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Exhibit 10.12    
    

	LOCKHEED MARTIN	Solicitation, Offer & Award

	

	1. Purchase Order No.

 270662	 	2. Solicitation No.	 	3. Type Solicitation

ý Negotiated (RFP)

o Competitive

o Other, specify	 	4. Date, Effective

or Issued

15 Oct 2004	 	Reference (Internal Only Use)
	

	6. Issued To Or Subcontractor (Seller)

Uni-Pixel Displays, Inc.

ATTN: Mr. Dan Van Ostrand

8040 Airport Road, Suite T

Georgetown; Texas 78628

Phone: 512-868-6609

Fax: 512-868-6649

dvo@uni-pixel.com	 	7. Issued By (Buyer):

        Lockheed Martin Corporation

        Systems Integration - Owego

        ATTN: R.M. Powell

        Mail Drop - 0908

        1801 State Route 17c

        Owego, NY 13827-3998

        Phone - (607) 751-3187

        Fax - (607) 751-3910

        Robert.powell@lmco.com.
	

	IRAD Funding and Overhead Expense - No Gov. Prime
	

	

	9. Table of Contents

	
 X

	
 	

Sec.

	
 	

Description

	
 	

Pages

	
 	

X

	
 	

Sec.

	
 	

Description

	
 	

Pages

	

	X	 	A	 	Solicitation/Contract Form	 	1 - 2	 	 	 	H	 	Special Provisions	 	 
	

	X	 	B	 	Supplies or Services	 	3 - 4	 	 	 	I	 	General Provisions	 	7 - 14
	

	X	 	C	 	Description/Specs/Statement of Work	 	5 - 6	 	 	 	J	 	List of Attachments	 	N/A
	

	 	 	D	 	Shipping, Packaging and Marking	 	N/A	 	 	 	K	 	Representations, Certification and Other Statement of the Offerors	 	N/A
	

	 	 	E	 	Inspections and Acceptance	 	N/A	 	 	 	 	 	 	 	 
	

	 	 	F	 	Deliveries or Performance	 	N/A	 	 	 	L	 	Instructions, Conditions & Notices	 	N/A
	

	 	 	G	 	Contract Administration Data	 	N/A	 	 	 	M	 	Evaluation Factors for Award	 	N/A
	

	
 	
 	

 	
 	

 	
 	

 	
 	

 
	

	10.    Offer.  In accordance with the terms of this solicitation, the undersign agrees if this offer is accepted with
             calendar days (60 calendar days unless a different period is inserted by the Offeror) from the date of receipt of offers specified above, to furnish any or all items upon
which prices we offered at the price set opposite each items.
	

	11. Acknowledgement of Amendments	 	Amendment No. & Date	 	Amendment No. & Date	 	Amendment No. & Date	 	Amendment No. & Date
	

	12. Name & Address of

Offeror

Uni-Pixel Displays, Inc.

8040 Airport Road, Suite T

Georgetown, Texas 78628	 	 	 	 	 	13. Name & Title of Person Authorized to Sign

Offeror (Type or Print)

Dan Van Ostrand

Executive Vice President

/s/ Dan Van Ostrand
	

	
 	
 	

 	
 	

 
	

	Award (To Be Completed by Buyer)
	

	

 	
 	

 	
 	

 
	

	13. Accepted As To Item Numbers	 	14.  Contract Price

***	 	 
	

	15. Signature Of Buyer

/s/ Robert M. Powell	 	16. Name of Buyer

/s/ RMR	 	17. Award Date

10/21/04
	

***
Confidential Information Omitted and 

Filed Separately with the Securities and Exchange 

Commission 

   Schedule B  

	1.
	This
is a Time & Material/Labor Hour Order issued subject to the terms and conditions of this subcontract. All correspondence and invoices shall cite the Purchase Order number
assigned to this task order.

	2.
	Line Items.    A line item marked as "N/A", not applicable, means that the line item does not apply to this Task
order. A line item marked "NSP", not separately priced, means that the line item applies, however, it is not separately priced. 

	Line

Item
	 	Description
	 	Qty.
	 	Unit
	 	Unit Price
	 	Total Price

	900	 	Subassembly Design / Management, Per Section C Statement of Work (OHE Tasks)	 	0	 	SERV	 	***	 	***
	

 	
 	

Time & Material (T&M)	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Acceptance: Upon Delivery Of An Acceptable Prototype to LM or by Buyer Direction	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Delivery/Performance—Period of Performance***	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Tasks Listing:	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Sub-Assembly Design/Management	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    A) Light Guide	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    B) Tab Bonding	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    C) Flex Cable	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    D) Fixture	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    E) Circuit Board/Parts	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    F) Misc. Suppliers	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    G) Light Ejection Layer	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    H) Photo Masks	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Design / Build	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    A) Simple Matrix Row/Column Driver	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

    B) Light Injection Assembly	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	
Not To Exceed Cost: ***	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Subcontractor Cost: ***	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Hours: ***x $*** per hour = $***	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

Direct Labor Rate: $***	
 	

 	
 	

 	
 	

 	
 	

 
	

 	
 	

LM Workpackage:	
 	

 	
 	

 	
 	

 	
 	

 

	***
	Confidential
Information Omitted and Filed Separately with the Securities and Exchange Commission 

2

 

	Line

Item
	 	Description
	 	Qty.
	 	Unit
	 	Unit Price
	 	Total Price

	901 	 	Subassembly Design/Management, Per Statement of Work—Section C (IRAD Tasks)	 	0	 	SERV	 	$***	 	$***
	 	 	Time & Material (T&M)	 	 	 	 	 	 	 	 
	 	 	Acceptance: Upon Delivery Of An Acceptable Prototype to LM or by Buyer Direction	 	 	 	 	 	 	 	 
	 	 	Delivery/Performance—Period of Performance***	 	 	 	 	 	 	 	 
	 	 	Tasks Listing:	 	 	 	 	 	 	 	 
	 	 	Sub-Assembly Design/Management	 	 	 	 	 	 	 	 
	 	 	    A) Active Layer	 	 	 	 	 	 	 	 
	 	 	    B) Cladding Layer	 	 	 	 	 	 	 	 
	 	 	    C) Fixture	 	 	 	 	 	 	 	 
	 	 	    D) Display	 	 	 	 	 	 	 	 
	 	 	Not To Exceed Cost: $***	 	 	 	 	 	 	 	 
	 	 	Subcontractor Cost: $***	 	 	 	 	 	 	 	 
	 	 	Hours: ***× $*** per hour = $***	 	 	 	 	 	 	 	 
	 	 	Direct Labor Rate: $***	 	 	 	 	 	 	 	 
	 	 	LM Workpackage:	 	 	 	 	 	 	 	 

PURCHASE ORDER VALUE: $***—Time and Materials Efforts  

        Summary—As a result of this task order, a total of $*** has been funded for the identified
Time & Material/Labor Hour efforts. 

	***
	Confidential
Information Omitted and Filed Separately with the Securities and Exchange Commission 

3

   Section C: Statement of Work:  

1.0   Sub-Assembly Design/Management  

The
deliverables tabulated below describe the activities for the component inputs to the Assemble/Test phase of TMOS prototype fabrication. 

    •    ***

2.0   Design/Build  

        *** 

3.0   Assemble/Test  

Uni-Pixel
personnel will undertake the integration of all the subcomponents comprising the TMOS prototypes in this phase. Parts will be required to complete the fixturing and integration
of
the contemplated prototype systems. Each completed prototype will be thoroughly tested according to a mutually agreed-upon suite of performance metrics. 

4.0   Project Duration  

The
testing of completed prototypes is projected to begin *** after the launch of this project. Uni-Pixel Displays, Inc. will notify Lockheed Martin when the project reaches a
perceived 85% completion milestone. If it becomes apparent that fabrication of the TMOS display prototypes cannot be completed in a timely manner, Uni-Pixel Displays, Inc. will
notify Lockheed Martin immediately. 

5.0   Billing Milestones  

Upon
acceptance of this order the Billing Milestones shall be as follows: 

	a)	 	Order Acceptance (Subcontract Costs & first month's labor)	 	$***
	b)	 	Milestone 1: Acquisition of Light Guide w/standoff layer	 	$***
	c)	 	Milestone 2: Acquisition of Active Layer	 	$***
	d)	 	Prototype Delivery	 	$***

All
invoices shall be submitted to the Buyer: 

Lockheed
Martin Systems Integration—Owego

1801 State Route 17C

Owego, NY 13827 

Attention: R.M.
Powell M/D 0908

                   Subcontract Administrator Senior Staff 

        Payment
terms shall be net 10 days after receipt of an acceptable invoice for Order Acceptance. 

        Payment
terms shall be net 30 days after receipt of an acceptable invoice for other billings. 

	***
	Confidential
Information Omitted and Filed Separately with the Securities and Exchange Commission 

4

   LOCKHEED MARTIN CORPORATION  

GENERAL PROVISIONS—TIME AND MATERIALS

COMMERCIAL SUBCONTRACT/PURCHASE ORDERS  

	1.	 	Acceptance of Contract/Terms and Conditions
	2.	 	Applicable Laws
	3.	 	Assignment
	4.	 	Changes
	5.	 	Contract Direction
	6.	 	Default
	7.	 	Definitions
	8.	 	Disputes
	9.	 	Electronic Contracting
	10	 	Export Control
	11.	 	Extras
	12.	 	Furnished Property
	13.	 	Gratuities/Kickbacks
	14.	 	Independent Contractor Relationship and Seller Personnel
	15.	 	Information of Lockheed Martin
	16.	 	Information of Seller
	17.	 	Inspection and Acceptance
	18.	 	Insurance/Entry on Lockheed Martin Property
	19.	 	Intellectual Property
	20.	 	Maintenance of Records
	21.	 	New Materials
	22.	 	Offset Credit/Cooperation
	23.	 	Packing and Shipment
	24.	 	Payments, Taxes, and Duties
	25.	 	Precedence
	26.	 	Quality Control System
	27.	 	Release of Information
	28.	 	Severability
	29.	 	Stop Work
	30.	 	Survivability
	31.	 	Termination for Convenience
	32.	 	Timely Performance
	33.	 	Waivers, Approvals, and Remedies
	34.	 	Warranty

1.     ACCEPTANCE OF CONTRACT/TERMS AND CONDITIONS  

	(a)
	This
Contract integrates, merges, and supersedes any prior offers, negotiations, and agreements concerning the subject matter hereof and, together with Exhibits, Attachments and any
Task Order(s) issued hereunder, constitutes the entire agreement between the parties.

	(b)
	SELLER's
acknowledgment, acceptance of payment, or commencement of performance, shall constitute SELLER's unqualified acceptance of this Contract.

	(c)
	Additional
or differing terms or conditions proposed by SELLER or included in SELLER's acknowledgment are objected to by LOCKHEED MARTIN and have no effect unless expressly accepted
in writing by LOCKHEED MARTIN. 

5

 

2.     APPLICABLE LAWS  

	(a)
	This
Contract shall be governed by and construed in accordance with the laws of the State from which this Contract is issued, excluding its choice of law rules. SELLER agrees to
comply with all applicable laws, orders, rules, regulations, and ordinances. SELLER shall procure all licenses/permits, pay all fees, and other required charges, and shall comply with all guidelines
and directives of any local, state, and/or federal governmental authority.

	(b)
	SELLER
represents that each chemical substance constituting or contained in Work sold or otherwise transferred to LOCKHEED MARTIN hereunder is on the list of chemical substances
compiled and published by the Administrator of the Environmental Protection Administration pursuant to the Toxic Substances Control Act (15 U.S.C. Sec. 2601 et seq.) as amended.

	(c)
	SELLER
shall provide to LOCKHEED MARTIN with each delivery any Material Safety Data Sheet applicable to the Work in conformance with and containing such information as required by the
Occupational Safety and Health Act of 1970 and regulations promulgated thereunder, or its State approved counterpart.

	(d)
	SELLER
shall be responsible for compliance with all requirements and obligations relating to its employees under all local, state, and federal statutes, ordinances, rules, and
obligations including, but not limited to, employer's obligations under laws relating to: income tax withholding and reporting; civil rights; equal employment opportunity; discrimination on the basis
of age, sex, race, color, religion, disability, national origin, or veteran status; overtime; minimum wage; social security contribution and withholding; unemployment insurance; employer's liability
insurance; worker's compensation; veteran's rights; and all other employment, labor, or benefits related laws.

	(e)
	SELLER
shall comply with Occupational Safety and Health Act of 1970, as amended. SELLER shall notify LOCKHEED MARTIN promptly in writing if a charge of noncompliance with the Act has
been filed against SELLER in connection with SELLER's services performed hereunder on premises owned, leased or operated by LOCKHEED MARTIN. 

3.     ASSIGNMENT  

Any
assignment of SELLER's Contract rights or delegation of SELLER's duties shall be void, unless prior written consent is given by LOCKHEED MARTIN, SELLER may assign rights to be paid amounts due, or
to become due, to a financing institution if LOCKHEED MARTIN is promptly furnished a signed copy of such assignment reasonably in advance of the due date for payment of any such amounts. Amounts
assigned shall be subject to setoff or recoupment for any present or future claims of LOCKHEED MARTIN against SELLER. LOCKHEED MARTIN shall have the right to make settlements and/or adjustments in
price without notice to say assignee. 

4.     CHANGES.  

	(a)
	The
LOCKHEED MARTIN Procurement Representative may at any time, by written notice of LOCKHEED MARTIN and written acceptance of SELLER, and without notice to sureties or assignees,
make changes within the general scope of this Contract in any one or more of the following: (i) description of services; (ii) drawings, designs, or specifications; (iii) method of
shipping or packing; (iv) place of inspection, acceptance, or point of delivery; (v) time of performance; and (vi) place of performance. 

6

 

	(b)
	If
any such change causes a change in the labor mix, or the time required for performance of any part of this Contract, SELLER may request an equitable adjustment in this Contract
price and/or delivery schedule.

	(c)
	SELLER
must request any equitable adjustment within three working (3) days from the date of receipt of the written change order. If the SELLER's proposal includes the cost of
property made obsolete or excess by the change, LOCKHEED MARTIN shall have the right to prescribe the manner of disposition of the property.

	(d)
	Failure
to agree to any adjustment shall be received in accordance with the "Disputes" clause of this Contract. However, nothing contained in this "Changes" clause shall excuse SELLER
from proceeding without delay in the performance of this Contract as changed. 

5.     CONTRACT DIRECTION  

	(a)
	Only
the LOCKHEED MARTIN Procurement Representative has authority to make changes in or amendments to this contract. Changes and amendments must be in writing.

	(b)
	LOCKHEED
MARTIN engineering and technical personnel may from time to time render assistance or give technical advice or discuss or effect an exchange of information with SELLER's
personnel concerning the Work hereunder. No such action shall be deemed to be a change under the "Changes" clause of this Contract and shall not be the basis for equitable adjustment.

	(c)
	Each
party shall appoint and identify to the other party a Technical Representative(s) who shall be responsible for maintaining liaison between the parties.

	(d)
	Except
as otherwise provided herein, all notices to be furnished by the SELLER shall be sent to the LOCKHEED MARTIN Procurement Representative. 

6.     DEFAULT  

	(a)
	LOCKHEED
MARTIN, by written notice, may terminate this Contract for default, in whole or in part, if SELLER fails to comply with any of the terms of this Contract, fails to make
progress so as to endanger performance of this Contract, or fails to provide adequate assurance of future performance. SELLER shall have ten (10) days (or such longer period as LOCKHEED MARTIN
may authorize in writing) to provide a plan to cure any such failure after receipt of notice from LOCKHEED MARTIN. Default involving performance schedule delays shall not be subject to the cure
provision.

	(b)
	SELLER
shall be compensated only for Work actually delivered and accepted. LOCKHEED MARTIN may require SELLER to deliver to LOCKHEED MARTIN any supplies and materials, manufacturing
materials, and manufacturing drawings that SELLER has specifically produced or acquired for the terminated portion of this Contract. LOCKHEED MARTIN and SELLER shall agree on the amount of payment for
these other deliverables.

	(c)
	SELLER
shall continue all Work not terminated.

	(d)
	In
the event of a termination for default, SELLER shall be liable to LOCKHEED MARTIN for cover costs, in addition to LOCKHEED MARTIN's other rights and remedies at law or in equity.

	(e)
	If
after termination under paragraph (a), it is determined that SELLER was not in default, such termination shall be deemed a Termination for Convenience. 

7

 

7.     DEFINITIONS  

The
following terms shall have the meanings set forth below: 

	(a)
	"Contract"
means the instrument of contracting, such as "PO", "Purchase Order", or "Task Order", issued hereunder, or other such type designation, including all referenced documents,
exhibits, and attachments. If these terms and conditions are incorporated into a "master" agreement that provides for releases, (in the form of a Task Order or other such document) the term "Contract"
shall also mean the release document for the Work to be performed.

	(b)
	"LOCKHEED
MARTIN" means Lockheed Martin Corporation, acting through its companies, or business units, as identified on the face of this Contract. If a subsidiary or affiliate of
Lockheed Martin Corporation is identified on the face of this Contract, then "LOCKHEED MARTIN" means that subsidiary or affiliate.

	(c)
	"LOCKHEED
MARTIN Procurement Representative" means a person authorized by Lockheed Martin's cognizant procurement organization to administer and/or execute this Contract.

	(d)
	"PO"
or "Purchase Order" means this Contract.

	(e)
	"SELLER"
means the party identified on the face of this Contract with whom LOCKHEED MARTIN is contracting.

	(f)
	"Task
Order" means a separate order issued under this Contract.

	(g)
	"Work"
means all required labor, articles, materials, supplies, goods, and services constituting the subject matter of this Contract. 

8.     DISPUTES  

All
disputes under this Contract which are not disposed of by mutual agreement may be decided by recourse to an action at law or in equity. Until final resolution of any dispute hereunder, SELLER
shall diligently proceed with the performance of this Contract as directed by LOCKHEED MARTIN. 

9.     ELECTRONIC CONTRACTING  

The
parties agree that if this Contract is transmitted electronically neither party shall contest the validity of this Contract, or any Acknowledgement thereof, on the basis that this Contract or
Acknowledgement contains an electronic signature. 

10.   EXPORT CONTROL  

	(a)
	SELLER
agrees to comply with all applicable U.S. export control laws and regulations, specifically including, but not limited to, the requirements of the Arms Export Control Act, 22
U.S.C. 2751-2794, including the International Traffic in Arms Regulation (ITAR), 22 C.F.R. 120 et seq.; and the Export Administration Act, 50 U.S.C. app. 2401-2420, including
the Export Administration Regulations, 15 C.F.R. 730-774; including the requirement for obtaining any export license or agreement, if applicable. Without limiting the foregoing, SELLER
agrees that it will not transfer any export controlled item, data, or services, to include transfer to foreign persons employed by or associated with, or under contract to SELLER or SELLER's
lower-tier suppliers, without the authority of an export license, agreement, or applicable exemption or exception.

	(b)
	SELLER
agrees to notify LOCKHEED MARTIN if any deliverable under this Contract is restricted by export control laws or regulations. 

8

 

	(c)
	SELLER
shall immediately notify the LOCKHEED MARTIN Procurement Representative if SELLER is, or becomes, listed in any Denied Parties List or if SELLER's export privileges are
otherwise denied, suspended or revoked in whole or in part by any U.S. Government entity or agency.

	(d)
	If
SELLER is engaged in the business of either exporting or manufacturing (whether exporting or not) defense articles or furnishing defense services, SELLER represents that it is
registered with the Office of Defense Trade Controls, as required by the ITAR, and it maintains an effective export/import compliance program in accordance with the ITAR.

	(e)
	Where
SELLER is a signatory under a LOCKHEED MARTIN export license or export agreement (e.g., TAA, MLA), SELLER shall provide prompt notification to the LOCKHEED MARTIN Procurement
Representative in the event of changed circumstances including, but not limited to, ineligibility, a violation or potential violation of the ITAR, and the initiation or existence of a U.S. Government
investigation, that could affect the SELLER's performance under this Contract.

	(f)
	SELLER
shall be responsible for all losses, costs, claims, causes of action, damages, liabilities and expense, including attorneys' fees, all expense of litigation and/or settlement,
and court costs, arising from any act or omission of SELLER, its officers, employees, agents, suppliers, or subcontractors at any tier, in the performance of any of its obligations under this clause. 

11.   EXTRAS  

Work
shall not be supplied in excess of quantities specified in this Contract. SELLER shall be liable for handling charges and return shipment costs for any excess quantities. 

12.   FURNISHED PROPERTY  

	(a)
	LOCKHEED
MARTIN may provide to SELLER property owned by either LOCKHEED MARTIN or its customer (Furnished Property).

	(b)
	Title
to Furnished Property shall remain in LOCKHEED MARTIN or its customer. SELLER shall clearly mark (if not so marked) all Furnished Property to show its ownership.

	(c)
	Except
for reasonable wear and tear, SELLER shall be responsible for, and shall promptly notify LOCKHEED MARTIN of, any loss or damage. Without additional charge, SELLER shall manage,
maintain, and preserve Furnished Property in accordance with good commercial practice.

	(d)
	At
LOCKHEED MARTIN's request, and/or upon completion of this Contract, the SELLER shall submit, in an acceptable form, inventory lists of Furnished Property and shall deliver or make
such other disposal as may be directed by LOCKHEED MARTIN. 

13.   GRATUITIES/KICKBACKS  

No
gratuities (in the form of entertainment, gifts, or otherwise) or kickbacks shall be offered or given by SELLER, to any employee of LOCKHEED MARTIN for the purpose of obtaining or rewarding
favorable treatment as a supplier. 

14.   INDEPENDENT CONTRACTOR RELATIONSHIP AND SELLER PERSONNEL  

	(a)
	SELLER's
relationship to LOCKHEED MARTIN shall be that of an Independent Contractor and this Contract does not create an agency, partnership, or joint venture relationship between
LOCKHEED MARTIN and SELLER or LOCKHEED MARTIN and SELLER personnel. Personnel supplied by SELLER hereunder shall be deemed employees of SELLER 

9

 

and
shall not for any purposes be considered employees or agents of LOCKHEED MARTIN. SELLER assumes full responsibility for the actions and supervision of such personnel while performing services
under this Contract. LOCKHEED MARTIN assumes no liability for SELLER personnel. 

	(b)
	SELLER
shall inform LOCKHEED MARTIN if a former employee of LOCKHEED MARTIN or its parent or any subsidiary will be assigned Work under this Contract, and any such assignment shall be
subject to LOCKHEED MARTIN approval.

	(c)
	Nothing
contained in this Contract shall be construed as granting to SELLER or any personnel of SELLER rights under any LOCKHEED MARTIN benefit plan.

	(d)
	SELLER
will ensure that SELLER personnel assigned to work on LOCKHEED MARTIN's or Customer's premises comply with any on-premises guidelines and: (i) do not bring
weapons of any kind onto LOCKHEED MARTIN's or Customer's premises; (ii) do not manufacture, sell, distribute, possess, use or be under the influence of controlled substances or alcoholic
beverages while on LOCKHEED MARTIN's or Customer's premises; (iii) do not possess hazardous materials of any kind on LOCKHEED MARTIN's or Customer's premises without LOCKHEED MARTIN's
authorization; (iv) remain in authorized areas only; (v) will not conduct any non-LOCKHEED MARTIN related business activities (such as interviews, hirings, dismissals or
personal solicitations) on LOCKHEED MARTIN's or Customer's premises, (vi) will not send or receive non-LOCKHEED MARTIN related mail through LOCKHEED MARTIN's or Customer's mail
systems; and (vii) will not sell, advertise or market any products or memberships, distribute printed, written or graphic materials on LOCKHEED MARTIN's or Customer's premises without LOCKHEED
MARTIN's written permission or as permitted by law.

	(e)
	All
persons, property, and vehicles entering or leaving LOCKHEED MARTIN's or Customer's premises are subject to search.

	(f)
	SELLER
will promptly notify LOCKHEED MARTIN and provide a report of any accidents or security incidents involving loss of or misuse or damage to LOCKHEED MARTIN's or Customer's
intellectual or physical assets, and all physical altercations, assaults, or harassment.

	(g)
	SELLER
must coordinate with LOCKHEED MARTIN access to LOCKHEED MARTIN's or Customer's premises.

	(h)
	SELLER
personnel: (i) will not remove LOCKHEED MARTIN or Customer assets from LOCKHEED MARTIN's or Customer's premises without LOCKHEED MARTIN authorization; (ii) will
use LOCKHEED MARTIN or Customer assets only for purposes of this Contract; (iii) will only connect with, interact with or use computer resources, networks, program, tools or routines that
LOCKHEED MARTIN agrees are needed to provide services; and (iv) will not share or disclose user identifiers, passwords, cipher keys or computer dial port telephone numbers. LOCKHEED MARTIN may
periodically audit SELLER's data residing on LOCKHEED MARTIN's or Customer's information assets.

	(i)
	LOCKHEED
MARTIN may, at its sole discretion, have SELLER remove any specified employee of SELLER from LOCKHEED MARTIN's premises and request that such employee not be reassigned to
any LOCKHEED MARTIN premises under this Contract.

	(j)
	SELLER
shall provide LOCKHEED MARTIN any information about SELLER's personnel that LOCKHEED MARTIN is required by law to obtain, including information on "leased employees" and
"management services organization" as these terms are used in Secs. 414(m), (n), and (o) of the Internal Revenue Code. 

10

 

	(k)
	Violation
of this clause may result in termination of this Contract in addition to any other remedy available to LOCKHEED MARTIN at law or in equity. SELLER shall reimburse LOCKHEED
MARTIN or Customer for any unauthorized use of LOCKHEED MARTIN or Customer assets.

	(l)
	SELLER
shall advise the LOCKHEED MARTIN Procurement Representative of any unauthorized direction or course of conduct.

	(m)
	SELLER
shall be responsible for all losses, costs, claims, causes of action, damages, liabilities, and expenses, including attorneys' fees, all expenses of litigation and/or
settlement, and court costs, arising from any act or omission of SELLER, its officers, employees, agents, suppliers, or subcontractors at any tier, in the performance of any of its obligations under
this Contract.

	(n)
	SELLER
shall indemnify and hold harmless LOCKHEED MARTIN from and against any actual or alleged liability, loss, costs, damages, fees of attorneys, and other expenses which LOCKHEED
MARTIN may sustain or incur in consequence of (i) SELLER's failure to pay any employee for the Work rendered ender this Contract, or (ii) any claims made by SELLER's personnel against
LOCKHEED MARTIN. 

15.   INFORMATION OF LOCKHEED MARTIN  

	(a)
	SELLER
shall not reproduce or disclose any information, knowledge, or data of LOCKHEED MARTIN that SELLER may receive from LOCKHEED MARTIN or have access to, including proprietary or
confidential information of LOCKHEED MARTIN or of others when in possession of LOCKHEED MARTIN (hereinafter LOCKHEED MARTIN INFORMATION), without the prior written consent of LOCKHEED MARTIN.

	

	LOCKHEED
MARTIN INFORMATION includes, but is not limited to, business plans, marketing information, cost estimates, forecasts, bid and proposal data,
financial data, formulae, compositions, products, processes, procedures, inventions, systems, or designs. SELLER agrees not to use any LOCKHEED MARTIN INFORMATION for any purposes except to perform
this Contract or any other contract or agreement between LOCKHEED MARTIN and SELLER.

	(b)
	Prior
to commencement of Work, SELLER shall have a written agreement with each of its employees performing services hereunder sufficient to enable SELLER to comply with this Clause.

	(c)
	LOCKHEED
MARTIN INFORMATION provided to the SELLER remains the property of LOCKHEED MARTIN. Within thirty (30) days of the expiration or termination of this Contract or upon
the request of LOCKHEED MARTIN, SELLER shall return or certify the destruction of all LOCKHEED MARTIN INFORMATION and any reproductions, and the SELLER shall promptly surrender all information or
proprietary data developed by SELLER in performance of this Contract, unless its retention is authorized in writing by LOCKHEED MARTIN.

	(d)
	The
provisions set forth above are in addition to any obligations contained in a proprietary information agreement between the parties. 

16.   INFORMATION OF SELLER  

SELLER
shall not provide any proprietary information to LOCKHEED MARTIN without prior execution of a proprietary information agreement by both parties. 

11

 

17.   INSPECTION AND ACCEPTANCE  

	(a)
	LOCKHEED
MARTIN and its customer may inspect all Work at reasonable times and places. SELLER shall provide all information, facilities, and assistance necessary for safe and
convenient inspection without additional charge.

	(b)
	No
such inspection shall relieve SELLER of its obligations to furnish all Work in accordance with the requirements of this Contract. LOCKHEED MARTIN's final inspection and acceptance
shall be at destination.

	(c)
	If
SELLER delivers non-conforming Work, LOCKHEED MARTIN may, (i) accept all or part of such Work at an equitable price reduction; or (ii) reject such Work.

	(d)
	SELLER
shall not re-tender rejected Work without disclosing the corrective action taken. 

18.   INSURANCE/ENTRY ON LOCKHEED MARTIN PROPERTY  

	(a)
	In
the event that SELLER, its employees, agents, or subcontractors enter the site(s) of LOCKHEED MARTIN or its customers for any reason in connection with this Contract then SELLER
and its subcontractors shall procure and maintain for the performance of this Contract worker's compensation, comprehensive general liability, bodily injury and property damage insurance in reasonable
amounts, and such other insurance as LOCKHEED MARTIN may require. In addition, SELLER and its subcontractors shall comply with all site requirements. SELLER shall provide LOCKHEED MARTIN thirty
(30) days advance written notice prior to the effective date of any cancellation or change in the term or coverage of any of SELLER's required insurance, provided however such notice shall not
relieve SELLER of its obligations to procure and maintain the required insurance. If requested, SELLER shall send a "Certificate of Insurance" showing SELLER's compliance with these requirements.
SELLER shall name LOCKHEED MARTIN as an additional insured for the duration of this Contract. Insurance maintained pursuant to this clause shall be considered primary as respects the interest of
LOCKHEED MARTIN and is not contributory with any insurance which LOCKHEED MARTIN may carry. "Subcontractor" as used in this clause shall include SELLER's subcontractors at any tier. SELLER'S
obligations for procuring and maintaining insurance coverages are freestanding and are not affected by any other language in this Contract.

	(b)
	SELLER
shall indemnify and hold harmless LOCKHEED MARTIN, its officers, employees, and agents from any losses, costs, claims, causes of action, damages, liabilities, and expenses,
including attorneys' fees, all expenses of litigation and/or settlement, and court costs, by reason of property damage or loss or personal injury to any person caused in whole or in part by the
actions or omissions of SELLER, its officers, employees, agents, suppliers, or subcontractors. 

19.   INTELLECTUAL PROPERTY  

***  

	***
	Confidential
Information Omitted and Filed Separately with the Securities and Exchange Commission 

12

 

20.   MAINTENANCE OF RECORDS  

	(a)
	SELLER
shall maintain complete and accurate records in accordance with generally accepted accounting principles to substantiate SELLER's charges hereunder. Such records shall include,
but not be limited to, applicable time sheets, job cards, phone bills, travel receipts and job summaries. SELLER shall retain such records for three (3) years from final payment of this
Contract.

	(b)
	LOCKHEED
MARTIN shall have access to such records, and any other records SELLER is required to maintain under this Contract, for the purpose of audit during normal business hours,
upon reasonable notice for so long as such records are required to be retained. 

21.   NEW MATERIALS  

The
Work to be delivered hereunder shall consist of new materials, not used, or reconditioned, remanufactured or of such age as to impair its usefulness or safety. 

22.   OFFSET CREDIT/COOPERATION  

This
Contract has been entered into in direct support of LOCKHEED MARTIN's international offset programs. All offset benefit credits resulting from this Contract are the sole property of LOCKHEED
MARTIN to be applied to the offset program of its choice. SELLER agrees to assist LOCKHEED MARTIN in securing appropriate offset credits from the respective country government authorities. 

23.   PACKAGING AND SHIPMENT  

	(a)
	Unless
otherwise specified, all Work is to be packed in accordance with good commercial practice.

	(b)
	A
complete packing list shall be enclosed with all shipments. SELLER shall mark containers or packages with necessary lifting, loading, and shipping information, including the
LOCKHEED MARTIN Contract number, item number, dates of shipment, and the names and addresses of consignor and consignee. Bills of lading shall include this Contract number.

	(c)
	Unless
otherwise specified, delivery shall be FOB Place of Shipment. 

24.   PAYMENT, TAXES, AND DUTIES  

	(a)
	Payment
to SELLER shall be made upon the basis of invoices submitted in such form and detail as Lockheed Martin may require. LOCKHEED MARTIN shall make payment within thirty
(30) days after receipt and approval of such invoices.

	(b)
	Payment
for labor shall be computed by multiplying the appropriate hourly rate(s), set forth in this Contract by the number of direct labor hours performed. Rates shall include wages,
overhead, general and administrative expense, and profit. Fractional parts of an hour shall be payable on a prorated basis.

	(c)
	No
overtime will be paid by LOCKHEED MARTIN unless approved in advance by the LOCKHEED MARTIN Procurement Representative. If no overtime rates are provided in this Contact, overtime
rates will be negotiated.

	(d)
	Reimbursable
costs in connection with lower-tier subcontracts shall be limited to the amounts actually paid by SELLER to low-tier subcontractors.

	(e)
	SELLER
shall procure required materials at the most advantageous prices available. Cash and trade discounts, rebates, allowances, credits, and other amounts, which have been accrued
to 

13

 

the
benefit of SELLER, are for the account of LOCKHEED MARTIN. All residual material valued at greater than $2,000 (two thousand) per item shall belong to LOCKHEED MARTIN who shall provide disposition
instructions to the SELLER. 

	(f)
	LOCKHEED
MARTIN may audit invoices and substantiating books and records as LOCKHEED MARTIN deems necessary. Each payment shall be subject to reduction to the extent found by LOCKHEED
MARTIN not to have been properly payable. Contractor shall promptly advise LOCKHEED MARTIN if it becomes aware of an overpayment. 

25.   PRECEDENCE  

Any
inconsistencies in this Contract shall be resolved in accordance with the following descending order of precedence: (i) Face of the Purchase Order and/or Task Order, release document, or
schedule (including any continuation sheets), as applicable, including any special terms and conditions; (ii) This CORPDOC; and (iii) Statement of Work. 

26.   QUALITY CONTROL SYSTEM  

	(a)
	SELLER
shall provide and maintain a quality control system to an industry recognized Quality Standard and in compliance with any other specific quality requirements identified in this
Contract.

	(b)
	Records
of all quality control inspection work by SELLER shall be kept complete and available to LOCKHEED MARTIN and its customers. 

27.   RELEASE OF INFORMATION  

n/a 

28.   SEVERABILITY  

Each
paragraph and provision of this Contract is severable, and if one or more paragraphs or provision are declared invalid, the remaining paragraphs and provisions of this Contract will remain in
full force and effect. 

29.   STOP WORK  

	(a)
	n/a

	(b)
	LOCKHEED
MARTIN shall either terminate in accordance with the provisions of this Contract or continue the Work by written notice to SELLER. In the event of a continuation, an
equitable adjustment in accordance with the principles of the "Changes" clause shall be made to the price, delivery schedule, or other provision(s) affected by the Work stoppage, if applicable,
provided that the claim for equitable adjustment is made within thirty (30) days after date of notice to continue. 

30.   SURVIVABILITY  

If
this Contract expires, is complete, or is terminated, SELLER shall not be relieved of those obligations contained in the following provisions: 

Applicable
Laws

Electronic Contracting

Export Control

Independent Contractor Relationship and Seller Personnel

Information of LOCKHEED MARTIN

14

 

Information/Entry
on LOCKHEED MARTIN Property

Intellectual Property

Maintenance of Records

Release of Information

Warranty 

31.   TERMINATION FOR CONVENIENCE  

	(a)
	Lockheed
Martin may terminate part or all of this Contract for its convenience by giving written notice to SELLER.

	(b)
	Upon
termination, in accordance with LOCKHEED MARTIN's written direction, SELLER will immediately: (i) Cease work; (ii) Prepare and submit to LOCKHEED MARTIN an
itemization of all completed and partially completed deliverables and services; (iii) Deliver to LOCKHEED MARTIN deliverables satisfactorily completed up to the date of termination at the
agreed upon prices in the relevant statement of work; and (iv) Deliver upon request any Work in process. In the event LOCKHEED MARTIN terminates for its convenience after performance has
commenced, LOCKHEED MARTIN will compensate SELLER for the actual, allowable, and reasonable expenses incurred by SELLER for Work in process up to and including the date of termination provided SELLER
uses reasonable efforts to mitigate LOCKHEED MARTIN's liability under this clause.

	(c)
	In
no event shall LOCKHEED MARTIN be liable for lost or anticipated profits, unabsorbed indirect costs or overhead, or for any sum in excess of the total Contract price. SELLER's
termination claim shall be submitted within ninety (90) days from the effective date of the termination.

	(d)
	SELLER
shall continue all Work terminated. 

32.   TIMELY PERFORMANCE  

	(a)
	SELLER's
timely performance is a critical element of this Contract.

	(b)
	Unless
advance shipment has been authorized in writing by LOCKHEED MARTIN, LOCKHEED MARTIN may store at SELLER's expense, or return, shipping charges collect, all Work received in
advance of the scheduled delivery date.

	(c)
	If
SELLER becomes aware of difficulty in performing the Work, SELLER shall timely notify LOCKHEED MARTIN, in writing, giving pertinent details. This notification shall not change any
performance schedule.

	(d)
	In
the event of a termination for convenience or change, no claim will be allowed for any manufacture or procurement in advance of SELLER's normal flow time unless there has been
prior written consent by LOCKHEED MARTIN. 

33.   WAIVERS, APPROVALS, AND REMEDIES  

	(a)
	Failure
by LOCKHEED MARTIN to enforce any of the provisions of this Contract shall not be construed as a waiver of the requirements of such provisions, or as a waiver of the right of
LOCKHEED MARTIN thereafter to enforce each such provision.

	(b)
	LOCKHEED
MARTIN's approval of documents shall not relieve SELLER of its obligation to comply with the requirements of this Contract.

	(c)
	The
rights and remedies of LOCKHEED MARTIN in this Contract are cumulative and in addition to any other rights and remedies provided by law or in equity. 

15

 

34.   WARRANTY  

	(a)
	SELLER
warrants that it is and shall remain free of any obligation or restriction which would interfere or be inconsistent with or present a conflict of interest concerning the Work
to be furnished by SELLER under this Contract.

	(b)
	SELLER
warrants that it will perform the services under this Contract with the degree of high professional skill and sound practices and judgment which is normally exercised by
recognized professional firms with respect to services of a similar nature.

	(c)
	SELLER
warrants that all Work furnished pursuant to this Contract shall strictly conform to applicable specifications, drawings, samples, descriptions, and other requirements of this
Contract and be free from defects in design, material, and workmanship, keeping in mind that a fabricated prototype is not a "finished" product by definition. This warranty shall begin upon final
acceptance and extend for a period of one (1) year. If any nonconforming Work is identified within the warranty period, SELLER at LOCKHEED MARTIN's option, shall promptly repair, replace, or
reperform the non-conforming Work. Transportation of replacement Work, return of non-conforming Work, and reperformance of Work shall be at SELLER', expense. If repair, or
replacement, or reperformance of Work is not timely, LOCKHEED MARTIN may elect to return, reperform, or repair, replace, or reprocure the Work at SELLER's expense. All warranties shall run to LOCKHEED
MARTIN and its customers. 

***  

	***
	Confidential
Information Omitted and Filed Separately with the Securities and Exchange Commission 

16

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Exhibit 4.1    
    

 
 

FOR ACCREDITED INVESTORS ONLY    
    

 
 

INTERNATIONAL INTEGRATED INCORPORATED
  FORM OF CONVERTIBLE DEBENTURE LOAN AGREEMENT    
    

        THIS LOAN AGREEMENT (the "Agreement") is by and between
                        (the "Holder") and INTERNATIONAL
INTEGRATED INCORPORATED, a British Virgin Islands
corporation with its registered office at Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands (the "Company"). 

 
 

RECITALS:    
    

WHEREAS:  

        A.    The Holder agrees to lend the Company the principal amount as defined below and receive one year's worth of prepaid
interest thereon; and 

        B.    The Holder agrees to make such loan to the Company in the form of a Convertible Debenture, convertible in the Holder's
sole discretion, into the Company's Common Stock, $.01 par value per share (the "Common Stock") on the terms set forth below which is limited to
Accredited Holders only; and 

        C.    The Company and the Holder wish to enter into this Agreement to reflect the other terms of the investment. 

 
 

AGREEMENT    
    

        NOW, THEREFORE, intending to be legally bound, the parties hereto agree as follows: 

        1.    LOAN. The Holder hereby agrees to lend to the
Company                        
($            ) payable in cash, or good funds (the "Loan Amount"). The Company hereby agrees to
pay
to the Holder on the date which is twelve (12) months from the date hereof (the "Maturity Date"), at the Holder's sole discretion as indicated to
III in writing, either: (a.) the Loan Amount; or (b) shares of III common stock (the  "Debenture Shares")
equal to the Principal Amount divided by FIVE DOLLARS ($5.00) per share (the "Conversion
Price"). The Company agrees to pay the Holder prepaid interest in the amount of           

            THOUSAND DOLLARS ($                        ) within Ten
(10) business days of bank clearance of the Holder's Loan Amount. 

        2.    COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to Holder that on the date hereof: 

        2.1    The Company is a corporation duly organized, validly existing and in good standing under the laws of the British Virgin
Islands and is duly qualified as a foreign corporation in each jurisdiction in which the character of the properties owned or held under lease by it or the nature of the business transacted by it
requires such qualification. The Company has all requisite power to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and all other documents and
agreements contemplated hereby and thereby, and to perform the provisions hereof and thereof and to consummate the transactions contemplated hereby and thereby. 

        2.2    The execution, delivery and performance of this Agreement and all other documents and agreements contemplated hereby to
be executed, delivered and performed by the Company, and the 

1

 

consummation
of the transactions contemplated hereby or thereby, have been duly authorized and approved by the Company. This Agreement and all other documents and agreements contemplated hereby to be
executed and delivered by the Company have each been duly authorized, executed and delivered by, and each is the valid and binding obligation of, the Company, enforceable against it in accordance with
its terms, except as may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws or by legal or equitable principles relating to or limiting creditors' rights
generally. 

        2.3    The authorized capital stock of the Company consists of the following: 50,000,000 authorized shares of common stock, par
value $0.01; and 20,000,000 authorized shares of Preferred stock, par value $0.01. The Shares will, when issued, be duly and validly issued, fully paid and nonassessable. 

        2.4    The consummation of the transactions contemplated by this Agreement and the performance of the terms and provisions of
this Agreement and any other documents or agreements contemplated hereby will not (i) contravene, result in any breach of, or constitute a default under any indenture, mortgage, deed of trust,
bank loan or credit agreement, corporate charter, by-laws or other material agreement or instrument to which the Company is a party or by which the Company or any of its properties is
bound, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order of any court, arbitrator or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign (collectively, "Governmental Person") applicable to the Company or
(iii) violate any material provision of any statute or other rule or regulation of any Governmental Person applicable to the Company. 

        2.5    No consent, approval or authorization of, or registration, filing or declaration with, any person or entity is required
for the transfer of the Convertible Debenture or the Debenture Shares or the valid delivery of the Convertible Debenture or the Debenture Shares or for the performance by the Company of this Agreement
or any other documents or agreements contemplated hereby, other than the filings, registrations or qualifications under securities laws or that may be required to be made or obtained in connection
with the offers transfer, sale or delivery of the Convertible Debenture or the Debenture Shares or any interest therein. 

        2.6    Upon issuance (including payment of the purchase or exercise price there for), Holder shall acquire good and marketable
title to the Convertible Debenture free and clear of all covenants, conditions, restrictions, liens, pledges, charges, encumbrances, options and adverse claims or rights of any kind whatsoever. 

        3.    COVENANTS OF THE COMPANY. The Company hereby makes the following covenants
and agrees that: 

        3.1    The Company will do or cause to be done all things necessary to preserve and keep in full force and effect the Company's
corporate existence in accordance with the rights (charter and statutory), licenses and franchises of the Company; provided, however, that the foregoing
shall not restrict any merger, acquisition of, consolidation with or other such transaction involving the Company, whether or not it is the surviving corporation. 

        3.2    The Company shall pay prior to delinquency all taxes, assessments and governmental levies that may be imposed upon the
Company, except as contested in good faith and by appropriate proceedings. 

        3.3    The Company shall comply in all respects with all applicable laws, statutes and regulations of any Governmental Person, a
violation of which would have a material adverse effect on the financial condition, operations, business, profits, prospects or properties of the Company or the validity or enforceability of this
Agreement or any other documents or agreements contemplated hereby or thereby or any of the transactions contemplated hereby or thereby. 

2

 

        3.4    The Company shall refuse to register any transfer of any of the Debenture Shares not made in accordance with the
provisions of Regulation D, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration. 

        4.    HOLDER'S REPRESENTATIONS. The Holder hereby makes the following
representations to the Company which shall also be true and correct at the Closing and which shall survive the Closing: 

        4.1    The Holder represents and warrants that the Holder is an "Accredited Holder" within the meaning of Regulation D
promulgated under the Act, and as more specifically described in Exhibit A hereto. 

        4.2    The Holder is, by reason of the Holder's business or financial experience, or by reason of the business or financial
experience of the Holder's professional adviser, who is not affiliated with and is not compensated directly or indirectly by the Company, or any affiliate or selling agent of the Company, is capable
of evaluating the merits and risks of the purchase of the Shares and of protecting the Holder's own interests in connection with the investment contemplated herein. 

        4.3    The Holder acknowledges that it has received and carefully reviewed a copy of the form of Convertible Debenture attached
hereto as Exhibit "B". The form of Convertible Debenture and this Agreement are hereinafter collectively referred to as the "Materials," and the Holder
further acknowledges that it has read all of the disclosures set forth in the Materials. The Holder has had the opportunity to ask questions and receive answers from the Company concerning the terms
and conditions of the offering described in the Materials and by the Company. The Holder recognizes that the Company has a limited operating history and is a speculative venture, and that if the
Holder invests therein, the Holder may lose the entire amount of its investment. The Holder acknowledges that its representatives and the Holder have been provided with the opportunity to obtain any
additional information necessary to verify the accuracy of all information provided to the Holder in the Materials. 

        4.4    In deciding whether to acquire the Convertible Debenture, the Holder has relied exclusively upon consultations with its
legal, financial and tax advisers with respect to the nature of the investment and the information provided by the Company in the Materials and this Agreement. None of the Holder's advisors are
affiliated with, or compensated directly or indirectly by, the Company or any affiliate or selling agent of the Company. 

        4.5    The Holder understands that neither the SEC, nor any other governmental agency having jurisdiction over the sale and
issuance of the Convertible Debenture will make any finding or determination relating to the appropriateness for investment of the Convertible Debenture offered by the Company and that none of them
has or will recommend or endorse the Convertible Debenture. 

        4.6    The Holder represents that the Convertible Debenture is purchased for his own account for investment and is not being
purchased with a view to the resale or distribution thereof, and that the Holder has no present intention of distributing or reselling any portion of the Convertible Debenture. The Holder acknowledges
that it has been informed by the Company that the Convertible Debenture, and the Debenture Shares, to be issued and delivered have not been registered under the Act and that the Convertible Debenture
and Debenture Shares must be held indefinitely unless subsequently registered under the Act or an exemption for such registration is available. The Holder acknowledges that, other than as may be set
forth in the Materials, the Company has no obligation to register the Convertible Debenture or the Debenture Shares under the Act. The Holder also acknowledges that it is fully aware of the
restrictions on disposing of the Convertible Debenture and the Debenture Shares resulting from the provisions of the Act and the General Rules and Regulations of the SEC thereunder. 

        4.7    The Holder understands that the Convertible Debenture will not be freely transferable and the ability to transfer the
Debenture Shares is also restricted. 

3

 

        4.8    The Holder recognizes that there is not a public market for the Convertible Debenture and that there is no assurance that
there will be such a market for these securities. The Holder understands that it may have to hold the Debenture Shares indefinitely due to the lack of such a market. 

        4.9    The Holder represents that he possesses such knowledge and experience in business and financial matters that he is
capable of evaluating the merits and risks of his investment in the Convertible Debenture. The Holder also has the degree of sophistication in these matters necessary to understand (1) the
financial and operational information provided to it relating to the Company, and (2) the potential risk of losing all or a portion of his investment in the Convertible Debenture. The Holder
represents that he is able to bear the economic risk of a loss of its investment in the securities, that he has funds adequate to meet personal needs and contingencies and that he has no need for
liquidity of the investment in the Convertible Debentures. 

        4.10    The Holder recognizes that "stop transfer" instructions will be issued against his Debenture Shares and that the
following legend will be placed on the Debenture Shares issued: 

THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. 

        5.     REGISTRATION RIGHTS.  

        5.1    For the period commencing with the issuance of the Convertible Debenture and terminating one year after the Effective Date as
defined below, if
at any time the Company shall propose to register any of its shares for sale or disposition for its own account for cash under the Act in a public offering, including an initial public offering (the
"IPO") under an S-1 registration statement other than a registration relating to its employee benefit plans, the Company shall: 

        (a)   Promptly give to the Holder at least thirty (30) days' written notice prior to the filing thereof (which shall
include, if then determined, the proposed date on which the registration statement is to be filed, the proposed price and registration price per share, the number of shares proposed to be included in
such registration, the identity of any proposed selling stockholders and a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and 

        (b)   Subject to Section 5.2 below, include in such registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, a portion of the Holder's Shares (as hereinafter defined) which are specified in a written request, or requests, made by the Holder within
ten (10) days after receipt of such written notice from the Company by the Holder. 

        The
rights of the Holder to registration pursuant to this Section 5.1 shall be conditioned upon the Holder's participation in any underwriting relating to the Company's registered
public offering. The Holder shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter or underwriters selected by the Company. The Company will use
its best efforts to include the Holder's Shares in such registration statement. Notwithstanding any provision of this Section 5.1, if the underwriter, in its sole discretion, determines that
marketing factors require a limitation of the number of securities to be underwritten, or that the registration statement be limited to shares offered by the Company only, the underwriter may exclude
some or all of the Holder's Shares for which the Holder seeks registration from inclusion in the registration and underwriting, which reduction shall be pro rata among the Holder, the Company, and any
other shareholder whose shares are sought to be included in the registration. The Company will bear the expenses of such registration, except for an underwriting commission or discount and the
expenses of special counsel for the Holder. 

4

 

        5.2    In addition, from time to time, the Company will register the Holder's Shares, at its expense, on registration statements
or Form S-3 after the date upon which the Company meets the requirements to register Holder's Shares on a Form S-3. 

        5.3    Definitions. For purposes of this Section 5: 

        5.3.1     The terms "register", "registered" and  "registration" refer to a registration effected
by preparing and filing a registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or document; and 

        5.3.2     The term "Holder's Shares" means any Common Stock issued
upon conversion of the Convertible Debenture held by the Holder; and 

        5.3.3     The term "Effective Date" shall mean the date the
effectiveness of the Company's registration on Form S-1, or equivalent registration, for an initial public offering (IPO) is declared effective by the SEC. 

        5.4    Indemnification. In the event any Holder's Shares are included in a
registration statement under this Section 5: 

        5.4.1 To the extent permitted by law, the Company will indemnify and hold harmless the Holder, and its partners, against any
losses, claims, damages or liabilities (joint or several) to which it may become subject under the Act, the 1934 Act, or other federal or state law, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any
rule or regulation promulgated under the Act, the 1934 Act or any state securities law. The Company will reimburse the Holder, and its partners, for any legal or other expense actually incurred by
them in connection with investigating or defending any such loss, claim, damage, liability or action. Notwithstanding the preceding, the indemnity agreement contained in this Section 6.4.1
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which
occurs solely in reliance upon or in conformity with written information furnished expressly for use in connection with such registration by the Holder. 

        5.4.2 To the extent permitted by law, the Holder will indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, and any underwriter, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director, officer, controlling person, or underwriter may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such
Violation occurs solely in reliance upon written information furnished by the Holder and expressly for use in connection with such registration. The Holder will reimburse any legal or other expense
reasonably incurred by the Company or any such director, officer, controlling person or 

5

 

underwriter
in connection with investigating or defending any such loss, claim, damage, liability or action. Notwithstanding the preceding, the indemnity agreement contained in this
Section 6.4.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld. 

        5.4.3 Promptly after receipt by an indemnified party under this Section 6.4 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.4, deliver to the
indemnifying party a written notice of the commencement thereof. Following receipt of such notice, the indemnifying party shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the
indemnifying party
would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 5.4. However, the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 5.4. 

        5.4.4 The obligations of the Company under this Section 5.4 shall survive the completing of any offering of the
Holder's Shares in a registration statement under this Section 5. 

        5.5   Delay. The Holder shall have no right to take any action to restrain,
enjoin or otherwise delay any registration as a result of any controversy that may arise with respect to the interpretation or implementation of this undertaking. 

        5.6   Transfer of Registration Rights. The rights granted to the Holder
hereunder to cause the Company to register securities pursuant to the terms hereof may be assigned to a transferee or assignee in connection with any permitted transfer or assignment of any of the
Holder's Shares (including, without limitation, any transfers or assignments effected by operation of law), but excluding any transferee who purchases the Company's Common Shares which have been
otherwise registered. 

        6.    TRANSFER OF CONVERTIBLE DEBENTURE.  

        With respect to any offer, sale or other disposition of the Convertible Debenture (or of any securities issued upon conversion of this Debenture other than
pursuant to Section 5 above), the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's counsel,
to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written
notice, the Company shall notify such Holder whether such Holder may sell or otherwise dispose of the Convertible Debentures, all in accordance with the terms of the notice delivered to the Company.
Notwithstanding the above, Holder agrees not to sell, assign or otherwise dispose of the Convertible Debenture or the Debenture Shares to any competitor of III, including but not limited to Inamed
Corporation or Mentor Corporation, or to any executive officer of any competitor of III, including but not limited to any executive officer of Inamed Corporation or Mentor Corporation. 

6

 

        7.    GENERAL PROVISIONS.  

         7.1    All representations, warranties, covenants and agreements of the Company herein shall be deemed to be material and to have been
relied upon by
Purchaser and shall survive the execution and delivery of this Agreement and of the Securities. 

        7.2    This Agreement shall bind and inure to the benefit of and be enforceable by the Company, Purchaser and each of their
respective successors and assigns. Purchaser shall be permitted to transfer the Shares in accordance with their terms and the terms of this Agreement and in accordance with applicable restrictions
under applicable federal and state securities laws. 

        7.3    All notices and other communications provided for in this Agreement shall be in writing and delivered by registered or
certified mail, postage prepaid, or delivered by overnight courier (for next business day delivery) or telecopied, addressed as set forth on the signature page hereof, or at such other address as any
of the parties hereto may hereafter designate by notice to the other parties given in accordance with this Section. Any such notice or communication shall be deemed to have been duly given on the
fifth day after being so mailed, the next business day after delivery by overnight courier, when received when transmitted by telecopy with confirmation of transmission or upon receipt when delivered
personally. 

        7.4    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Signatures may be exchanged by telecopy, with original signatures to follow. Each of the parties hereto agrees that it will be bound by its own
telecopied signature and that it accepts the telecopied signatures of the other parties to this Agreement. The original signature pages shall be forwarded to the Company or its counsel and the Company
or its counsel will provide all of the parties hereto with a copy of the entire Agreement. Notwithstanding the above, this Agreement shall not be effective until accepted by the Company. 

        7.5    This Agreement may only be amended by a writing duly executed by the parties hereto. 

        7.6    If any term or provision of this Agreement or any other document executed in connection herewith shall be determined to
be illegal or unenforceable, all other terms and provisions hereof and thereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law. 

        7.7    EXCEPT TO THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY SELECTED HEREIN, THIS
AGREEMENT AND ALL AMENDMENTS, SUPPLEMENTS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE BRITISH VIRGIN ISLANDS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE COURTS SITTING IN THE BRITISH VIRGIN ISLANDS AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER BRITISH VIRGIN ISLANDS LAW.  

        7.8    Any dispute arising in connection with the interpretation or enforcement of the provisions of this Agreement, or its application or
validity,
will be submitted to arbitration. Such arbitration proceedings will be held in the British Virgin Islands. This agreement to arbitrate is specifically enforceable. Any award rendered in any such
arbitration proceeding will be final and binding on each of the parties, and judgment may be entered thereon in any court of competent jurisdiction. The costs and fees of any such arbitration
proceeding will be borne by the respective parties. The arbitrators may in their discretion award costs and reasonable attorneys' fees to the prevailing party. 

        7.9    This Agreement contains the entire Agreement of the parties hereto with respect to the transactions contemplated hereby
and supersedes all previous oral and written, and all previous contemporaneous oral negotiations, commitments and understandings. 

7

 

        7.10    Each party agrees promptly to execute and deliver such documents and to take such other acts as are reasonably necessary
to effectuate the purposes of this Agreement. 

        7.11    The headings contained herein are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. 

        7.12    This Agreement contains the entire agreement between the Holder and the Company in regards to the Convertible Debenture,
and all prior negotiations, understandings and agreements with regards to the Convertible Debenture are superseded by this Agreement. No amendment, modification, supplement, termination or waiver of
any provision of this Agreement, and no consent to any departure by the Company therefrom, shall be effective unless in writing and signed by the Holder, and then only in the specific instance and for
the specific purpose given. "Including" as used herein means "including, but not limited to." 

        7.13    The Holder acknowledges and agrees that the non-public information it has received and will receive about
the Company and the Company's financial performance is confidential, and agrees to use all reasonable efforts to maintain the confidentiality thereof. Any Confidentiality Agreement between the Holder
and the Company, including the foregoing, is hereby modified, only to
the extent necessary, to permit the Holder to exercise and protect its rights under this Agreement, or as a shareholder of the Company. 

        IN WITNESS WHEREOF, the parties have signed this Agreement as of                        , 2002.

	 	 	"HOLDER"
	

 	
 	

Signed
	

 	
 	

Address:
	

 	
 	

	

 	
 	

	 	 	Phone:	 
	 	 	 	

	 	 	FAX:	 
	 	 	 	

	 	 	Email:	 
	 	 	 	

	 	 	Tax I.D. or Social Security Number:
	

 	
 	

 
 

THIS SUBSCRIPTION IS NOT ACCEPTED AND THIS AGREEMENT IS NOT EFFECTIVE UNTIL AFTER THE RECEIPT AND VERIFICATION OF GOOD FUNDS FROM THE HOLDER TO THE BANK ACCOUNT LISTED BELOW  AND ACCEPTANCE BY THE COMPANY AS WITNESSED BY
THE SIGNATURE ON THE NEXT PAGE    
    

        Wires should be sent via Fed Wire System to:

U.S. Bank of Nevada

Nevada Financial Center

2300 West Sahara Avenue

Las Vegas, NV 89102

For credit to the account of:

MediCor Ltd.

Acct. #                         

 (continued on next page)  

8

 
 Checks should be made payable to International Integrated Incorporated

and sent, via Federal Express, to:

International Integrated Incorporated

3800 Howard Hughes Parkway

18th Floor

Las Vegas, NV. 89109

Phone: 702/731-2519

FAX: 702/791-5365 

	THE COMPANY:	 	 
	

International Integrated Incorporated	
 	

The Effective Date:

	By:	 	 	                         , 2002
	 	 	
	 

	Its:	 	 	 	 
	 	 	
	 	 

	Registered Office Address:

International Integrated Incorporated

Craigmuir Chambers

P.O. Box 71

Road Town, Tortola

British Virgin Islands	 	Management Office Address and Address for Notices:

International Integrated Incorporated

3800 Howard Hughes Parkway

18th Floor

Las Vegas, NV. 89109

Phone: 702/731-2519

FAX: 702/791-5365
	

Additional Guarantor:	
 	

 
	

 Donald K. McGhan	
 	

 

9

 
 
 

LIST OF EXHIBITS
  TO
  INVESTMENT AGREEMENT    
    

	EXHIBIT A	 	—	 	DEFINITION OF AN "ACCREDITED HOLDER"
	EXHIBIT B	 	—	 	FORM OF CONVERTIBLE DEBENTURE

10

 
 
 

EXHIBIT A TO INVESTMENT AGREEMENT
  
    DEFINITION OF ACCREDITED HOLDER
  REGULATION D    
    

        To be eligible to purchase the Convertible Debentures, prospective investors must meet the Accredited Investor requirements described below. 

        Under
Regulation D an "Accredited Investor" shall mean any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the
following categories at the time of the sale of the securities to that person: 

	(1)
	any
bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act of
1991 whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in
section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; Small
Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and
maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess
of $5,000,000; employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited Holders;

	(2)
	any
private business development company as defined in section 202(a)(22) of the Investment Advisors Act of 1940;

	(3)
	any
organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership not formed for the specific
purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

	(4)
	any
director, executive officer or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of that issuer;

	(5)
	any
natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000;

	(6)
	any
natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same income level in the current year;

	(7)
	any
trust with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as
described in Section 230.506(b)(2)(ii);

	(8)
	any
entity in which all of the equity owners are accredited Investors. 

11

  

 
 

EXHIBIT B
  TO INVESTMENT AGREEMENT
  
    FORM OF CONVERTIBLE DEBENTURE
  
    CONFIDENTIAL    
    

12

 

THE CONVERTIBLE DEBENTURES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND HAVE NOT BEEN QUALIFIED UNDER THE SECURITIES
LAWS OF ANY OTHER STATE. THE CONVERTIBLE DEBENTURES CANNOT BE SOLD OR TRANSFERRED WITHOUT SUCH REGISTRATION OR QUALIFICATION UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS THEN
AVAILABLE.

 
 

INTERNATIONAL INTEGRATED INCORPORATED
  FORM OF CONVERTIBLE DEBENTURE    
    

	DEBENTURE #:	 	DATE OF ISSUANCE:
	

#	
 	

 
	

AMOUNT:	
 	

 
	

$	
 	

 

FOR VALUE RECEIVED, the undersigned, INTERNATIONAL INTEGRATED INCORPORATED, a
British Virgin Islands Corporation ("III") promises to pay to the order of                        (the "Holder"), or order, at
Holder's address as designated on the signature page hereof, or at such other
address as the Holder designates, on or before twelve (12) months from the date hereof (the "Maturity Date") at the Holder's sole discretion as indicated to III in writing, either:  (a.) the
principal sum of                        
($            ) (the "Principal Amount") herein evidenced;
or (b) shares of III common stock (the "Debenture Shares") equal to the Principal Amount divided by FIVE DOLLARS ($5.00) per share (the "Conversion
Price"). This Convertible Debenture is subject to that certain Convertible Debenture Loan Agreement between the Holder and III (the "Loan Agreement"). The provisions of the Loan Agreement are hereby
incorporated herein by this reference. 

        1.    PAYMENTS AND INTEREST.  

        This Convertible Debenture shall bear interest at the rate of Ten Percent (10%) per annum, prepaid to the Holder by III in the amount
of                        THOUSAND
DOLLARS ($                        ) payable by III within Ten (10) business days of bank clearance of the Holder's Principal
Amount, in the form of a bank wire or check. This Convertible Debenture is
payable either by repayment of III of the Principal Amount hereof or by the issuance by III of the Debenture Shares, at the Holder's sole discretion and written notification thereof. No fractional
shares will be issued and any fractional shares which may be issuable hereunder will be paid in cash by III pursuant to Section 8 hereof. 

        2.    SEVERABILITY.  

        If any provision of this Convertible Debenture is invalid by operation of any law or interpretation placed thereon by any court, this Convertible Debenture shall
be construed as not containing such provision and all other provisions of this Convertible Debenture which are otherwise lawful shall remain in full force and effect, and to this end the provisions of
this Convertible Debenture are declared to be severable. 

        3.    GOVERNING LAW.  

        This Convertible Debenture and the Investment Agreement shall be governed by and construed in accordance with the laws of the British Virgin Islands. 

13

 

        4.    ASSIGNMENT.  

        Except to the extent provided in Section 9 below, the Holder shall have the right to sell, assign, or otherwise transfer, either in part or in its
entirety, this Convertible Debenture, and any other instrument evidencing or securing the indebtedness of this Convertible Debenture, without III's consent. Such transferee or transferees shall be
deemed to be entitled, as to III, to be treated in all favorable respects as a holder or holders in due course. Notwithstanding the above, Holder agrees not to sell, assign or otherwise dispose of the
Convertible Debenture or the Debenture Shares to any competitor of III, including but not limited to Inamed Corporation or Mentor Corporation, or to any executive officer of any competitor of III,
including but not limited to any executive officer of Inamed Corporation or Mentor Corporation. 

        5.    FORBEARANCE NOT A WAIVER.  

        No delay or omission on the part of the Holder in exercising any rights under this Convertible Debenture or under the Investment Agreement as defined herein, on
default by III, shall operate as a waiver of such right or of any other right under this Convertible Debenture, for the same default or any other default. 

        6.    MANNER OF NOTIFICATION.  

        Any notice to III provided for in this Convertible Debenture shall be given by personal delivery or by mailing such notice by first class or certified mail,
return receipt requested, addressed to III at the management office address stated below, or to such other address as III may designate by written notice to the Holder. Any notice to the Holder shall
be given by personal delivery or by mailing such notice by first class or certified mail, return receipt requested, to the Holder at the address stated on the signature page hereof, or at such other
address as may have been designated the Holder by written notice to III. Mailed notices shall be deemed delivered and received on the delivery date as shown on the postal return receipt or the receipt
furnished by an independent courier service, and any notices transmitted by confirmed facsimile transmission will be deemed delivered and received as of the date of the transmission. 

        7.    CONVERSION RIGHTS OF HOLDER.  

        At the Holder's option, at any time prior to the Maturity Date as defined above, Holder may elect to convert all of this Convertible Debenture, in accordance with
the provisions of this Section 7. into fully paid and non-assessable shares of Common Stock of III (the "Common Stock"). The number of Convertible Debenture Shares into which this
Convertible Debenture may be converted shall be determined by dividing the unpaid Principal Amount by the Conversion Price of FIVE DOLLARS ($5.00) PER SHARE. On the Maturity Date hereof, III will
automatically convert the Convertible Debenture into the Convertible Debenture Shares, unless notified in writing by the Holder of Holder's decision to be repaid the Principal Amount, and III shall be
forever released from all of its obligations and liabilities under the Convertible Debenture. 

        7.1   Conversion Procedure; Notice of Conversion.  

        Before the Holder shall be entitled to convert this Convertible Debenture into shares of Common Stock, the Holder shall surrender this Convertible Debenture at
the office of III and shall give written notice by mail, postage prepaid, to III at its management office, of the election to convert the same. III shall, as soon as practicable thereafter, issue and
deliver at such office to the Holder a certificate or certificates for the Convertible Debenture Shares to which the Holder shall be entitled as aforesaid (bearing such legends as are required by
applicable state and federal securities laws in the opinion of counsel to III), including a check payable to the Holder for any cash amounts payable as described in Section 7.3. Such conversion
shall be deemed to have been made immediately prior to the close of 

14

 

business
on the date of such surrender of this Convertible Debenture, and the Holder shall be treated for all purposes as the record holder or holders of such shares of the Common Stock as of such
date. 

        7.2   Delivery of Stock Certificate.  

        As promptly as practicable after the conversation of this Convertible Debenture, III at its expense will issue and deliver to the Holder a certificate or
certificates for the number of full shares of Common Stock issuable upon such conversion. 

        7.3   Mechanics and Effect of Conversion.  

        No fractional shares of the Common Stock shall be issued upon conversion of this Convertible Debenture. In lieu of III issuing any fractional shares to the Holder
upon the conversion of this Convertible Debenture, III shall pay to the Holder the amount of outstanding principal that is not so converted because of a fractional share. 

        7.4   Reservation of Stock Issuable Under Conversion.  

        III shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of
the Convertible Debenture, such number of its shares of Common Stock as shall, from time to time, be sufficient to effect the conversion of the Convertible Debentures; and if at any time the number of
authorized by unissued shares of the Common Stock, for issuance on conversion of such Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this
Convertible Debenture, in addition to such other remedies as shall be available to the Holder of this Convertible Debenture, III will use its best efforts to take such corporate actions as may, in the
opinion of its counsel, be necessary to increase its authorized, but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 

        8.    REGISTRATION RIGHTS.  

         8.1    For a period commencing with the issuance of the Convertible Debenture and terminating one year after the Effective Date as defined
below, if at
any time III shall propose to register any of its shares for sale or disposition for its own account for cash under the Act in a public offering, including an initial public offering (the "IPO") under
an S-1 registration statement, other than a registration relating to its employee benefit plans, III shall: 

        (a)   Promptly give the Holder at least thirty (30) days' written notice prior to the filing thereof (which shall
include, if then determined, the proposed date on which the registration statement is to be filed, the proposed price and registration price per share, the number of shares proposed to be included in
such registration, the identity of any proposed selling stockholders and a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and 

        (b)   Subject to Section 8.2 below, include in such registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, a portion of the Holder's Shares (as hereinafter defined) which are specified in a written request, or requests, made by the Holder within
ten (10) days after receipt of such written notice from the Company by the Holder. 

        The
rights of the Holder to registration pursuant to this Section 8.1 shall be conditioned upon the Holder's participation in any underwriting relating to the Company's registered
public offering. The Holder shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter or underwriters selected by the Company. The Company will use
its best efforts to include the Holder's Shares in such registration statement. Notwithstanding any provision of this Section 8.1, if the underwriter, in its sole discretion, determines that
marketing factors require a 

15

 

limitation
of the number of securities to be underwritten, or that the registration statement should be limited to shares offered by the Company only, the underwriter may exclude some or all of the
Holder's Shares for which the Holder seeks registration from inclusion in the registration and underwriting, which reduction shall be pro rata among the Holder, the Company, and any other shareholder
whose shares are sought to be included in the registration. The Company will bear the expenses of such registration, except for an underwriting commission or discount and the expenses of special
counsel for the Holder. 

        8.2    In addition, from time to time, the Company will register the Holder's Shares, at its expense, on registration statements
or Form S-3 after the date upon which the Company meets the requirements to register Holder's Shares on a Form S-3. 

        8.3    Definitions. For purposes of this Section 8: 

        8.3.1 The terms "register", "registered" and  "registration" refer to a registration effected by preparing and filing
a registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or document; and 

        8.3.2 The term "Holder's Shares" means any Common Stock issued upon
conversion of this Convertible Debenture, held by the Holder and purchased in this Offering; and 

        8.3.3 The term "Effective Date" shall mean the date the effectiveness of the
Company's registration on Form S-1, or equivalent registration, for an initial public offering (IPO) is declared effective by the SEC. 

        8.4    Indemnification. In the event any Holder's Shares are included in a
registration statement under this Section 8: 

        8.4.1 To the extent permitted by law, the Company will indemnify and hold harmless the Holder, and its partners, against any
losses, claims, damages or liabilities (joint or several) to which it may become subject under the Act, the 1934 Act, or other federal or state law, insofar as such losses, claims, damages or
liabilities (or action in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any
rule or regulation promulgated under the Act, the 1934 Act or any state securities law. The Company will reimburse the Holder, and its partners, for any legal or other expense actually incurred by
them in connection with investigating or defending any such loss, claim, damage, liability or action. Notwithstanding the preceding, the indemnity agreement contained in this Section 8.4.1
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which
occurs solely in reliance upon or in conformity with written information furnished expressly for use in connection with such registration by the Holder. 

        8.4.2 To the extent permitted by law, the Holder will indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, and any underwriter, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director, officer, controlling person, or underwriter may become subject, under the Act, the 

16

 

1934
Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs solely in reliance upon written information furnished by the Investor and expressly for use in connection with such registration. The Holder will
reimburse any legal or other expense reasonably incurred by the Company or any such director, officer, controlling person or underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding the preceding, the indemnity agreement contained in this Section 8.4.2 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld. 

        8.4.3 Promptly after receipt by an indemnified party under this Section 8.4 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 8.4, deliver to the
indemnifying party a written notice of the commencement thereof. Following receipt of such notice, the indemnifying party shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the
indemnifying party
would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8.4. However, the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 8.4. 

        8.4.4 The obligations of the Company under this Section 8.4 shall survive the completing of any offering of the
Holder's Shares in a registration statement under this Section 8. 

        8.5   Delay. The Holder shall have no right to take any action to restrain,
enjoin or otherwise delay any registration as a result of any controversy that may arise with respect to the interpretation or implementation of this undertaking. 

        8.6   Transfer of Registration Rights. The rights granted to the Holder
hereunder to cause the Company to register securities pursuant to the terms hereof may be assigned to a transferee or assignee in connection with any permitted transfer or assignment of any of the
Holder's Shares (including, without limitation, any transfers or assignments effected by operation of law), but excluding any transferee who purchases the Company's Common Shares which have been
otherwise registered. 

        9.    TRANSFER OF THIS CONVERTIBLE DEBENTURE.  

        With respect to any offer, sale or other disposition of this Convertible Debenture (or of any securities issued upon conversion of this Convertible Debenture
other than pursuant to Section 8.6 above), the Holder will give written notice to III prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder's
counsel, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such
written notice, III shall notify such Holder whether such Holder may sell or otherwise dispose of this Convertible Debenture, all in accordance with the terms of the notice delivered to III.
Notwithstanding the above, Holder agrees not to sell, assign or otherwise dispose of the Convertible Debenture or the Debenture Shares to any competitor of III, including but not limited to Inamed
Corporation or Mentor Corporation, or to any executive officer of any 

17

 

competitor
of III, including but not limited to any executive officer of Inamed Corporation or Mentor Corporation. 

        10.    HEADING; REFERENCES.  

        All headings used herein are used for convenience only and shall not be used to construe or interpret this Convertible Debenture. Except where otherwise
indicated, all references herein to Sections refer to Sections hereof. 

Signatures on next page  

18

 

	THE COMPANY:

INTERNATIONAL INTEGRATED INCORPORATED	 	THE EFFECTIVE DATE:

	By:	 	 	                         , 2002
	 	 	
 Edward V. Lower, Ph.D.

Its: Chief Executive Officer	 

	

Registered Office Address:

International Integrated Incorporated

Craigmuir Chambers

P.O. Box 71

Road Town, Tortola

British Virgin Islands	
 	

Management Office Address and Address for Notices:

International Integrated Incorporated

3800 Howard Hughes Parkway

18th Floor

Las Vegas, NV. 89109

Phone: 702/731-2519

FAX: 702/791-5365
	

Additional Guarantor:	
 	

 

	 	 	 	                         , 2002
	
 Donald K. McGhan	 

19

 
 
 

NOTICE OF CONVERSION
  
    (To be signed only upon Conversion of Convertible Debenture)    
    

	TO:	 	INTERNATIONAL INTEGRATED INCORPORATED

Management Offices

3800 Howard Hughes Parkway 18th Floor

Las Vegas, NV. 89109

        The
undersigned, the Holder of the foregoing Convertible Debenture, hereby surrenders such Convertible Debenture for conversion into shares of the Common Stock of  INTERNATIONAL INTEGRATED INCORPORATED, a British Virgin Islands
Corporation, to the extent of                        THOUSAND DOLLARS
($            )
unpaid Principal Amount of such Convertible Debenture, and requests that the certificates for such shares be issued in the name of, and delivered to: 

whose
address is: 

Dated:

	 	 	 	 	Signed:
	 	 	 	 	

	 	 	 	 	(Signature must conform in all respects to the name of

the Holder as specified on the face of the Convertible Debenture)
	

 	
 	

 	
 	

Address:
	

 	
 	

 	
 	

	

 	
 	

 	
 	

20

QuickLinks

Exhibit 4.1

FOR ACCREDITED INVESTORS ONLY

INTERNATIONAL INTEGRATED INCORPORATED FORM OF CONVERTIBLE DEBENTURE LOAN AGREEMENT

RECITALS

AGREEMENT

THIS SUBSCRIPTION IS NOT ACCEPTED AND THIS AGREEMENT IS NOT EFFECTIVE UNTIL AFTER THE RECEIPT AND VERIFICATION OF GOOD FUNDS FROM THE HOLDER TO THE BANK ACCOUNT LISTED BELOW AND ACCEPTANCE BY THE COMPANY AS
WITNESSED BY THE SIGNATURE ON THE NEXT PAGE

LIST OF EXHIBITS TO INVESTMENT AGREEMENT

EXHIBIT A TO INVESTMENT AGREEMENT DEFINITION OF ACCREDITED HOLDER REGULATION D

EXHIBIT B TO INVESTMENT AGREEMENT FORM OF CONVERTIBLE DEBENTURE CONFIDENTIAL

INTERNATIONAL INTEGRATED INCORPORATED FORM OF CONVERTIBLE DEBENTURE

NOTICE OF CONVERSION (To be signed only upon Conversion of Convertible Debenture)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00082-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00082-of-00352.parquet"}]]