee shall include normal out of pocket expenses incurred by S&A. Any extraordinary expenses for which S&A desires to be reimbursed must be approved in writing in advance by the Company. 4.2. Upon the completion of the merger agreement with ImmunoTechnology Corporation the Company shall grant S&A an option to purchase up to 1,600,000 common shares of the Company's common stock (subject to the conversation ratio as set forth in the agreement with ImmunoTechnology). The Company shall deliver such shares, within fifteen (15) days of the date such option is exercised by S&A. In addition the company will file a registration statement with the SEC within 45 days of the signed contract to register the shares underlying these options. The purchase price of these options will be $ .10 per share (subject to the conversation ratio as set forth in the agreement with ImmunoTechnology). This option will be available for one year from the date of this contact or one year from the effective date of the Registration Statement. 91 4.3. Compensation defined in item 4.1 is contingent on the amount of funding to the company, arranged and placed by S&A. These amounts are percentage based on a funding level of one million dollars ($1,000,000) up to a maximum of four million dollars ($4,000,000). 4.4. Upon closing of any Financing and/or Funding (exclusive of the company's currently outstanding common stock warrants) .The COMPANY shall pay `SA' on an advisory and introduction fee in an amount to be mutually agreed upon but no less than 4% of the financing. 5. ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supercedes all prior agreements, written or oral, with respect thereto. 6. WAIVERS AND AMENDMENTS. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law or in equity. 7. GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Florida. 8. NO ASSIGNMENT. This Agreement is not assignable by the parties without the prior consent of the others. 9. SEVERABILITY. The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or other provision of this Agreement shall in no way affect the validity or enforcement of any other provision or part thereof. 10. NO AGENCY. S&A shall not, without the express written consent of the Company, hold itself out as the agent of the Company, nor shall S&A have the authority to bind the Company or incur liabilities on behalf of the Company, except as otherwise provided for herein, without the express written consent of the Company. 11. NOTICES. All notices to be given hereunder shall be in writing, with fax notices being an acceptable substitute for mail and/or and delivery to: 92 If to Shulman & Associates: 2200 Corporate Blvd Suite 309 Boca Raton, Florida 33431 Att: Manny J. Shulman, Shulman & Associates, If to the Company: 18271 West McDurmott Ste F Irvine, Ca 92614 Attention: James K. Cooper, President IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. ULTIMATE SECURITY SYSTEMS CORPORATION BY: ---------------------------- James K. Cooper, CFO Dollars and Sterling Corp D\B\A Shulman & Associates BY: ----------------------------- Manny J Shulman, President EX-10 14 exh10-2.txt 10.2 Stenton Leigh Business Resources, Inc. 1900 Corporate Blvd., Suite 305 West Boca Raton, Florida 33431 Telephone (561) 241-9921 Fax (561) 241-7011 February 19, 2003 PRIVATE AND CONFIDENTIAL - ------------------------- Mr. James K. Cooper CEO and Chairman Ultimate Security Systems Corp. 17173 Gillette Ave., Suite 5B Irvine, CA 92614 Dear Mr. Cooper: Re: Advisory Services --------------------- Further to our conversations, we at Stenton Leigh Business Resources, Inc. ("SL") have become aware of potential investor(s), merger partner(s) or acquirer(s) for Ultimate Security Systems Corporation, and its affiliates, subsidiaries or associates (collectively "USSC" or the "Company"). In this regard, we submit herein our Agreement to confirm our understanding that USSC is prepared to compensate SL as its advisor in connection with a possible divestiture, joint venture, or other business combination of USSC and all or part of its assets or business with the party or parties to be introduced by SL (the "Transaction"), including Immunotechnology Corporation ("IMNT") or its subsidiaries or successors. 1. COMPENSATION ------------ SL shall receive a $500,000 cash fee upon completion of a Transaction, including a merger or acquisition with ImmunoTechnology ("IMNT") payable upon completion of a minimum of $5.0 million gross in financing from USSC's upcoming Private Placement. In consideration of these services to be rendered and performed by SL during the term of this Contract, the Company will pay SL a fee of $15,000 per month during a term of sixty (60) months ("Term") to commence payment after completion of the $5.0 million gross upcoming Private Placement. Inconsideration for the performance of services hereunder, the Company hereby agrees to pay to SL a non-refundable retainer in immediately available funds, of $15,000, upon execution of this Agreement. II. EQUITY OPTION ------------- At the consummation of a Transaction, SL and or assign will have the option for three years from the date of consummation of the Transaction to purchase 2,000,000 common shares of the Company at $0. 10 per share ("exercise price"). These Options will have a cashless exercise provision allowing for conversion by the Optionee at the difference between the stock market bid price at time of conversion and the Exercise Price as stated above, to be used to compute the stock payment by this differential. In the event that the Company shall sell or issue any Common Shares or Convertible Securities (including, without limitation, warrants, options, etc.) at a per share price (or exchange, exercise or conversion price) or on the day of exercise by the Optionee, the Common Shares are publicly trading on any NASD below the Exercise Price then in effect, the Exercise Price shall be immediately and automatically reduced to such lower price and the Options to purchase the Common Shares shall be proportionally increased, as to give the Company the same economic benefit originally granted. (Example: 300,000 options at $1.00 per Share would result in $300,000 to the Company. Should the Exercise Price be reduced to say $.75 per share, then the number of shares to be issued would then be increased to 400,000 "Conversion Price Protection"). III. TERMINATION ----------- SL's services may be terminated at any time. If SL's services are terminated SL will be entitled to receive and retain the portion of any fees payable as set out above. In the event of termination of this agreement SL would receive full compensation if at any time prior to the expiration of twenty-four (24) months after the giving of notice of termination of our arrangement, any Transaction is consummated with any party or parties with whom discussions regarding a Transaction had been initiated during the period of our engagement. Moreover, the indemnity contained herein would remain operative and in full force and effect regardless of any such termination, including USSC. 93 The termination of the Agreement shall be without liability or continuing obligation to you or to SL, except as set forth herein. USSC agrees that USSC will not within two years from this date deal directly or indirectly with any party or parties with whom discussions regarding a Transaction had been initiated by SL without SL's written consent and should USSC do so, and a sale or other financial arrangement be consummated, USSC shall be liable to SL for all and any damages which SL may suffer including but not limited to the compensation which would have been payable upon consummation on the listed selling price or minimum commission, whichever is greater. IV. INDEMNIFICATION --------------- In addition to the compensation which the Company has agreed to pay to SL for the services performed, the Company also agrees to indemnify and hold harmless SL and related persons and entities all as set forth in Schedule I attached hereto and made a part hereof. V. DISCLOSURE ---------- Any advice rendered by SL pursuant to this Agreement may not be disclosed publicly in any manner without the prior written approval of SL. All non-public information given to SL by the Company and all advice given by SL to the Company will be treated by SL as confidential information, and SL agrees not to make use of such information and advice other than for the performance of this Agreement, and shall not disclose or release such information or advice other than to or for the appropriate executive officers of the Company or as directed or permitted by such executive officers. USSC understands and agrees that all dealings concerning any business opportunity will be handled through SL and that SL represents USSC and will be paid for its services by USSC. USSC further agrees that information received with respect to any above-mentioned opportunity will be kept in strict confidence and that USSC shall not disclose this information to any person, excluding those parties specifically involved in the transaction itself and USSC's sole purpose in seeking information about the business is to consummate a transaction. In particular, but without limitation, USSC will not use said information in competition with a potential party to a transaction. In the event that USSC violates this confidentiality covenant or any other covenant herein with respect to a potential party, both SL and the potential party shall be entitled to all remedies provided by law, including but not limited to, injunctive relief and damages. SL is not registered as a broker or dealer under The Securities Act of 1934, and certain transactions contemplated herein may require the retention of same to consummate such transactions. All data on business opportunities are provided for information purposes only. No representation is made by SL as to the accuracy of any data provided. SL encourages USSC to thoroughly review and independently verify to USSC's own satisfaction that any data provided are substantially representative of the business activity of such entity and can be relied upon when considering a transaction with such entity. USSC acknowledges that USSC has been advised to seek the independent counsel of an attorney and/or accountant to verify the information supplied by SL and to examine any and all applicable documentation relevant to the transaction. The Company represents and warrants that all information (i) made available to SL and any prospective financing source, or (ii) contained in any materials prepared by the Company with respect to the financing, will, at all times during this engagement, be true, accurate and complete in all material respects and will not contain any untrue statement of a material fact or omit to state therein or necessary to make the statements therein not misleading in light of the circumstances under which they are made. The Company further represents that any projections provided to SL or contained in any materials prepared by the Company with respect to the financing will have been prepared in good faith and will be based upon assumptions which, in light of the circumstances under which they are made, are in Company's determination, reasonable. VI. NON-CIRCUMVENTION ----------------- The Company agrees not to contact persons or entities introduced by SL or persons or entities resulting directly from introductions made from SL without the prior consent of SL. The spirit of mutual trust and confidence shall be the underlying principle of this undertaking and the parties agree to adhere thereto. 94 VII. ENTIRE AGREEMENT ---------------- This Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes and cancels any prior communications, understandings, and agreements between the parties relating to such subject matter. This Agreement cannot be modified or changed, nor can any of its provisions be waived, except by written agreement signed by all parties. VIII. ILLEGALITY/UNENFORCEABILITY --------------------------- In the event that any provision of this Letter of Agreement is declared illegal or unenforceable in any respect under applicable law, rule, or court decision, (i) the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired, and (ii) this Letter of Agreement shall be construed so as to effectuate as nearly as possible the intent of said provision and the intent of the parties. IX. GOVERNING LAWS AND JURISDICTION ------------------------------- The Company hereof hereby waives all pleas of lack of jurisdiction, improper venue and forum nonconveniens as not being a resident of any County in Florida where suit is instituted and hereby specifically authorizes any action brought in connection with the enforcement of this Agreement to be instituted and prosecuted in the Circuit Court of Palm Beach County, in the State of Florida, at the election of SL. This Agreement and all rights and obligations of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Florida and applicable United States federal law. X. SURVIVAL -------- This agreement will survive any Transaction with USSC. XiI ACCEPTANCE ---------- Please confirm that the foregoing is in accordance with your understanding by signing upon behalf of the Company and returning to SL at SL's Boca Raton office, 1900 Corporate Blvd., Suite 305 West, Boca Raton, Florida 3343 1, the duplicate of this Agreement. This offer of services is available until February 27, 2003, unless extended at the sole discretion of SL. Any signature on a facsimile copy of this Agreement shall be binding and valid as if made on the original copy of this Agreement. Yours very truly, STENTON LEIGH BUSINESS RESOURCES, INC. Acknowledged and accepted this ______day of ___________, 2003. Ultimate Security Systems Corporation - -------------------------------------- By: Mr. James K. Cooper, CEO and Chairman SCHEDULE I ---------- INDEMNIFICATION PROVISIONS The Board of Directors of Ultimate Security Systems Corporation (the "Company") agrees to indemnify and hold harmless Stenton Leigh Business Resources, Inc. ("SU) from and against any and all losses, claims, damages, liabilities, obligations, penalties, judgements, awards, costs, expenses and disbursements, joint or several (and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise) including, without limitation, the costs, expenses and disbursements (including counsel fees), as they are incurred, of investigating, preparing or defending any such action, suit, proceeding or investigation (whether or not in connection with pending or threatened litigation in which SL is a party), directly or indirectly caused by, relating to, based upon, arising out of, or in connection with any services rendered by SL to the Company, including, without limitation, any act or on-fission by SL in connection with its acceptance of or the performance or non-performance of its obligations under the letter agreement dated February 19, 2003, between the Company and SL, as it may be amended from time to time (the "Agreement"); provided, however, that the Company will not be liable under these Indemnification Provision to the extent that any portion of such loss, claim, damage, liability, obligation, penalty, judgement, award, cost, expense or disbursement is found in a finaI judgement by a court of competent jurisdiction from which no appeal can be or is taken to have resulted solely from gross negligence of SL or the SL affiliates (as defined below). The Company also agrees that SL shall not have any liability (whether direct or indirect, in contact or tort or otherwise) to the Company for or in connection with the engagement of SL under the Agreement, except to the extent that any such liability is found in a final judgement by a court of competent jurisdiction from which no appeal can be or is taken to have resulted solely from the gross negligence of SL. These Indemnification Provisions shall be in addition to any liability which the Company may otherwise have to SL or the persons identified below in this sentence and shall extend to the following: Stenton Leigh Capital Corp., Stenton Leigh Business Resources, Inc., Stenton Leigh Financial Services Corp., and their respective affiliated entities, partners, directors, officers, employees, legal counsel, agents, co-brokers and controlling persons (within the meaning of the federal securities laws). All references to SL in these Indemnification Provisions shall be understood to include any and all of the foregoing. SL agrees to notify the Company with reasonable promptness of the assertion against SL of any claim or the commencement of any action or proceeding relating to these Indemnification Provisions, but SL's failure to so notify the Company shall not relieve the Company from any obligation or liability which the Company may have pursuant to the Agreement or these Indemnification Provisions. SL shall have the right to retain counsel of its own choice to represent it, which counsel is reasonably satisfactory to the Company, and the Company shall pay the reasonable fees, expenses and disbursements of such counsel (provided, however, that the Company shall be obligated to pay such fees, expenses and disbursements only for one lead counsel, and where appropriate, local counsel, with respect to each claim for indemnification hereunder), and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against SL made with the Company's written consent, which consent will not be unreasonably withheld. The Company shall not, without the prior written consent of SL, settle or compromise any claim, or permit a default or consent to the entry of any judgement in respect thereof, unless such settlement, compromise or consent includes, and as an unconditional term thereof, the giving by the claimant to SL of an unconditional release from all liability in respect of such claim. In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these Indemnification Provisions is made but it is found in a final judgement by a court of competent jurisdiction from which no appeal can be or is taken that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, the Company, on the one hand, and SL, on the other hand shall contribute to the losses, claims, damages, liabilities, obligations, penalties, judgements, awards, costs, expenses and disbursements to which the indemnified persons may be subject in accordance with the relative benefits received by the Company, on the one hand, and SL, on the other hand, and also the relative fault of the Company, on the one hand, and SL, on the other hand, in connection with the statements, acts or omissions which resulted in such losses, claims, damages, liabilities, obligations, penalties, judgements, awards, costs, expenses or disbursements and the relevant equitable considerations shall also be considered. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for such fraudulent misrepresentation. Notwithstanding the foregoing, SL shall not be obliged to contribute any amount hereunder that exceeds the amount of fees previously received by SL pursuant to the Agreement. 95 The Company agrees that reliance by SL on any publicly available information or the information or any directions furnished by the Company shall not constitute gross negligence by SL. Neither termination nor completion of the engagement of SL referred to in the Agreement shall affect these Indemnification Provisions which shall then remain operative and in full force and effect. 96 EX-10 15 ex10_3.txt 10.3 AGREEMENT OF EMPLOYMENT ----------------------- THIS AGREEMENT OF EMPLOYMENT ("Agreement") is effective as of October __, 2001 (the "Effective Date"), and is by and between Ultimate Security Systems Corporation, a Nevada corporation ("Employer" or "Company"), and James K. Cooper ("Executive"). AGREEMENT --------- THE MUTUAL COVENANTS, PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN THIS AGREEMENT, AND OTHER GOOD AND VALUABLE CONSIDERATION ARE A SUBSTANTIVE PART OF THIS AGREEMENT. THE SUFFICIENCY OF THE CONSIDERATION IS ACKNOWLEDGED AND RECEIVED WITH THE INTENT OF BEING LEGALLY AND EQUITABLY OBLIGATED, THEREFORE, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT AND WARRANT AS FOLLOWS: ARTICLE I. ---------- DEFINITIONS For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article I. SECTION 1.0 "AGREEMENT" -- employment agreement with an effective date of October __, 2001 between Employer and Executive. SECTION 1.1 "BASE SALARY" -- One Hundred Twenty Thousand Dollars ($120,000) per annum less applicable deductions and withholdings. SECTION 1.2 "BASIC COMPENSATION" -- remuneration received by Executive from Employer in the form of base salary and benefits. SECTION 1.3 "BOARD" or "Board of Directors"-- Employer's Board of Directors. SECTION 1.4 "CAUSE" -- termination for "Cause" shall mean termination because of Executive's: (i) gross incompetence; (ii) willful gross misconduct resulting in economic harm to Employer or its affiliates or that brings discredit to Employer's or Employer's affiliates' reputation; (iii) insubordination , or failure to follow directions of the Board of Directors that are consistent with Executive's duties pursuant to this Agreement; (iv) final, nonappealable conviction of a felony involving moral turpitude; or (v) material breach of any provision of this Agreement. Section 1.5 "Confidential Information" -- information, regardless of manner of documentation, used in Employer's and Employer's affiliates' business and: (i) any and all trade secrets concerning the business and affairs of the Company, product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current and planned research and development, current and planned manufacturing and distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs, including object code and source code, computer software and database technologies, systems, structures and architectures, and related processes, formulae, compositions, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and information, of the Company and any other information, however documented, of the Company that is a trade secret within the meaning of applicable law; (ii) any and all information concerning the business and affairs of the Company, including historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials; and (iii) any and all notes, analysis, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing. Confidential Information shall not include: (i) information already in Executive's possession prior to the date of this Agreement unless acquired or obtained from Employer or its affiliates or pursuant to a confidentiality agreement; (ii) information obtained or was previously obtained by the Executive from a third Person who, insofar as is known to the Executive after reasonable inquiry, is permitted to transmit the information to Executive by contractual, legal or fiduciary obligation to Employer or its affiliates; or (iii) information that is, or becomes, generally available to the public other than as a result of a direct or indirect disclosure by the Executive. SECTION 1.6 "DATE OF TERMINATION" -- the date on which Notice of Termination is sent or given pursuant to this Agreement. SECTION 1.7 "DISABILITY" -- Executive's inability or failure to perform (as determined by the Board of Directors in good faith) Executive's duties pursuant to this Agreement due to Executive's ill health, physical or mental disability, or any other reason beyond Executive's control, and notwithstanding reasonable accommodations made by Employer for a period of thirty (30) consecutive days or, for an aggregate of sixty (60) days in any twelve (12) month period. SECTION 1.8 "EFFECTIVE DATE" -- the date specified in the preamble of the Agreement. SECTION 1.9 "EMPLOYEE INVENTIONS" -- all discoveries, inventions, improvements, designs, innovations and works of authorship, including all data and records pertaining thereto, which relate to the business of Employer, whether or not capable of being patented, copyrighted or reduced to writing, that Employee may discover, invent or originate during the term of his employment pursuant to this Agreement, and for a period of six (6) months following the termination of this Agreement, either alone or with other persons and whether or not during working hours or by the use of the facilities of Employer. SECTION 1.10 "FISCAL YEAR" -- Employer's fiscal year, as it exists on the Effective Date or as changed from time to time. SECTION 1.11"PERSON" -- any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or governmental body. SECTION 1.12 "POST-AGREEMENT PERIOD"-- the period beginning on the date of termination of Executive's employment with Employer, plus six (6) months. SECTION 1.13 "SALARY" -- gross cash compensation paid in equal periodic installments to Executive by Employer in the amount of One Hundred Twenty Thousand Dollars ($120,000) per annum. ARTICLE II. ----------- EMPLOYMENT TERMS AND DUTIES SECTION 2.1 EMPLOYMENT. Employer hereby employs Executive, and Executive hereby accepts employment by Employer, upon the terms and subject to the conditions set forth in this Agreement. SECTION 2.2 TERM. Subject to the provisions of Article VI, the term of Executive's employment pursuant to this Agreement will be five (5) years, beginning on the Effective Date and ending on a date exactly five (5) years after the Effective Date ("the First Term"). The term of this Agreement is automatically renewable for succeeding periods of five (5) years each unless either party gives notice to the other party of the noticing party's intention not to renew the term of this Agreement. Notice must be received at least thirty (30) days prior to the expiration of the First Term and at least sixty (60) days prior to the expiration of any subsequent term. For purposes of this Agreement, the word "Term" will include the First Term and any renewal terms. SECTION 2.3 POSITION AND DUTIES. Executive will initially serve as Chief Executive Officer of the Company and shall be assigned or delegated duties by the Board of Directors. Executive shall have those duties and authority customarily commensurate with one employed in Executive's position. Executive shall perform, to the best of Executive's ability, all duties incident to Executive's position with the highest degree of good faith and loyalty. Executive shall use Executive's best efforts to promote the interests of the Company. SECTION 2.4 OBLIGATION TO THE COMPANY. Executive represents and warrants to Employer that Executive, is under no obligations or commitments, contractual or otherwise, which is inconsistent with Executives obligations under this Agreement. During the term of Executive's employment, Executive will comply fully with the Company's policies and rules in effect. During the Term of this Agreement, Executive will not engage in any competitive business activity without the express written consent of the Board. Executive will: (i) devote his entire business time, attention, skill, and energy exclusively to the business of Employer; (ii) use his best efforts to promote the success of Employer's business; and (iii) cooperate fully with the Board of Directors in the advancement of the best interests of Employer. Executive will fulfill his duties as a member of Employer's Board of Directors without additional compensation. ARTICLE III. ------------ COMPENSATION AND BENEFITS Section 3.1 Basic Compensation. During the Term, Executive's basic compensation will consist of the following salary and benefits: (a) BASE SALARY. Employer shall pay Executive as compensation for Executive's services a base salary in the sum of One Hundred Twenty Thousand Dollars ($120,000) annually ("Base Salary"), less applicable deductions and withholdings. Executive will receive equal periodic installments according to Employer's customary payroll practices, but not less frequently than semi-monthly. Any earned but unpaid salary will accrue interest at ten percent (10%) per annum until paid. (b) BENEFITS. During the Term, Executive is eligible to participate in all Company employee benefit plans applicable to other senior executives of the Company of similar rank and status, according to the terms of such plans, as such plans and terms exist from time to time. Benefits include, but are not limited to, group health insurance, 401(K), and equity incentive plans (collectively, "Core Benefits"). SECTION 3.2 BONUS. In addition to the Salary and the Core Benefits, Executive is entitled to receive from Employer a cash bonus in an amount equal to one percent (1%) of Employer's "gross income" for each of Employer's complete fiscal quarters during the Term. For purposes of this Section 3.2, the term "gross income" is defined as and shall mean all gross income from the operations of Employer (other than capital gains). "Gross income" shall be determined in accordance with generally accepted accounting principles utilized by the certified public accountant(s) regularly employed by Employer, and the determination of gross income by such accountant(s) shall obligate and be conclusive on Employer and Executive. Payment of the bonus shall be made no later than forty-five (45) days after the end of Employer's fiscal quarter for which such bonus is due and payable. SECTION 3.3 HEALTH CARE BENEFITS. Employer shall, as part of Executive's Core Benefit package, include Executive in the hospital, surgical, medical and dental benefit plan maintained by Employer. SECTION 3.4 ILLNESS. During the Term, Executive shall be entitled to participate in Employer's sick leave policies. SECTION 3.5 OTHER BENEFITS. In addition to those benefits available to other senior executives of similar rank and status, Executive shall receive all other benefits of employment available generally to other employees of Employer. ARTICLE IV. ----------- FACILITIES AND EXPENSES SECTION 4.1 OFFICE AND STAFF. Employer will furnish Executive office facilities, equipment, supplies, and such other facilities and personnel, as Employer deems necessary or appropriate for the performance of Executive's duties pursuant to this Agreement. SECTION 4.2 REIMBURSEMENT OF BUSINESS EXPENSES. During the Term, Executive is authorized to incur necessary and reasonable travel and other business expenses in connection with Executives duties. Employer will pay on behalf of Executive (or reimburse the Executive for) reasonable business expenses incurred by Executive at the request of, or on behalf of, Employer in the performance of the Executive's duties pursuant to this Agreement, and in accordance with Employer's employment policies. Business and travel expenses incurred must be consistent with policies and procedures established by the Company. Executive will be reimbursed for such expenses according to Company policies and procedures upon presentation of an itemized account and appropriate supporting documentation. ARTICLE V. ---------- VACATIONS AND HOLIDAYS SECTION 5.1 ANNUAL VACATION. Executive will be entitled to participate in Employer's vacation and holiday policies. SECTION 5.2 PAID HOLIDAYS. Per Employer's policies, Executive will also be entitled to paid holidays. ARTICLE VI. ----------- TERMINATION SECTION 6.1 (A) DISABILITY. Employer may terminate this Agreement for Disability. Executive hereby consents to examination by a physician designated by Employer, and Executive hereby waives any physician-patient privilege resulting from any such examination, under the following conditions: (i) Employer must provide Executive with at least sixty (60) days prior written notice of its intent to have Executive examined. (ii) Employer must pay any and all expenses and costs related to such examination, including, but not limited to, Executive's travel expenses. (iii) Executive shall have the right to arrange for a second opinion examination if he disagrees with Employer's physician's diagnosis. If the second opinion materially contradicts the initial diagnosis, Employer and Executive shall mutually agree on a third physician whose diagnosis shall be binding on the parties. If Employer and Executive cannot mutually agree on a physician, one shall be chosen by the first two physicians. (iv) If Executive shall disagree with Employer's decision to order an examination, Executive shall have the right to prevent such examination until and unless a mutual third party mediator, mutually agreed upon by Executive and Employer, recommends such an examination. (b) CAUSE. Employer may terminate Executive's employment for Cause. Termination of Executive for Cause requires either an action of at least a majority of the Company's Board of Directors at a meeting duly called and held upon at least thirty (30) business days written notice to the Executive of the particulars of the act or omission alleged to constitute cause, or an action of at least two-thirds (2/3) of the Company's shareholders entitled to vote at a meeting duly called and held upon at least thirty (30) business days written notice to the Executive of the particulars of the act or omission alleged to constitute cause. Executive may not be terminated for Cause if Executive cures such matter within twenty (20) days after such notice is sent or given pursuant to this Agreement. Executive is permitted to respond and defend himself before the Board or any appropriate committee thereof within a reasonable time after written notification of any proposed termination for Cause which involves an allegation of gross incompetence, willful gross misconduct, insubordination, or a material breach of any provision of this Agreement. (c) SEVERANCE. If Executive is terminated for Cause, Executive will receive on the Date of Termination, as compensation, the following: (i) The Base Salary provided for in Section 3.1(a) as then in effect, due and accrued through the Date of Termination; (ii) On the Date of Termination, Employer shall repurchase all shares, series and classes of Employer's stock then held by Executive at the greater of either: (a) the prevailing market rate; or (b) five dollars ($5.00) per share (iii) Employer shall pay Executive all vacation pay accrued and unpaid through the Date of Termination for the year in which such termination occurred; and (iv) Executive shall also receive reimbursement for any attorney's fees related to the Termination. If Executive is terminated with or without cause, Executive will receive the Base Salary provided for in Section 3.1(a) which is due but unpaid as of the Date of Termination and shall be entitled to receive the Base Salary for an additional thirty-six months (36) following the Date of Termination. Executive will also receive (ii), (iii) and (iv) directly above. P (d) WITHOUT GOOD REASON. During the Term, Executive may terminate his employment Without Good Reason. Termination "Without Good Reason" shall mean termination of the Executive's employment by the Executive other than termination for Employer breach or resulting from the death of Executive. (e) EXPLANATION OF TERMINATION OF EMPLOYMENT. Any party terminating this Agreement shall give prompt written notice ("Notice of Termination") to the other party hereto advising such other party of the termination of this Agreement. Within ten (10) days after notification that this Agreement has been terminated, the terminating party shall deliver to the other party hereto a written explanation, which shall specify in reasonable detail the basis for such termination and shall indicate whether termination is being made for Cause, Without Cause or for Disability (if Employer has terminated the Agreement) or for Employer Breach or Without Good Reason (if Executive has terminated the Agreement). (f) GOLDEN PARACHUTE. Executive may elect to terminate his employment in the event that: (i) five percent (5%) or more of Employer's then issued and outstanding common stock or five percent (5%) or more of any class of Employer's then issued and outstanding preferred stock is acquired by any person or entity, or persons or entities acting in concert as determined by Executive in his sole and absolute discretion; (ii) Employer loses its ability to exercise a controlling influence over Employer's operations; (iii) a hostile election of a majority of Employer's Board occurs; or (iv) Employer is merged, sold or dissolved. Such events shall be known as a "Change-In-Control". If Executive elects to be retained, Executive will maintain that capacity and function occupied by Executive at the time of such Change-In-Control. If Executive elects to terminate his employment at such time, and under such conditions, Executive shall be entitled to those severance arrangements as would be applicable under Section 6.1(c). In addition to those severance arrangements applicable under Section 6.1(c), Executive shall further receive a parachute payment consisting of a one-time, lump sum payment totaling 2.99 times the average of Executives Base Salary (even if such Base Salary was unpaid) over the past five taxable years prior to the Change-In-Control ("Parachute Payment"). If the Executive has not been employed with Employer for five taxable years, the calculation shall be for the shorter period, with any partial taxable year annualized, excluding one-time payments, such as relocation expenses. Executive's Parachute Payment will be adjusted accordingly to avoid tax penalties imposed pursuant to Sections 280G and 4999 of the Internal Revenue Code, as amended. Executive shall also be reimbursed for 150% of any golden parachute excise taxes. Executive shall also receive reimbursement for any attorney's fees and other expenses incurred to collect severance benefits and payments under this section because of a Change-In-Control. All payments provided for in this Section 6.1(f) are due on the date of Change-In-Control. SECTION 6.2 COMPENSATION DURING DISABILITY OR UPON TERMINATION. (a) DURING DISABILITY. During any period that Executive fails to perform his duties pursuant to this Agreement because of ill health, physical or mental disability, or any other reason beyond Executive's control, Executive is entitled to receive the sick pay specified by the provisions of Section 3.4 of this Agreement. (b) TERMINATION FOR DISABILITY. If Employer shall terminate Executive's employment for Disability, Employer's obligation to pay Basic Compensation shall terminate, except that Employer shall pay Executive: (i) accrued but unpaid Basic Compensation through the Date of Termination, including any interest accrued thereon; and (ii) the benefits set forth in Section 3.1 (b) for a period not to exceed ninety (90) days. SECTION 6.3 DEATH OF EXECUTIVE. If Executive dies prior to the expiration of the Term, Executive's employment and other obligations pursuant to this Agreement shall automatically terminate and all compensation, to which Executive is or would have been entitled pursuant to (including, without limitation, under Section 3.1), shall terminate as of the date in which Executive's death occurs. ARTICLE VII. ------------ NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS SECTION 7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE. Executive acknowledges that (a) during the Term and as a part of his employment, Executive will have access to Confidential Information; (b) public disclosure of such Confidential Information could have an adverse effect on Employer and its business; (c) because Executive possesses substantial technical expertise and skill with respect to Employer's business, Employer desires to obtain exclusive ownership of each Employee Invention, and Employer will be at a substantial competitive disadvantage if Employer fails to acquire exclusive ownership of each Employee Invention; and (d) the provisions of this Article VII are reasonable and necessary to prevent the improper use or disclosure of Confidential Information and to provide Employer with exclusive ownership of all Employee Inventions. SECTION 7.2 AGREEMENTS OF THE EXECUTIVE. In consideration of the compensation and benefits to be paid or provided to Executive by Employer pursuant to this Agreement, Executive covenants as follows: (a) CONFIDENTIALITY. (i) During and following the Term, Executive will hold in confidence the Confidential Information and will not disclose the Confidential Information, or any portion thereof, to any Person, except with the specific prior written consent of Employer or except as otherwise expressly permitted by the terms of this Agreement. (ii) Any trade secrets of Employer or its affiliates will be entitled to all of the protections and benefits pursuant to applicable law. If any information that Employer or its affiliates deems to be a trade secret is determined by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement. (iii) None of the foregoing obligations and restrictions applies to any part of the Confidential Information that Executive demonstrates was or became generally available to the public other than as a result of a direct or indirect disclosure by Executive. (iv) The Executive will not remove from Employer's or Employer's affiliates' premises (except to the extent such removal is for purposes of the performance of the Executive's duties at home or while traveling, or except as otherwise specifically authorized by Employer) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the "Proprietary Items"). Executive agrees that, as between Employer and Executive, all of the Proprietary Items, whether or not developed by Executive, are the exclusive property of Employer. Upon termination of this Agreement by either party, or upon the request of Employer during the Term, Executive will return to Employer all of the Proprietary Items in Executive's possession or subject to Executive's control, and Executive shall not retain any copies, abstracts, sketches, or other physical embodiment of any of the Proprietary Items. (b) Employee Inventions. Each Employee Invention will belong exclusively to Employer. Executive covenants that Executive will promptly: (i) disclose to Employer in writing any Employee Invention; (ii) assign to Employer or to a party designated by Employer, at Employer's request and without additional compensation, all of Executive's right to the Employee Invention for the United States and all foreign jurisdictions; (iii) execute and deliver to Employer such applications, assignments, and other documents as Employer may request in order to apply for and obtain patents or other registrations with respect to any Employee Invention in the United States and any foreign jurisdictions; (iv) sign all other papers necessary to carry out the above obligations; and (v) give testimony and render any other assistance in support of Employer's rights to any Employee Invention. SECTION 7.3 DISPUTES OR CONTROVERSIES. Executive acknowledges that in the event that a dispute or controversy resulting from or relating to this Agreement be submitted for adjudication to any court, arbitration panel, or other third party, the preservation of the secrecy of Confidential Information may be jeopardized. All pleadings, documents, testimony and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by Employer, Executive, and their respective attorneys and experts, who will agree, in advance and in writing, to receive and maintain all such information in secrecy, except as may be limited by them in writing. ARTICLE VIII. ------------- NON-COMPETITION AND NON-INTERFERENCE SECTION 8.1 ACKNOWLEDGMENTS BY EXECUTIVE. Executive acknowledges that (a) the services to be performed by him pursuant to this Agreement are of a special, unique, unusual, extraordinary, and intellectual character; (b) Employer's business conducted nationally and Employer's services and products are marketed throughout the United States; (c) Employer competes with other businesses that are or could be located in any part of the United States; and (d) the provisions of this Article VIII are reasonable and necessary to protect Employer's business. SECTION 8.2 COVENANTS OF EXECUTIVE. To the extent permissible pursuant to California Business and Professions Code section 16600, and in consideration of the acknowledgments by Executive, and the compensation and benefits to be provided to Executive by Employer, Executive makes the following covenants. (a) COVENANTS NOT TO COMPETE. Pursuant to this Agreement, and during the Term and Post-Agreement Period, Executive shall not engage, invest, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of any business whose products, services or activities compete in whole or in part with the products, services or activities of Employer or any affiliate of Employer anywhere in the United States ("Competitor"). (i) During the Term and Post-Agreement Period, Executive will not be employed by, associated, or in any manner connected with, a Competitor. Executive may purchase or otherwise acquire up to three percent (3%) of any class of securities of any issuer if such securities are listed on any national or regional securities exchange or have been registered pursuant to Section 12(g) of the Securities Exchange Act of 1934. Executive may not, however, participate in the activities of such issuer. (ii) During the Term and Post-Agreement Period, Executive may not, for Executive's own account or for the account of any other Person, solicit business of the same or similar type as Employer from any Person known by Executive to be a customer of Employer, whether or not Executive had personal contact with such Person during and by reason of Executive's employment with Employer. (iii) During the Term and Post-Agreement Period, Executive may not, for Executive's account or the account of any other Person, solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any Person who is or was an employee of Employer at any time during the Term or in any manner induce or attempt to induce any employee of Employer to terminate his or her employment relationship with Employer, nor may Executive interfere with Employer's relationship with any Person, who at any time during the Term was an employee, contractor, supplier, or customer of Employer. (iv) During the Term and Post-Agreement Period, Executive many not, disparage Employer or any of Employer's shareholders, directors, officers, employees, or agents. (b) DIVISIBILITY OF COVENANTS. If any covenant in this Section 8.2 is determined by a court of competent jurisdiction to be unreasonable, arbitrary, or against public policy, such covenant will be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against Executive. (c) TIME APPLICABLE TO COVENANTS. The period of time applicable to any covenant in Section 8.2 is extended by the duration of any violation by Executive of such covenant. (d) NOTICE OF SUBSEQUENT EMPLOYMENT. While the covenant, pursuant to this Section 8.2, is in effect, Executive will give notice of the identity of Executive's subsequent employer to Company within ten (10) days after accepting any other employment. Company may notify such employer that Executive is obligated by this Agreement and, at Employer's election, furnish such employer with a copy of this Agreement or relevant portions thereof. ARTICLE IX. ----------- GENERAL PROVISIONS SECTION 9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY. Executive acknowledges that the damage that would be suffered by Employer as a result of a breach of the provisions of this Agreement (including any provision of Articles VII and VIII) would be irreparable and that an award of monetary damages to Employer for such a breach would be an inadequate remedy. Consequently, Employer will have the right, in addition to any other rights Employer may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and Employer will not be obligated to post bond or other security in seeking such relief. SECTION 9.2 COVENANTS OF ARTICLES VII AND VIII ARE ESSENTIAL AND INDEPENDENT COVENANTS. The covenants by Executive in Articles VII and VIII are essential provisions of this Agreement, and without Executive's agreement to comply with such covenants, Employer would not have entered into this Agreement or employed or continued the employment of Executive. Employer and Executive have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the business conducted by Employer. Executive's covenants in Articles VII and VIII are independent covenants and the existence of any claim by Executive against Employer or any of its affiliates under this Agreement or otherwise will not excuse Executive's breach of any covenant in Articles VII or VIII. If Executive's employment pursuant to this Agreement expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of Executive in Articles VII and VIII. SECTION 9.3 OFFSET. Employer will be entitled to offset against any and all amounts owing to Executive pursuant to this Agreement the amount of any and all claims that Employer may have against Executive. SECTION 9.4 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE. Executive represents and warrants to Employer that the execution and delivery by Executive of this Agreement do not, and the performance by Executive of Executive's obligations pursuant to this Agreement will not, with or without the giving of notice or the passage of time, or both (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to Executive; or (b) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which Executive is a party or by which Executive is or may be obligated. SECTION 9.5 OBLIGATIONS CONTINGENT ON PERFORMANCE. The obligations of Employer pursuant to this Agreement, including Employer's obligation to pay the compensation provided for in this Agreement, are contingent upon Executive's performance of Executive's obligations pursuant to this Agreement. SECTION 9.6 WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by either party in exercising any right, power, or privilege pursuant to this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right resulting from this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable, except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take additional action without notice or demand as provided in this Agreement. SECTION 9.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This Agreement shall inure to the benefit of, and shall obligate, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which Employer may merge or consolidate or to which all or substantially all of its assets may be transferred. The duties and covenants of Executive pursuant to this Agreement are personal and may not be delegated. SECTION 9.8 NOTICES. All notices, requests, demands or other communications pursuant to this Agreement is in writing or by telex or facsimile transmission and is deemed to have been duly given (i) on the date of service if delivered in person or by telex or facsimile machine transmission (with the telex or facsimile confirmation of transmission receipt acting as confirmation of service when sent and provide telexed or telecopied notices are also mailed by first class, certified or registered mail, postage prepaid); or (ii) seventy-two (72) hours after mailing by first class, registered or certified mail, postage prepaid, and properly addressed as follows: If to Executive: James K. Cooper 18271 West McDurmott, Suite F Irvine, California 92612 Telephone: 800.689.8004 Facsimile: 949.251.0051 If to Employer: Ultimate Security Systems Corporation 18271 West McDurmott, Suite F Irvine, California 92612 Telephone: 800.689.8004 Facsimile: 949.251.0051 With a copy to: MC LAW GROUP 4100 Newport Place, Suite 830 Newport Beach, California 92660 Telephone: 949.250.8655 Facsimile: 949.250.8656 or at such other address as the party affected may designate in a written notice to such other party in compliance with this section. SECTION 9.9 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, constitutes the entire agreement among the parties with respect to the (i) employment relationship by and among Employer and Executive, and (ii) the terms and conditions of all other relationships by and among Employer, in any capacity, and Executive, in any capacity and supersede all prior agreements and understandings, oral or written, among the parties hereto with respect thereto. This Agreement may not be amended orally, but only by an agreement in writing signed by the parties hereto. SECTION 9.10 GOVERNING LAW. This Agreement will be governed by the laws of the State of California, without regard to conflicts of laws principles. SECTION 9.11 JURISDICTION. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement is brought against either of the parties in the courts of the State of California, County of Orange, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue. Process in any action or proceeding referred to in the preceding sentence may be served on either party anywhere in the world. SECTION 9.12 SECTION AND ARTICLE HEADINGS, CONSTRUCTION. The headings of sections and articles in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "section" or "sections" and "article" or "articles" refer to the corresponding section or sections and article or articles of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. SECTION 9.13 SEVERABILITY. If any provision of this Agreement, other than those relating to Section 9.2, is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement determined to be invalid or unenforceable only in part will remain in full force and effect to the extent not determined to be invalid or unenforceable. SECTION 9.14 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. SECTION 9.15 INDEMNIFICATION FOR NEGLIGENCE OR MISCONDUCT. A. Employer shall save Executive harmless from and against and shall indemnify Executive for any liability, loss, costs, expenses or damages howsoever caused by reason of any injury (whether to body, property, or personal or business character or reputation) sustained by any person or to any person or to property by reason of any act, neglect, default or omission of Employer, and Employer shall pay any and all amounts to be paid or discharged in case of an action for any such damages or injuries. No provision of this section is intended to, nor shall any provision of this section, relieve Executive from that Executive's own act, omission or negligence. B. Executive shall save Employer harmless from and against and shall indemnify Employer for any liability, loss, costs, expenses or damages howsoever caused by reason of any injury (whether to body, property, personal or business character or reputation) sustained by any person or to any person or to property by reason of any act, neglect, default or omission of Executive, and Executive shall pay any and all amounts to be paid or discharged in case of an action for any such damages or injuries. No provision of this section is intended to, nor shall any provision of this section, relieve Employer from Employer's own act, omission or negligence. IN WITNESS WHEREOF the parties have executed this Agreement of Employment in duplicate and in multiple counterparts, each of which shall have the force and effect of an original, effective as of the date specified in the preamble of this Agreement. "EMPLOYER" "EXECUTIVE" Ultimate Security Systems Corporation a Nevada corporation By: --------------------------------- ------------------------------- James K. Cooper James K. Cooper Its: Chief Executive Officer EX-10 16 ex10-4.txt 10.4 ADDENDUM TO EMPLOYMENT CONTRACT FOR JAMES K. COOPER, PRESIDENT AND CHIEF EXECUTIVE OFFICER Ultimate Security Systems Corporation, a Nevada corporation ("Employer"), located at 18271 West McDurmott, Suite F, Irvine, CA 92612, and James K. Cooper ("Executive"), in consideration of the mutual promises made herein, and in the Employment Agreement with an effective date of October 20, 2001, between the parties (hereinafter the "Employment Agreement"), hereby agree to amend the following sections of the Employment Agreement (amendments are underlined and any sections of the Employment Agreement not specifically listed below remain as written in the Employment Agreement): ARTICLE I. DEFINITIONS SECTION 1.1 "BASE SALARY" -- One Hundred Seventy Thousand Dollars ($170,000) per annum less applicable deductions and withholdings. SECTION 1.13 "SALARY" -- gross cash compensation paid in equal periodic installments to Executive by Employer in the amount of One Hundred Seventy Thousand Dollars ($170,000) per annum. ARTICLE II. EMPLOYMENT TERMS AND DUTIES SECTION 2.2 TERM. Subject to the provisions of Article VI, the term of Executive's employment pursuant to this Agreement will be five (5) years, beginning on the Effective Date and ending on a date exactly five (5) years after the Effective Date ("the First Term"). The term of this Agreement is automatically renewable for succeeding periods of five (5) years each unless either party gives notice to the other party of the noticing party's intention not to renew the term of this Agreement. Notice must be received at least thirty (30) days prior to the expiration of the First Term and at least sixty (60) days prior to the expiration of any subsequent term. The term of this Agreement shall be automatically renewed for an additional five (5) years upon the Company's stock becoming eligible for quotation on an electronic quotation medium such as the Over-the-Counter Bulletin Board or is listed on a national exchange, including the NASDAQ SmallCap. For purposes of this Agreement, the word "Term" will include the First Term and any renewal terms. 1 ARTICLE III. COMPENSATION AND BENEFITS SECTION 3.1 BASIC COMPENSATION. During the Term, Executive's basic compensation will consist of the following salary and benefits: (a) BASE SALARY. Employer shall pay Executive as compensation for Executive's services a base salary in the sum of One Hundred Seventy Thousand Dollars ($170,000) annually ("Base Salary"), less applicable deductions and withholdings. Executive will receive equal periodic installments according to Employer's customary payroll practices, but not less frequently than semi-monthly. Any earned but unpaid salary will accrue interest at seventeen percent (17%) per annum until paid. SECTION 3.2 BONUS. In addition to the Salary and the Core Benefits, Executive is entitled to receive from Employer a cash bonus in an amount equal to one percent (1%) of Employer's "gross income" for each of Employer's complete fiscal quarters during the Term. For purposes of this Section 3.2, the term "gross income" is defined as and shall mean all gross income from the operations of Employer (other than capital gains). "Gross income" shall be determined in accordance with generally accepted accounting principles utilized by the certified public accountant(s) regularly employed by Employer, and the determination of gross income by such accountant(s) shall obligate and be conclusive on Employer and Executive. Payment of the bonus shall be made no later than forty-five (45) days after the end of Employer's fiscal quarter for which such bonus is due and payable. In addition, if the Company's stock is eligible for quotation on an electronic quotation service or is listed on national exchange and the Market Price of the Company's stock increases 200% or more during any twelve (12) month period (the "Stock Increase Period"), Executive shall be entitled to receive options to purchase Company common stock equal to 5% of the Company's authorized common stock at a price that is discounted 35% from the prevailing Market Price. For purposes of this Section 3.2, "Market Price" shall be determined by taking the average of the bid and ask price within five (5) days of the date the price is determined. For purposes of determining whether Executive is entitled to receive the options described herein, Employer shall determine the Market Price at the beginning of the Stock Increase Period and compare that to the Market Price at the end of the Stock Increase Period. SECTION 3.3 HEALTH CARE BENEFITS. Employer shall, as part of Executive's Core Benefit package, include Executive and co-dependents in the hospital, surgical, medical and dental benefit plan maintained by Employer. ARTICLE V. VACATIONS AND HOLIDAYS SECTION 5.1 ANNUAL VACATION. Executive will be entitled to six (6) weeks paid vacation per year which, if not used, shall carry over to the succeeding year. 2 ARTICLE VI. TERMINATION SECTION 6.1 (A) DISABILITY. Employer may terminate this Agreement for Disability. Executive hereby consents to examination by a physician designated by Employer, and Executive hereby waives any physician-patient privilege resulting from any such examination, under the following conditions: (i) Employer must provide Executive with at least sixty (60) days prior written notice of its intent to have Executive examined. (ii) Employer must pay any and all expenses and costs related to such examination, including, but not limited to, Executive's travel expenses. (iii) Executive shall have the right to arrange for a second opinion examination if he disagrees with Employer's physician's diagnosis. If the second opinion materially contradicts the initial diagnosis, Employer and Executive shall mutually agree on a third physician whose diagnosis shall be binding on the parties. If Employer and Executive cannot mutually agree on a physician, one shall be chosen by the first two physicians. (iv) If Executive shall disagree with Employer's decision to order an examination, Executive shall have the right to prevent such examination until and unless a mutual third party mediator, mutually agreed upon by Executive and Employer, recommends such an examination. (B) CAUSE. Employer may terminate Executive's employment for Cause. Termination of Executive for Cause requires either an action of at least a majority of the Company's Board of Directors at a meeting duly called and held upon at least thirty (30) business days written notice to the Executive of the particulars of the act or omission alleged to constitute cause, or an action of at least two-thirds (2/3) of the Company's shareholders entitled to vote at a meeting duly called and held upon at least thirty (30) business days written notice to the Executive of the particulars of the act or omission alleged to constitute cause. Executive may not be terminated for Cause if Executive cures such matter within twenty (20) days after such notice is sent or given pursuant to this Agreement. Executive is permitted to respond and defend himself before the Board or any appropriate committee thereof within a reasonable time after written notification of any proposed termination for Cause which involves an allegation of gross incompetence, willful gross misconduct, insubordination, or a material breach of any provision of this Agreement. 3 (C) SEVERANCE. If Executive is terminated for Cause, Executive will receive on the Date of Termination, as compensation, the following: (i) The Base Salary provided for in Section 3.1(a) as then in effect, due and accrued through the Date of Termination; (ii) On the Date of Termination, Employer shall repurchase all shares, series and classes of Employer's stock then held by Executive at the greater of either: (a) 150% of the prevailing market rate; or (b) a minimum of five dollars ($5.00) per share (iii) Employer shall pay Executive all vacation pay accrued and unpaid through the Date of Termination for the year in which such termination occurred; and (iv) Executive shall also receive reimbursement for any attorney's fees related to the Termination. If Executive is terminated with or without cause, Executive will receive the Base Salary provided for in Section 3.1(a) which is due but unpaid as of the Date of Termination and shall be entitled to receive the Base Salary for an additional thirty-six months (36) following the Date of Termination. Executive will also receive (ii), (iii) and (iv) directly above. (F) GOLDEN PARACHUTE. Executive may elect to terminate his employment in the event that: (i) seven percent (7%) or more of Employer's then issued and outstanding common stock or seven percent (7%) or more of any class of Employer's then issued and outstanding preferred stock is acquired by any person or entity, or persons or entities acting in concert as determined by Executive in his sole and absolute discretion; (ii) Employer loses its ability to exercise a controlling influence over Employer's operations; (iii) a hostile election of a majority of Employer's Board occurs; or (iv) Employer is merged, sold or dissolved. Such events shall be known as a "Change-In-Control". If Executive elects to be retained, Executive will maintain that capacity and function occupied by Executive at the time of such Change-In-Control. If Executive elects to terminate his employment at such time, and under such conditions, Executive shall be entitled to those severance arrangements as would be applicable under Section 6.1(c). In addition to those severance arrangements applicable under Section 6.1(c), Executive shall further receive a parachute payment consisting of a one-time, lump sum payment totaling 2.99 times the average of Executives Base Salary (even if such Base Salary was unpaid) over the past five taxable years prior to the Change-In-Control ("Parachute Payment"). If the Executive has not been employed with Employer for five taxable years, the calculation shall be 4 for the shorter period, with any partial taxable year annualized, excluding one-time payments, such as relocation expenses. Executive's Parachute Payment will be adjusted accordingly to avoid tax penalties imposed pursuant to Sections 280G and 4999 of the Internal Revenue Code, as amended. Executive shall also be reimbursed for 150% of any golden parachute excise taxes. Executive shall also receive reimbursement for any attorney's fees and other expenses incurred to collect severance benefits and payments under this section because of a Change-In-Control. All payments provided for in this Section 6.1(f) are due on the date of Change-In-Control. Executed on May __, 2003, at Irvine, California. EMPLOYER ULTIMATE SECURITY SYSTEMS CORPORATION By: --------------------------- Jay Bitner Its: Director EXECUTIVE By: ---------------------------- James Cooper EX-23 17 ex23_1.txt 23.1 John Kinross-Kennedy, C.P.A. 4921 Birch Street, Suite 110 Newport Beach, CA 92660 (949)724-3817 jkinross@zamucen.com -------------------- Mark Scharmann Persident and Chief Executive Officer Immunotechnology Corporation 1661 Lakeview Circle Ogden, Utah 84403 Dear Mr. Scharmann: This is to certify that I consent to the publication of the Form S-4 Registration Statement of Immunotechnology Corporation dated July 24, 2003, an S.E.C. registration statement wherein I expressed audit opinions on financial statements and provided other financial data. /s/ John Kinross-Kennedy - --------------------------- John Kinross-Kennedy Certified Public Accountant Cc: John C. Thompson, Esq. -----END PRIVACY-ENHANCED MESSAGE-----