-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ayqlo33JRUokqDKQRPecgUrXx6VNqLn0IEfHF4PFZJuvnDi6kjm6QEBLJFaJxJil WZkomsWkeUWrNyF5/H4b/g== 0000950137-01-503250.txt : 20010822 0000950137-01-503250.hdr.sgml : 20010822 ACCESSION NUMBER: 0000950137-01-503250 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010821 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTIVE IQ TECHNOLOGIES INC CENTRAL INDEX KEY: 0000912875 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 412004369 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-68088 FILM NUMBER: 1720647 BUSINESS ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 BUSINESS PHONE: 9524495000 MAIL ADDRESS: STREET 1: 601 CARLSON PARKWAY STREET 2: SUITE 1500 CITY: MINNETONKA STATE: MN ZIP: 55305 FORMER COMPANY: FORMER CONFORMED NAME: METEOR INDUSTRIES INC DATE OF NAME CHANGE: 19960313 S-3 1 c64205s-3.txt REGISTRATION STATEMENT 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AUGUST 21, 2001 REGISTRATION NO. 333-______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------------- ACTIVE IQ TECHNOLOGIES, INC. (Exact name of registrant as specified in charter) MINNESOTA 41-2004369 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification number) 601 CARLSON PARKWAY, SUITE 1550 MINNETONKA, MINNESOTA 55305 (952) 449-5000 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) COPIES TO: MR. KENNETH W. BRIMMER WILLIAM M. MOWER, ESQ. CHIEF EXECUTIVE OFFICER & CHIEF FINANCIAL OFFICER CHRISTOPHER J. MELSHA, ESQ. ACTIVE IQ TECHNOLOGIES, INC. MASLON EDELMAN BORMAN & BRAND, LLP 601 CARLSON PARKWAY, SUITE 1550 3300 WELLS FARGO CENTER MINNETONKA, MINNESOTA 55305 MINNEAPOLIS, MINNESOTA 55402-4140 TELEPHONE: (952) 449-5000 TELEPHONE: (612) 672-8200 FACSIMILE: (952) 449-5001 FACSIMILE: (612) 672-8397
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED DISTRIBUTION: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE - ----------------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED PER SHARE PRICE FEE - ----------------------------------------------------------------------------------------------------------------------- COMMON STOCK, PAR VALUE $.01 PER SHARE (1) 8,525,922 $4.93 $42,032,792 $10,508.20 - ----------------------------------------------------------------------------------------------------------------------- CLASS B REDEEMABLE WARRANTS (2) 5,008,101 $5.50 $27,544,555 $6,886.14 - ----------------------------------------------------------------------------------------------------------------------- TOTAL 13,534,023 $69,577,347 $17,394.34 - -----------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 of the Securities Act based upon a $4.93 per share average of high and low prices of the Registrant's common stock on the Nasdaq Small Cap Market on August 15, 2001. (2) Fee based on warrant exercise price of $5.50 in accordance with Rule 457(g). THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SELLING SECURITY HOLDER OFFERING PROSPECTUS [ACTIVE IQ TECHNOLOGIES LOGO] 5,008,101 CLASS B REDEEMABLE WARRANTS 8,525,922 SHARES OF COMMON STOCK The selling security holders identified on pages 27-41 of this prospectus are offering the following securities on a resale basis: - 5,008,101 Class B Redeemable Warrants, of which 3,013,101 warrants were issued in connection with our acquisition of activeIQ Technologies Inc., including 89,106 warrants which are, as a result of the merger, issuable upon the exercise of certain warrants. Also included are 300,000 warrants issued to two investors in a private placement of units of our securities; 370,000 warrants issued in connection with a January 2001 private placement; 100,000 warrants issued as fees for services provided by consultants to Meteor Industries, Inc., our predecessor; 1,000,000 warrants issued to financial advisors in connection with our recent merger with activeIQ Technologies Inc., all of which were later exchanged for Class B Warrants, and 225,000 warrants were as consideration to a consultant retained by us. Each Class B Redeemable Warrant entitles the holder thereof to purchase, at any time until April 30, 2006, one share of our common stock at a price of $5.50 per share, subject to adjustment. The warrants are redeemable for $.01 per warrant, upon 30 days' notice, any time after April 30, 2002 following a period of 14 consecutive days in which the average closing bid price of our common stock exceeds $7.50 per share, subject to adjustment. - 5,008,101 shares of our common stock issuable upon the exercise of our Class B Redeemable Warrants; - 400,000 shares of our common stock which were issued in a private placement in connection with our acquisition of Red Wing Business Systems, Inc.; - 500,000 shares of our common stock issued to investors in a private placement of units of our securities; - 365,000 shares of our common stock issuable upon conversion of our Series B Convertible Preferred Stock; - 1,049,167 shares of our common stock held by certain of our other shareholders; and - An aggregate of 1,203,654 shares of our common stock issued or issuable upon the exercise of the following options and warrants: - 500,000 shares issuable upon the exercise of warrants issued to financial advisors in connection with our recent merger with activeIQ Technologies Inc. (at an exercise price of $3.00 per share); - 365,000 shares issuable upon the exercise (at a price of $2.50 per share) of warrants issuable upon the conversion of our Series B Preferred Stock; - 95,678 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to a selling agent in connection with a 2000 private placement; - 80,000 shares issuable upon 4 privately-issued options each to purchase 20,000 shares exercisable at $3.95, $4.73, $5.52 and $6.31 per share, respectively; - 125,000 shares issuable upon the exercise (at a price of $7.50 per share) of a warrant issued to a consultant in consideration of financial advisory services; - 17,976 shares issued upon the exercise of a warrant issued in connection with the payment of legal services; and - 20,000 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued in connection with an August 2000 bridge financing. Our common stock is listed on the Nasdaq Small Cap Market under the symbol "AIQT." On August 20, 2001, the last sale price for our common stock as reported on the Nasdaq Small Cap Market was $5.27. We intend to apply for listing of our Class B Redeemable Warrants on the Nasdaq Small Cap Market under the symbol "AIQTZ." 3 THE SHARES AND WARRANTS OFFERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7. ---------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. A REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is _______, 2001. 4 TABLE OF CONTENTS
PAGE ---- About this Prospectus .................................................................................... 2 Where You Can Find More Information and Incorporation by Reference........................................ 2 Prospectus Summary ....................................................................................... 4 Risk Factors ............................................................................................. 7 Note Regarding Forward-Looking Statements ................................................................ 15 Business ................................................................................................. 16 Management ............................................................................................... 20 Certain Relationships and Related Transactions............................................................ 22 Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 23 Use of Proceeds .......................................................................................... 27 Selling Security Holders ................................................................................. 27 Plan of Distribution...................................................................................... 43 Description of Capital Stock ............................................................................. 45 Description of Class B Redeemable Warrants ............................................................... 46 Disclosure of Commission Position On Indemnification For Securities Act Liabilities ....................................................................... 47 Legal Matters ............................................................................................ 48 Experts .................................................................................................. 48
-------------- No dealer, salesman or other person has been authorized to give any information or to make any representations other than those contained in this prospectus. You must not rely on any information or representations not contained in this prospectus, if given or made, as having been authorized by us. This prospectus is not an offer or solicitation in respect to these securities in any jurisdiction in which such offer or solicitation would be unlawful. The delivery of this prospectus shall not under any circumstances, create any implication that there has been no change in our affairs or that the information contained in this prospectus is correct as of any time subsequent to the date of this prospectus. However, in the event of a material change, this prospectus will be amended or supplemented accordingly. ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission. The registration statement that contains this prospectus (including the exhibits to the registration statement) contains additional information about our company and the securities offered under this prospectus. That registration statement can be read at the SEC web site or at the SEC's offices mentioned under the heading "Where You Can Find More Information." WHERE YOU CAN FIND MORE INFORMATION Federal securities law requires us to file information with the Securities and Exchange Commission concerning its business and operations. Accordingly, we file annual, quarterly, and special reports, proxy statements and other information with the SEC. You can inspect and copy this information at the Public Reference Facility maintained by the SEC at Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549. You can also do so at the following regional offices of the Commission: (1) New York Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048. 2 5 (2) Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can receive additional information about the operation of the SEC's Public Reference Facilities by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies that, like us, file information electronically with the SEC. The SEC allows us to "incorporate by reference" information that has been filed with it, which means that we can disclose important information to you by referring you to the other information we have filed with the SEC. The information that we incorporate by reference is considered to be part of this prospectus, and related information that we file with the SEC will automatically update and supersede information we have included in this prospectus. We also incorporate by reference any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, until the selling securityholders sell all of their securities or until the registration rights of the selling securityholders expire. This prospectus is part of a registration statement that we filed with the SEC (Registration No. 333-______). The following are specifically incorporated herein by reference: 1. Annual Report on Form 10-K for the fiscal year ended December 31, 2000; 2. Definitive Proxy Statement filed on February 14, 2001; 3. Quarterly Reports on Form 10-Q for the quarter ended March 31, 2001 and June 30, 2001; and 4. Current Report on Form 8-K filed on May 14, 2001; 5. Current Report on Form 8-K filed on June 15, 2001; and 6. Current Report on From 8-K/A filed on August 13, 2001. You can request a free copy of the above filings or any filings subsequently incorporated by reference into this prospectus by writing or calling us at the following address: Active IQ Technologies, Inc. Attention: Kenneth W. Brimmer, Chief Executive Officer 601 Carlson Parkway, Suite 1550 Minnetonka, Minnesota 55305 (952) 449-5000 You should rely only on the information incorporated by reference or provided in this prospectus or any supplement or amendment to this prospectus. We have not authorized anyone else to provide you with different information or additional information. The selling security holders will not make an offer of our securities in any state where the offer is not permitted. You should not assume that the information in this prospectus, or any supplement or amendment to this prospectus, is accurate at any date other than the date indicated on the cover page of such documents. 3 6 PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus or incorporated by reference in this prospectus. Because it is a summary, it may not contain all of the information that is important to you. Accordingly, you are urged to carefully review this prospectus and the documents incorporated in this prospectus by reference in their entirety. OUR COMPANY We are engaged in the design, development, marketing and support of software and eBusiness applications to the small to medium-sized business market, known as the "SME market." We offer businesses in the SME market an affordable, service-based product line ranging from website creation tools to more sophisticated eBusiness solutions. In addition to traditional accounting software solutions offered through Red Wing Business Systems, Inc., our recently-acquired and wholly-owned subsidiary, we also are developing a line of eBusiness applications and solutions that we call our "Epoxy Network." Red Wing Business Systems has provided the SME market with accounting software solutions since its inception in 1979. Its software products are currently utilized by more than 10,000 businesses, of which approximately half are in the agriculture industry. We will offer our Epoxy Network to customers through a monthly subscription. The initial offering of the Epoxy Network will be comprised of the following: - Epoxy Network is an easy-to-use, self-service Web navigation tool that provides users with appropriate, secured role-based access and control of Epoxy Network services. - Epoxy Account Management allows a business to provide its customers with critical information online 24-hours-a-day, 365 days a year via the business' Epoxy Web site, allowing customers to track their orders, retrieve invoice history, order information, and view their account balances whenever they want. - Epoxy Storefront leverages the Internet to link electronically a business' operations with its customers, suppliers and partners through an integrated electronic storefront. - Epoxy Connect is an easy to use solution that allows a small to medium-sized supplier to communicate electronically with their large trading partners in any common data exchange format (EDI to XML). - Epoxy e-Marketing provides a seamless suite of services that meet the e-marketing needs of small and mid-size companies. - Epoxy Content Management provides users with the functionality of an enterprise-class content management system known as Expedio, through our strategic partnership with IntraNet Solutions, Inc. We were originally incorporated in Colorado in December 1992 under the name Meteor Industries, Inc. On April 30, 2001, immediately prior to the effective time of the reverse merger transaction between activeIQ Technologies Inc. and Meteor Industries, we reincorporated under Minnesota law and changed our name to Active IQ Technologies, Inc. Our executive offices are located at 601 Carlson Parkway, Suite 1550, Minnetonka, Minnesota 55305 and our telephone number is (952) 449-5000. Our web site is www.activeiq.com. 4 7 RECENT DEVELOPMENTS On April 30, 2001, Meteor Industries, Inc. (our predecessor), activeIQ Technologies Inc. and AIQ, Inc., a wholly-owned subsidiary of Meteor Industries, closed on a triangular merger transaction whereby activeIQ Technologies ("Old AIQ") merged with and into AIQ, Inc. Immediately prior to the merger, Meteor Industries sold all of its assets relating to its former business, having only the cash and a note receivable from that sale as its only asset at the time of the merger with Old AIQ. In the merger, the shareholders of Old AIQ received one share of Meteor Industries common stock for each share of common stock in Old AIQ held, plus two Class B Redeemable Warrants for every three shares of Old AIQ common stock held by such shareholder. (For a complete description of the terms of the warrants, see "Description of Class B Redeemable Warrants.") Immediately following the merger, the Old AIQ shareholders held approximately 50 percent of our outstanding common stock. Since Meteor Industries had only monetary assets and no operations at the effective time of the merger, the transaction was accounted for as the issuance of stock by Old AIQ in exchange for the monetary assets of Meteor Industries. Since its inception in April 1996 through the fiscal year ended December 31, 2000, Old AIQ was a development stage company. Because Old AIQ was treated as the acquiring company in the merger for accounting purposes, when we discuss or refer to business and financial information in this prospectus relating to dates prior to the merger, we are referring to Old AIQ's business and financial information, unless otherwise stated. As mentioned above, immediately prior to the merger with Old AIQ, Meteor Industries sold all of its assets relating to its gas and oil distribution business to Capco Energy, Inc., one of our significant shareholders. In consideration for these assets, Capco Energy delivered to Meteor Industries approximately $4.6 million in cash, a promissory note in the amount of $500,000, and 100,833 shares of our common stock, which were immediately canceled. As a result of the sale of its assets to Capco Energy, Meteor Industries discontinued all of its operations in the petroleum and gas distribution business and adopted the business plan of Old AIQ. In June 2001, we acquired all of the outstanding capital stock of Red Wing Business Systems, Inc., a Minnesota corporation, which is now our wholly-owned subsidiary. Red Wing Business Systems develops, markets and distributes accounting software applications to the SME market, and particularly to users in the agricultural industry. In exchange for all of the shares of Red Wing Business Systems, we issued an aggregate of 400,000 shares of our common stock and paid at closing a total of $400,000 to the company's former shareholders. We are also obligated to make three more payments of $400,000 each to such shareholders, payable on December 6, 2001, June 6, 2002 and December 6, 2002, respectively. We further agreed to register the resale of the 400,000 shares issued to the former shareholders of Red Wing Business Systems. However, the former shareholders entered into a lock-up agreement in which 75 percent of the shares cannot be sold or otherwise transferred (subject to limited exceptions), except that every 3 months following the effective date of the registration statement covering the resale of the shares, 12.5 percent of such shares would no longer be subject to any restriction on transfer. We recently hired Jeffrey Seabloom as the President of our Enterprise Solutions Division. Prior to joining our company, Mr. Seabloom was employed since March 2000 by Manugisitics, Inc., a leading provider of Enterprise Profit Optimization (EPO) and e-Marketplace solutions, where he served as Group Vice President Consumer Package Sales and also as North American Vice President of Sales Operations. From January through March 2000, he was Vice President of Business Consulting with Firepond. From August 1999 to January 2000, Mr. Seabloom was Vice President of Marketing with Highjump Software Inc. (formerly Data Collections Systems, Inc.). Between 1995 and 1999, he was Vice President of Market Research and Solutions Development with Oracle Corporation. Mr. Seabloom's employment with our company is pursuant to an employment agreement, which provides for an annual salary of $200,000, employment of 2 years and grants to Mr. Seabloom options to purchase 350,000 shares of our common stock at $5.20 per share. 5 8 RISK FACTORS For a discussion of some of the risks you should consider before purchasing our Class B Redeemable Warrants or our common stock, you are urged to carefully review and consider the section entitled "Risk Factors" beginning on page 7 of this prospectus. THE OFFERING The selling security holders identified on pages 27-41 of this prospectus are offering a total of 5,008,101 Class B Redeemable Warrants and 8,525,922 shares of our common stock on a resale basis. Each Class B Redeemable Warrant entitles the holder thereof to purchase one share of our common stock at a price of $5.50 per share, subject to adjustment. The warrants expire on April 30, 2006 and may be redeemed by us at a price of $.01 per warrant any time after April 30, 2002 following a period of 14 consecutive days in which the average closing bid price of our common stock exceeds $7.50 per share. For a complete description of the terms and conditions of our Class B Redeemable Warrants, as well as our common stock, you are referred to the sections in this prospectus entitled "Description of Class B Redeemable Warrants" and "Description of Capital Stock." Class B Redeemable Warrants offered .......................... 5,008,101 warrants Common stock offered ......................................... 8,525,922 shares Common stock outstanding before the offering(1) .............. 10,025,567 shares Common stock outstanding after the offering .................. 16,584,346 shares Common Stock Nasdaq symbol ................................... AIQT Class B Redeemable Warrant Nasdaq symbol(2) .................. AIQT Z
- -------------- (1) Based on the number of shares outstanding as of August 16, 2001, not including (a) 6,900,753 shares issuable upon exercise of certain warrants, including the Class B Warrants; (b) 3,351,224 shares reserved for issuance under various stock option agreements, including those issued under our stock option plans; or (c) 365,000 shares reserved for issuance upon the conversion of our Series B Convertible Preferred Stock. (2) We intend to apply for listing of the Class B Redeemable Warrants on the Nasdaq Small Cap Market, but have not yet obtained approval. 6 9 RISK FACTORS AN INVESTMENT IN OUR COMMON STOCK IS VERY RISKY. YOU MAY LOSE THE ENTIRE AMOUNT OF YOUR INVESTMENT. PRIOR TO MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULLY REVIEW THIS ENTIRE PROSPECTUS AND CONSIDER THE FOLLOWING RISK FACTORS: RISKS RELATING TO THIS OFFERING AN ACTIVE TRADING MARKET MAY NEVER DEVELOP FOR OUR CLASS B REDEEMABLE WARRANTS AND TRADING PRICES ARE UNCERTAIN. There is presently no public market for our Class B Redeemable Warrants and there can be no assurance that one will ever develop, or, if developed, that it can be maintained. We plan to file a registration statement with the Securities and Exchange Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934 and an initial listing application with the Nasdaq Stock Market in order to have the warrants listed on the Nasdaq Small Cap Market. Even if the listing application were approved and our Class B Redeemable Warrants were quoted on the Small Cap Market, the prices at which the warrants trade may fluctuate significantly. Prices for our Class B Redeemable Warrants will be determined in the marketplace and may be influenced by many factors, including, without limitation, (1) the depth and liquidity for the Class B Redeemable Warrants, (2) investors' perceptions of our Class B Redeemable Warrants and our company, in general, and (3) changes in government regulation and general economic and market conditions. THE CLASS B REDEEMABLE WARRANTS MAY NEVER BE LISTED ON THE NASDAQ SMALL CAP MARKET. Although we intend to apply for listing of our Class B Redeemable Warrants on the Nasdaq Stock Market's Small Cap Market System, there can be no assurance that listing will be approved or, if approved, that an active public market will develop or be sustained. If we fail to satisfy Nasdaq's requirements to maintain listing on Nasdaq in the future, our Class B Redeemable Warrants will likely trade in the over-the-counter market in either the OTC Bulletin Board or in the so-called "pink sheets." Consequently, it will be more difficult for an investor to trade the warrants. In addition, if we are unable to satisfy Nasdaq's requirements for continued listing, our Class B Redeemable Warrants would become subject to the rules promulgated under the Securities Exchange Act of 1934 relating to "penny stocks." These rules require brokers who sell securities subject to such rules to persons other than established customers and "institutional accredited investors" to complete certain documentation, making suitability inquiries of investors and provide investors with certain information concerning the risks of trading in the security. Accordingly, these rules may restrict the ability of brokers to sell the securities and may affect the ability of participants in this offering to sell their securities in the secondary market. OUR CLASS B REDEEMABLE WARRANTS ARE SUBJECT TO REDEMPTION AT A NOMINAL PRICE. We may redeem our Class B Redeemable Warrants at a price of $.01 per warrant at any time after April 30, 2002 following a 14-day period in which the average closing bid price of our common stock exceeds $7.50 per share. We must provide 30 days' written notice to the holders of the Class B Warrants prior to redemption and the shares of common stock issuable upon exercise of the warrants must have been registered under the Securities Act of 1933 or must otherwise be freely tradable. If we redeem the Class B Redeemable Warrants, the holders of the warrants will lose their right to exercise the warrants, except during the 30-day redemption period. Redemption of the Class B Redeemable Warrants could force the holders to exercise the warrants at a time when it may be disadvantageous for the holders to do so or to sell the warrants at the then-prevailing market price or accept the redemption price, which would likely be substantially less then the market price of the warrants at the time of redemption. 7 10 WE WILL RETAIN BROAD DISCRETION OVER THE USE OF THE PROCEEDS FROM THE EXERCISE OF THE CLASS B REDEEMABLE WARRANTS. Assuming the exercise of all 5,008,101 Class B Redeemable Warrants at the exercise price of $5.50, we will receive proceeds of approximately $27.5 million before expenses. Our management will have broad discretion over the application of such proceeds. We cannot guarantee that we will make the best or most efficient use of this money. The failure of our management to apply these funds effectively could have a material adverse effect on our business, results of operations and financial condition. BECAUSE WE WILL NOT PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE, THE ONLY RETURN ON YOUR INVESTMENT, IF ANY, WILL OCCUR ON THE SALE OF OUR COMMON STOCK. To date, we have not paid any cash dividends on our common stock, and we do not intend to do so in the foreseeable future. Rather, we intend to use any future earnings to fund our operations and the growth of our business. Accordingly, the only return on an investment in our common stock will occur upon its sale. RISKS RELATING TO OUR BUSINESS WE HAVE NO MEANINGFUL OPERATING HISTORY ON WHICH TO EVALUATE OUR BUSINESS OR PROSPECTS. We were a development stage company until January 2001 when we acquired Edge Technologies. Accordingly, we have no significant operating history on which you can base an evaluation of our business and prospects. Our business prospects must therefore be considered in the light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets, such as online commerce, using new and unproven business models. These risks include our: - substantial dependence on products with only limited market acceptance; - need to create sales and support organizations; - competition; - need to manage changing operations; - customer concentration; - reliance on strategic relationships; and - dependence on key personnel. We also depend heavily on the growing use of the Internet for commerce and communication and on general economic conditions. Our management cannot be certain that our business strategy will be successful or that it will successfully address these risks. WE ANTICIPATE INCURRING LOSSES FOR THE FORESEEABLE FUTURE. For the quarter ended June 30, 2001, we had a net loss of $1,844,416, and since our inception as Old AIQ in April 1996 through June 30, 2001, we have incurred an aggregate net loss of $6,435,581. As of June 30, 2001, we had total assets of $12,905,855. We expect operating losses to continue for the foreseeable future and there can be no assurance that we will ever be able to operate profitably. Furthermore, to the extent our business strategy is successful, we must manage the transition to higher volume operations, which will require us to control overhead expenses and add necessary personnel. 8 11 OUR SUCCESS DEPENDS, IN PART, ON OUR ABILITY TO SUCCESSFULLY INTEGRATE EDGE TECHNOLOGIES AND RED WING BUSINESS SYSTEMS WITH OUR BUSINESS PLAN AND TO SIGNIFICANTLY GROW EACH OF THESE BUSINESSES AS A PART OF OUR BUSINESS. On January 12, 2001, we acquired Las Vegas, Nevada based Edge Technologies, Inc. We are continuing to integrate the business and products of Edge Technologies, including its Account Wizard software application, with our existing business and products. On June 6, 2001, we acquired Red Wing Business Systems, Inc. and are currently integrating its business and products with ours. We may incur unanticipated costs in the course of integrating these two businesses. In addition, the integration of Edge Technologies and Red Wing Business Systems with our operations involves the following risks: - failure to develop complementary product offerings and marketing strategies; - failure to maintain the customer relationships of Edge Technologies and Red Wing Business Systems; - failure to retain the employees of Edge Technologies and Red Wing Business Systems; - failure to effectively coordinate product development efforts; - diversion of our management's time and attention from other aspects of our business; and - failure to manage operations that are geographically diverse. We cannot be sure that we will be successful in integrating and growing the businesses and products of Edge Technologies and Red Wing Business Systems as part of our core business and products. If we are not, our business, operating results and financial condition may be materially adversely affected. WE RELY ON THIRD-PARTY SYSTEMS AND OUR STRATEGIC RELATIONSHIPS. We license key elements of our services from third parties, including Stellent, Inc. (fka IntraNet Solutions, Inc.). Termination of these licenses would adversely affect our business. We believe that our success in penetrating our target markets depends in part on our ability to develop and maintain strategic relationships with key software vendors, distribution partners and customers. We believe these relationships are important in order to validate our technology, facilitate broad market acceptance of our products, and enhance our sales, marketing and distribution capabilities. If we are unable to develop key relationships or maintain and enhance existing relationships, we may have difficulty selling our products and services. We will also possibly license minor components from others such as reporting functions, charting functions and security features and incorporate them into our products. If these licensed components are not maintained, it could impair the functionality of our products and require us to obtain alternative products from other sources or to develop this software internally, either of which could involve costs and delays as well as diversion of engineering resources. WE WILL REQUIRE FUTURE FINANCINGS IN ORDER TO COMPLETE THE DEVELOPMENT OF OUR PRODUCTS AND SERVICES AND TO IMPLEMENT OUR BUSINESS PLAN, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS. We anticipate that further financing will be needed in approximately 12 months in order to complete development of our products, to develop our brand and services and to otherwise implement our 9 12 business plan. Product development, brand development and other aspects of Internet-related businesses are extremely expensive, and there is no precise way to predict when further financing will be needed or how much will be needed. Moreover, we cannot guarantee that the additional financing will be available when needed. If it is not available, we may be forced to discontinue our business, and your investment in our securities may be lost. If the financing is available only at a low valuation of our company, your investment may be substantially diluted. The continued health of the market for Internet-related securities and other factors beyond our control will have a major impact on the valuation of our company when we raise capital in the future. OUR FUTURE SUCCESS IS HIGHLY DEPENDENT ON THE CONTINUED AVAILABILITY OF TECHNOLOGICALLY SKILLED EMPLOYEES. In connection with the continued development of our products and services, we are substantially dependent upon on the continued service of our existing engineering personnel. However, there is currently a great demand for the services of software engineers and, accordingly, one or more of our engineers may receive and accept an employment offer from another technology company. Although our engineers have entered into confidentiality and invention assignment agreements, none have entered into noncompete agreements with our company. The loss of one or more of our engineers could delay the ongoing development of our products and services, which would adversely affect our business. Additionally, some of the employees we hire or seek to hire may be subject to non-competition covenants restricting their ability to work for us, which may hinder our ability to hire quality personnel. POTENTIAL FLUCTUATIONS IN OUR OPERATING RESULTS AND DIFFICULTY IN PREDICTING OUR OPERATING RESULTS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR SECURITIES. We expect our anticipated revenues and operating results to vary significantly from quarter to quarter. As a result, quarter-to-quarter comparisons of our revenues and operating results may not be meaningful. In addition, due to the fact that we have little or no operating history with our new and unproven technology, we may be unable to predict our future revenues or results of operations accurately. Our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed. Accordingly, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall, and any significant shortfall in revenues relative to its planned expenditures could have an immediate adverse effect on our business and results of operations. Lack of operating history and rapid growth makes it difficult for us to assess the effect of seasonality and other factors outside our control. Nevertheless, we expect our business to be subject to fluctuations, reflecting a combination of various Internet-related factors. OUR INABILITY TO DEVELOP SUCCESSFUL CUSTOMER RELATIONSHIPS WILL HINDER OUR PROFITABILITY. We intend to establish relationships with various types of customers and partners, such as e-Business customers, vertical market makers, technology partners, consulting partners and value-added resellers. Each of these relationships will involve negotiation of terms and fees. We cannot be certain that we will be able to negotiate profitable relationships or that we can successfully fulfill our obligations under development agreements that will allow us to continue these relationships. OUR BUSINESS WILL BE HARMED IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND MARKET NEW PRODUCTS AND SERVICES. An essential part of our growth strategy requires that new products with a broader range of features be developed. We expect to incur substantial expense and use significant resources in trying to 10 13 expand the type and range of the products that we offer. However, we may not be able to attract customers to purchase them. In addition, if end-users do not favorably receive the products and services we have developed, our reputation and the value of the Active IQ Technologies brand could be damaged. OUR BUSINESS WILL BE HARMED IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP OUR BRANDS. We believe that recognition and a favorable end-user perception of the Active IQ-enabled applications are essential to our future success. Successful positioning of our brand will largely depend on: - the success of our advertising and promotional efforts; - an increase in sales of Active IQ-based products and services including the Epoxy services; and - our ability to continue to provide high quality applications. We believe that end-users will associate the Active IQ brand primarily with high quality, intelligent applications. To grow our business, we believe we need to increase the recognition of the Active IQ brand with a wider range of applications. To increase awareness of the Active IQ brand and expand it to a wide range of services, we may need to spend significant amounts on advertising and promotion. These expenditures may not result in a sufficient increase in revenues to cover such advertising and promotion expenses. In addition, even if our brand recognition increases, sales of Active IQ-based products may not increase. OUR MARKETS ARE HIGHLY COMPETITIVE AND WE MAY NOT BE ABLE TO EFFECTIVELY COMPETE. We compete in markets that are new, intensely competitive, highly fragmented and rapidly changing. We face competition in the overall Internet, Corporate Intranet and Extranet infrastructure market, as well as the Internet search segments of this market. We will experience increased competition from current and potential competitors, many of which have significantly greater financial, technical, marketing and other resources. We compete with a number of companies to provide intelligent software-based solutions, many of which have operated services in the market for a longer period, have greater financial resources, have established marketing relationships with leading online software vendors, and have secured greater presence in distribution channels. Our business does not depend on significant amounts of proprietary rights and, therefore, our technology does not pose a significant entry barrier to potential competitors. Additionally, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than we can. In addition, our current and potential competitors may bundle their products with other software or hardware, including operating systems and browsers, in a manner that may discourage users from purchasing services and products offered by us. Also, current and potential competitors have greater name recognition, more extensive customer bases that could be leveraged, and access to proprietary content. Increased competition could result in price reductions, fewer customer orders, fewer search queries served, reduced gross margins and loss of market share. E-BUSINESS TECHNOLOGY IS RAPIDLY CHANGING. The Internet, Corporate Intranet and Extranet infrastructure market is characterized by rapid technological change, frequent new product introductions, changes in customer requirements and evolving industry standards. The introduction of products embodying new technologies and the 11 14 emergence of new industry standards could render our existing products obsolete. Our future success will depend upon our ability to develop and introduce a variety of new products and product enhancements to address the increasingly sophisticated needs of our customers. We may be unable to develop any products on a timely basis, or at all, and we may experience delays in releasing new products and product enhancements. Material delays in introducing new products and enhancements may cause our customers to forego purchases of our products and purchase those of our competitors. WE NEED TO CREATE AND GROW OUR SALES AND SUPPORT ORGANIZATIONS. We will need to create and substantially grow our direct and indirect sales operations, both domestically and internationally, in order to create and increase market awareness and sales. Our products and services will require a sophisticated sales effort targeted at several people within our prospective customers. Competition for qualified sales personnel is intense, and we might not be able to hire the kind and number of sales personnel we are targeting. In addition, we believe that our future success is dependent upon establishing successful relationships with a variety of distribution partners, including value added resellers. We cannot be certain that we will be able to reach agreement with additional distribution partners on a timely basis or at all, or that these distribution partners will devote adequate resources to selling our products. There is also no assurance that the pricing model relating to our Epoxy product will be accepted by our customers. Similarly, the anticipated complexity of our products and services and the difficulty of customizing them require highly trained customer service and support personnel. We will need to hire staff for our customer service and support organization. Hiring customer service and support personnel is very competitive in our industry due to the limited number of people available with the necessary technical skills and understanding of the Internet. PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS IT DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A COMMON SHAREHOLDER. Our authorized capital consists of 40,000,000 shares of capital stock, 365,000 of which have been designated as Series B Convertible Preferred Stock. Our Board of Directors, without any action by the shareholders, may designate and issue shares in such classes or series (including classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. As of August 16, 2001, we had 10,025,567 shares of common stock outstanding and a further 13,290,431 shares of common stock have been reserved as follows: - 5,447,935 shares for issuance under our stock option plans, of which options relating to 3,238,591 shares are currently outstanding; - 5,008,101 shares issuable upon the exercise of our Class B Redeemable Warrants; - 690,000 shares issuable upon the exercise of outstanding warrants issued in connection with our initial public offering; - 730,000 shares issuable upon the conversion of our Series B Convertible Preferred Stock, which includes warrants to purchase 365,000 shares of common stock that are issuable upon conversion of our Series B Convertible Preferred Stock; and - 1,414,395 shares issuable upon the exercise of certain other outstanding privately-issued warrants and options to purchase shares of our common stock. 12 15 The rights of holders of preferred stock and other classes of common stock that may be issued could be superior to the rights of our common shareholders. Our board of directors' ability to designate and issue such undesignated shares could impede or deter an unsolicited tender offer or takeover proposal. Further, the issuance of additional shares having preferential rights could adversely affect the voting power and other rights of our common shareholders. OUR FUTURE SUCCESS IS DEPENDENT ON THE MANAGEMENT OF OUR POTENTIAL GROWTH. Our ability to successfully offer products and services and implement our business plan in a rapidly evolving market requires an effective planning and management process. Rapid growth will place a significant strain on our management systems and resources. We expect that we will need to continually improve our financial and managerial controls and reporting systems and procedures, and will need to continue to expand, train and manage our work force. Furthermore, we expect that we will be required to manage multiple relationships with various customers and other third parties. POTENTIAL ACQUISITIONS MAY CONSUME SIGNIFICANT RESOURCES. We may continue to acquire businesses that we feel will complement or further our business plan. Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management's attention to other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired businesses. No assurance can be given as to our ability to consummate any acquisitions or integrate successfully any operations, personnel, services or products that might be acquired in the future, and our failure to do so could have a material adverse effect on our business, financial condition and operating results. OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN AND RECRUIT KEY PERSONNEL. Our products and technologies are complex and we are substantially dependent upon the continued service of its existing engineering personnel. We are also highly dependent on Kenneth Brimmer, our Chairman and Chief Executive Officer, D. Bradly Olah, our President and Chief Operating Officer, and Jeffrey Seabloom, the President of our Enterprise Solutions Division. We also expect to continue to add other important personnel in the near future. The loss of any of those individuals may have a material adverse impact on our business. We intend to hire a significant number of sales, support, marketing, and research and development personnel in calendar 2001 and beyond. Competition for these individuals is intense, and we may not be able to attract, assimilate or retain additional highly qualified personnel in the future. Further, some of these individuals may be either unable to begin or continue working for us because they may be subject to non-competition agreements with their former employers. SOME OF OUR REVENUES WILL BE DERIVED FROM LICENSE AGREEMENTS, WHICH MAY BE DISPUTED. We anticipate that we will license our products, portions of our products and intellectual property, including any patents, to third parties. If the nature or scope of such licenses are disputed, we will be compelled to institute proceedings to enforce our rights either under the licensing agreement or under patent laws. Such proceedings are generally time-consuming and expensive, and may distract our management from other business issues. OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY. If we are unable to protect our intellectual property, or incur significant expense in doing so, our business, operating results and financial condition may be materially adversely affected. Any steps we take to protect our intellectual property may be inadequate, time consuming and expensive. We currently have no patents, registered trademarks or service marks, or pending patent, trademark or service mark 13 16 applications. Without significant patent, trademark, service mark or copyright protection, we may be vulnerable to competitors who develop functionally equivalent products and services. We may also be subject to claims that our products infringe on the intellectual property rights of others. Any such claim may have a material adverse effect on our business, operating results and financial condition. Our success and ability to compete are substantially dependent upon our internally developed products and services, which we intend to protect through a combination of patent, copyright, trade secret and trademark law. We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our software, documentation and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. As with any knowledge-based product, we anticipate that policing unauthorized use of our products will be difficult, and we cannot be certain that the steps we intend to take to prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, will be successful. Other businesses may also independently develop substantially equivalent information. OUR TECHNOLOGY MAY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS. We anticipate that software product developers will be increasingly subject to infringement claims due to growth in the number of products and competitors in our industry, and the overlap in functionality of products in different industries. We also believe that many of our competitors in the intelligent applications business have filed or intend to file patent applications covering aspects of their technology that they may claim our technology infringes. We cannot be certain that these competitors or other third parties will not make a claim of infringement against us with respect to our products and technology. Any infringement claim, regardless of its merit, could be time-consuming, expensive to defend, or require us to enter into royalty or licensing agreements. Such royalty and licensing agreements may not be available on commercially favorable terms, or at all. We are not currently involved in any intellectual property litigation. Our products and services operate in part by making copies of material available on the Internet and other networks and making this material available to end users. This creates the potential for claims to be made against us (either directly or through contractual indemnification provisions with customers) for defamation, negligence, copyright or trademark infringement, personal injury, invasion of privacy or other legal theories based on the nature, content or copying of these materials. These claims have been brought, and sometimes successfully pressed, against online service providers in the past. Although we carry general liability insurance, that insurance may not cover potential claims of this type or may not be adequate to protect us from all liability that may be imposed. GOVERNMENT REGULATION OF E-COMMERCE IS INCREASING AND THERE ARE MANY UNCERTAINTIES RELATING TO THE LAWS OF THE INTERNET. Laws and regulations directly applicable to communications or commerce over the Internet are becoming more prevalent. Recent sessions of the United States Congress have resulted in Internet laws regarding children's privacy, copyrights, taxation and the transmission of sexually explicit material. The European Union recently enacted its own privacy regulations. The law of the Internet, however, remains largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, libel and taxation apply to the Internet. In addition, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business online. The adoption or modification of laws or regulations relating to the Internet could adversely affect our business. 14 17 THE LIMITATIONS ON DIRECTOR LIABILITY CONTAINED IN OUR ARTICLES OF INCORPORATION AND BY-LAWS MAY DISCOURAGE SUITS AGAINST DIRECTORS FOR BREACH OF FIDUCIARY DUTY. As permitted by Minnesota law, our articles of incorporation and by-laws, provide that members of our board of directors are not personally liable to you or our company for monetary damages resulting from a breach of their fiduciary duties. These limitations on director liability may discourage shareholders from suing directors for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought against a director by shareholders on our company's behalf. Furthermore, our by-laws provide for mandatory indemnification of directors and officers to the fullest extent permitted by Minnesota law. All of these provisions limit the extent to which the threat of legal action against our directors for any breach of their fiduciary duties will prevent such breach from occurring in the first instance. NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this prospectus and in the documents incorporated by reference in this prospectus are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "may," "will" or similar terms. Forward-looking statements also include projections of financial performance, statements regarding management's plans and objectives and statements concerning any assumption relating to the foregoing. Important factors regarding our business, operations and competitive environment which may cause actual results to vary materially from these forward-looking statements are discussed under the caption "Risk Factors." 15 18 BUSINESS GENERAL Active IQ Technologies, Inc. provides business management software and services to the small to medium-sized business community, referred to as the "SME market." These rapidly growing organizations number in the hundreds of thousands worldwide. We offer the SME market an affordable, service-based product line providing easy to use integrated eBusiness functionality ranging from website creation tools to more sophisticated e-business solutions. We have offices in Minnesota and Las Vegas, Nevada. We were originally incorporated in Colorado in December 1992 under the name Meteor Industries, Inc. On April 30, 2001, immediately prior to the effective time of our reverse merger with Old AIQ, we reincorporated under Minnesota law and changed our name to Active IQ Technologies, Inc. Since the completion of the Old AIQ merger, our common stock has traded on the Nasdaq Small Cap Market under the symbol "AIQT." See "Recent Developments." Initially, we focused on a plan to develop "connectivity products" for small businesses enabling legacy accounting software systems to access their larger trading partners via XML (extensible markup language) or EDI (electronic data interchange) through the World Wide Web. Following successful testing of this product, we concluded to broaden our e-services offering through an array of services called the Epoxy Network and we expect to introduce the Epoxy Network in series of steps over the next 12 months. On January 16, 2001, we completed the acquisition of privately-held Edge Technologies, Incorporated ("Edge Technologies"), a Nevada-based company engaged in fully integrated e-commerce website services for businesses. The Edge Technologies service offering allows users to build dynamic, secure, interactive e-commerce websites offering the benefits of direct access to a variety of existing legacy-system maintained critical information. Edge Technologies has developed connectivity to more than 40 separate accounting systems representing over 250,000 small business and currently provides integrated website services to approximately 300 customers. We have completed a re-branding of the former Edge Technologies product and it is now a part of the Epoxy Network. On June 6, 2001, we acquired Red Wing Business Systems, Inc. ("Red Wing"), located in Red Wing, Minnesota. Since 1979, Red Wing Accounting Software has provided the SME market with accounting software solutions. Red Wing currently serves more the 10,000 businesses including more that 5,000 agricultural users. Red Wing's software solutions address the gap between inexpensive, ultra-simple "starter" accounting software and the significant cost and complexity of high-end software, offering a stable, secure and flexible base for growing small business users. INDUSTRY BACKGROUND Businesses today are increasingly seeking to leverage existing infrastructures and to adopt new solutions to automate and improve fundamental business processes within an organization. Historically, these advanced solutions were available only to large enterprise-class software system users. The rapid growth of the Internet has leveled the playing field in many respects. In order to succeed in today's marketplace, businesses in the SME market need to extend the reach of their existing systems to include customers, partners, suppliers and employees. The requirements of the marketplace are driving purchasers of accounting solutions that provide the functionality of an enterprise Internet-capable system in a cost-effective manner. 16 19 OUR STRATEGY Our objective is to be the leading provider of service solutions that mirror much of the functionality historically found only in enterprise-class software systems. To achieve this objective, we intend to pursue the following strategies: - Provide Additional Value-Added Products and Services to Our Customers. We plan to enhance our core products to offer more value to existing and new customers by adding new business process applications and functionality. We believe there is a significant market opportunity for new and enhanced applications that can effectively automate and improve customer and supplier relationships. We expect to continue developing additional value-added products and services, principally by partnering with third parties. - Pursue Strategic Acquisitions. We intend to pursue strategic acquisitions, concentrating on opportunities to grow our base of potential subscribers to the Epoxy Network. - Leveraging existing sales channels. Accounting software has traditionally been sold through a network of value-added resellers, or "VARs." As we access the existing sale channels through partnerships or acquisitions, an important part of our strategy is to train and support the channel to develop Epoxy customers. INTELLECTUAL PROPERTY We regard certain aspects of our internal operations, software and documentation as proprietary, and rely on a combination of contract, copyright, trademark and trade secret laws and other measures, including confidentiality agreements, to protect our proprietary information. Existing copyright laws afford us only limited protection. We believe that, because of the rapid pace of technological change in the computer software industry, trade secret and copyright protection is less significant than other factors such as the knowledge, ability and experience of our employees, frequent software product enhancements and the timeliness and quality of support services. We cannot guarantee that these protections will be adequate or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology. In addition, when we license our products to customers, we provide source code for most of our products. We also permit customers to possibly obtain access to our other source code through a source code escrow arrangement. This access to our source code may increase the likelihood of misappropriation or other misuse of our intellectual property. In addition, the laws of certain countries in which our software products are or may be licensed do not protect our software products and intellectual property rights to the same extent as the laws of the United States. Our license agreements with our customers contain provisions designed to limit the exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in these license agreements may not be valid as a result of future federal, state or local laws or ordinances or unfavorable judicial decisions. Although we have not experienced any material product liability claims to date, the license and support of our software for use in mission critical applications creates the risk of a claim being successfully pursued against us. Damages or injunctive relieve resulting from such a successful claim could seriously harm our business. OUR PRODUCTS We design, develop, market and support software and eBusiness applications that provide organizations with technically advanced business solutions. In addition to traditional accounting solutions offered through our Red Wing subsidiary, we offer an e-services product suite for the SME market known as the "Epoxy Network." The Epoxy Network includes e-commerce, Account 17 20 Management, customer service and support, and trading partner connectivity and is offered to customers through a monthly subscription revenue model. We make getting online efficient for small and medium sized enterprises. We integrate with the accounting software that is already in place to help get a customer online. With products that coordinate order processing and payment fulfillment, to products that will walk a customer through the process for creating an online presence. Leveraging the power of the Internet, these applications allow an organization to extend beyond the traditional "four walls" of their enterprise to integrate their operations with their customers, suppliers and partners. We offer the "Epoxy Network," a fully integrated e-business solution through a monthly subscription program. The initial offering of the Epoxy Network is comprised of the following: - Epoxy Network is an easy-to-use, self-service Web navigation tool that provides users with appropriate, secured role-based access and control Epoxy Network services. - Epoxy Account Management provides critical customer information online 24-hours-a-day, 365 days a year via your Epoxy Web site. Customers can track their orders; retrieve invoice history, order information, and view their account balances whenever they want. - Epoxy Storefront leverages the Internet to link electronically a company's operations with its customers, suppliers and partners through an integrated electronic Storefront. - Epoxy Connect is an easy to use solution that allows a small to medium sized supplier to communicate electronically with their large trading partners in any common data exchange format. (EDI to XML). - Epoxy e-Marketing provides a seamless suite of services that meet the e-marketing needs of small and mid-size companies. - Epoxy Content Management provides users with the functionality of an enterprise-class content management system known as Expedio through a strategic partnership with IntraNet Solutions, Inc. (Nasdaq: INRS). We also develop, sell and support other software products through our Red Wing Business Systems subsidiary. These products include Red Wing Windows Accounting, AgCheck Accounting, and Red Wing Payroll. The Red Wing family of products offer a robust accounting solution designed for small to medium-sized businesses. AgCheck is the market leader in accounting solutions for the Agricultural Industry. Enterprise applications employed by the SME market are required to satisfy business and technology requirements that are significantly different from those found in larger organizations. Many growing smaller businesses seek opportunities to leverage their existing infrastructure to compete for business against larger corporations, other mid-sized competitors and start-ups. They understand the need to remain close to their customers and to make the most effective use of relatively limited resources. Small and medium sized enterprises historically have been later adopters of new technologies and seek a rapid return on technology investments. We provide solutions that meet the needs of the SME market. Our solutions are affordable to acquire and implement extending the useful life and functionality of existing systems enhancing productivity without requiring businesses to make significant changes to existing systems and procedures. RESEARCH AND DEVELOPMENT 18 21 Since inception, we have made substantial investments in research and software product development. We believe that timely development of additional services and enhancements to existing software products and the acquisition of rights to sell or incorporate complementary technologies and products into our software product offerings are essential to maintain our competitive position in our market. The software services market is characterized by rapid technological change, frequent introductions of new products, changes in customer demands and rapidly evolving industry standards. We estimate that our total research and development expenses will be approximately $500,000 in fiscal 2001. COMPETITION The markets for our products are intensely competitive. Many of the world's largest software companies, including Microsoft Corporation, Great Plains Software, Sage Software and Intuit, have developed software solutions addressing our target market. These companies are all substantially larger than we are with greater financial and other resources. EMPLOYEES As of August 1, 2001, we employed 58 people, including employees of our Red Wing and Edge Technologies subsidiaries. None of our employees are represented by a labor union and we consider our employee relations to be good. FACILITIES Our corporate headquarters are located at 601 Carlson Parkway, Suite 1550, Minnetonka, Minnesota 55305. We also lease offices in Las Vegas, Nevada and Red Wing, Minnesota, from which our Edge Technologies and Red Wing Business Systems subsidiaries' operations are conducted, respectively. LEGAL PROCEEDINGS We are not involved in any material litigation or other proceedings pending or, to our knowledge, threatened against our company. 19 22 MANAGEMENT Our executive officers and directors are described below.
NAME AGE POSITIONS WITH THE COMPANY ---- --- -------------------------- Kenneth W. Brimmer ............................... 46 Chairman, Chief Executive Officer and Chief Financial Officer D. Bradly Olah ................................... 36 President, Chief Operating Officer, Secretary and Director Philip C. Rickard ................................ 32 Executive Vice President Ronald E. Eibensteiner ........................... 49 Director Steven A. Weiss .................................. 38 Director Steven R. Levine ................................. 61 Director Kenneth S. Kaufman ............................... 35 Director
KENNETH W. BRIMMER currently serves as our Chairman, Chief Executive Officer and Chief Financial Officer. Having been appointed to the board of directors of Old AIQ in 1999, Mr. Brimmer served that company as its Chairman and Chief Executive Officer until its merger with our company on April 30, 2001. Mr. Brimmer was president of Rainforest Cafe, Inc. from April 1997 until April 2000 and was Treasurer from its inception in 1995. Mr. Brimmer is also Chairman of both Hypertension Diagnostics, Inc., and Oxboro Medical, Inc, both of which are NASDAQ listed companies. D. BRADLY OLAH, one of the co-founders of Old AIQ, is currently our President and Chief Operating Officer and a member of our board of directors. He formerly served Old AIQ as its Executive Vice President from November 1999 to March 2001 and as Chief Executive Officer from April 1996 to November 1999. Mr. Olah was also a member of Old AIQ's board of directors from its inception in April 1996 and has been actively involved in its business development. He was a director of Natural Resources Geophysical Corporation from 1996 until 1998, when it was sold to Eagle Geophysical of Houston, Texas. He was also the founder/Chairman and Chief Executive Officer and a director of Innovative Gaming Corporation of America from 1991 through February 1996 and also served as the Chief Financial Officer of that company from 1991 to 1993. PHILIP C. RICKARD has been Executive Vice President of our company since the merger with Old AIQ on April 30, 2001. Prior to that time, he served in the same position with Old AIQ from May 1999 until the Old AIQ merger. Prior to joining Old AIQ, Mr. Rickard served for five years as Director and VP of International Development for Ariobimo, an Asian-based group of companies. He initiated and directly managed the group's creation and development of various companies in Internet technologies, Internet service provision and wireless communications. RONALD E. EIBENSTEINER has been a director of our company since April 30, 2001, the effective date of our merger with Old AIQ. He was initially appointed to the board of directors of Old AIQ in September 2000. Mr. Eibensteiner is the president of Wyncrest Capital, Inc. and has been a seed investor in several early stage technology companies. Since May 1996, Mr. Eibensteiner has been chairman of the board of directors of OneLink, Inc., a provider of Internet-delivered business intelligence services to the telecommunications industry. From March 1996 until March 2001, he served as a director of IntraNet Solutions, Inc., a provider of Web-based document management solutions for corporate intranets. Mr. Eibensteiner co-founded of Diametrics Medical, Inc., a manufacturer of blood gas diagnostic systems, and was chairman of Prodea Software Corporation, a data warehousing software company, until its sale to Platinum technology, inc., in January 1996. 20 23 STEVEN A. WEISS was formerly a director of Old AIQ and was appointed to the board or directors of our company following the Old AIQ merger on April 30, 2001. Mr. Weiss co-founded Casino Data Systems, Inc., a designer, manufacturer and distributor of innovative, technology-driven products for the gaming industry, serving as its Chairman from June 1990 to August 1994 and from November 1994 to June 2001, when it was acquired by Aristocrat Leisure Ltd. STEPHEN R. LEVINE also was appointed to our board of directors following our merger with Old AIQ, having been a director of that company since October 1999. Dr. Levine is a computer science professional with over 30 years' software and hardware experience. Dr. Levine has received an award as a pioneer in the field of computer graphics and was one of the original founders of ACM SigGraph. He is currently Chief Technology Officer for the Temporal Bone Foundation, a nonprofit foundation dedicated to understanding the morphology of the middle ear and uncovering reasons for its dysfunction, particularly in newborns and infants. Dr. Levine is responsible for all aspects of technology at the Temporal Bone Foundation. KENNETH S. KAUFMAN was appointed to our board of directors following our merger with Old AIQ. Since 1999, Mr. Kaufman has been employed by A-Life Medical, Inc., a leading provider of natural language processing and artificial intelligence in healthcare applications, and he currently serves as that company's chief operating officer. From 1997 until to 1999, Mr. Kaufman was the Chief Executive Officer of Dietsite.com, a leading provider of nutritional and healthcare content and services on the Internet. Dietsite.com was acquired in 1999. Between 1998 and 2001, Mr. Kaufman served as the Vice President of Sales for ChannelHealth.com, an IDX Company, a subsidiary of IDX Systems Corporation, a leading supplier of health care software. Between the years of 1997 and 1998, Mr. Kaufman also served as the Director of Strategic Accounts for IDX Systems Corporation. Between 1995 and 1997 served as Director of Product Marketing and Development for IDX Systems Corporation. EMPLOYMENT AGREEMENTS The terms and conditions of Mr. Brimmer's employment with us are set forth in a May 1, 2001 employment agreement. In addition to his annual salary of $125,000, Mr. Brimmer is entitled to an annual bonus of up to 75 percent of his salary upon the achievement of certain corporate objectives and a $250,000 bonus when our company has raised an aggregate of $12 million in equity financings, of which approximately $9 million has been raised to date. Mr. Brimmer was also awarded an option to purchase up to 250,000 shares of our common stock at a price of $5.00 per share, which option vests in equal installments over four years. Mr. Olah's employment with our company is also pursuant to a May 1, 2001 employment agreement. Pursuant to the terms of that agreement, Mr. Olah is entitled to an annual salary of $150,000 and is eligible for an annual bonus of up to 100 percent of his salary upon the achievement of certain corporate objectives. Mr. Olah was also awarded options to purchase up to 300,000 shares of our common stock at a price of $5.00 per share, which option vests in equal installments over four years. 21 24 EXECUTIVE COMPENSATION The following table sets forth information with respect to the compensation of our Chief Executive Officer and our other executives whose total compensation for the current fiscal year will exceed $100,000.
SHARES UNDERLYING 2001 NAME AND PRINCIPAL POSITION 2001 SALARY OPTION AWARDS - --------------------------- ----------- ------------- Kenneth W. Brimmer .............................................. $125,000 250,000 Chairman, Chief Executive Officer and Chief Financial Officer D. Bradly Olah .................................................. 150,000 300,000 President, Chief Operating Officer and Secretary Philip C. Rickard ................................................ 100,000 0 Executive Vice President
OPTION GRANTS The following table provides information related to the number of options held by the above-named officers as of July 31, 2001, including the portion of options that are exercisable and the exercise prices.
NUMBER OF SHARES UNDERLYING UNEXERCISED OPTIONS AT JULY 31, 2001 ------------------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISE PRICE - ---- ----------------- ------------------ ------------------ Kenneth W. Brimmer ........................................... 50,000 200,000 $5.00 Chairman, Chief Executive Officer and 120,000 80,000 1.00 Chief Financial Officer D. Bradly Olah ............................................... 60,000 240,000 5.00 President, Chief Operating Officer and 60,000 40,000 1.00 Secretary Philip C. Rickard ............................................ 60,000 15,000 1.00 Executive Vice President
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In July 2000, we acquired software and related maintenance from IntraNet Solutions, Inc., one of our significant shareholders, for which we issued 151,200 shares of our common stock, valued at $2.50 per share, as consideration. On August 25, 2000, we received $300,000 from IntraNet Solutions in connection with a bridge loan transaction. In consideration for the loan, we delivered to IntraNet Solutions a note in the principal amount of $300,000 with interest accruing at the rate of 8 percent per annum. We also issued a warrant to IntraNet Solutions for the purchase of 20,000 shares of our common stock at a price of $2.75 per share. In December 2000, we entered into a series of agreements with IntraNet Solutions, including a reseller arrangement which allows us to sell IntraNet's products. In connection with this transaction, we paid IntraNet Solutions $150,000 in cash and issued 127,273 shares of common stock (valued at $2.75 per 22 25 share) as consideration of a non-refundable, prepaid minimum royalty. Pursuant to a intellectual property purchase agreement dated April 27, 2001 between our company and IntraNet Solutions, we sold to IntraNet Solutions our "Content Categorizer" product for $706,000. We received $400,000 in cash and the satisfaction of the $300,000 note (discussed above), plus $6,000 of accrued interest. In connection with the consummation of the merger of Old AIQ and Meteor Industries on April 30, 2001, we paid Blake Capital Partners, LLC, an entity owned and controlled by Wayne W. Mills, one of our significant shareholders, an aggregate fee of $250,000 pursuant to financial advisory agreements. In addition, upon the completion of the merger, Blake Capital Partners received a warrant to purchase 500,000 shares of our common stock at a price of $3.00 per share. Also in connection with the Old AIQ-Meteor Industries merger, pursuant to an agreement between Meteor Industries and Gulfstream Financial Partners, LLC, an entity owned and controlled by Henry Fong, we were obligated to issue to Gulfstream Financial Partners a warrant to purchase 615,000 shares of our common stock at a price of $5.50 per share upon the consummation of the merger. Gulfstream Financial Partners is one of our significant shareholders. In December 2000, Old AIQ entered into a subscription receivable for the purchase of 100,000 shares of common stock at a price of $2.75 per share with Mr. Eibensteiner, a director of our company. On July 30, Mr. Eibensteiner delivered to our company a cash payment in the amount of $75,000 and a 2-month promissory note in the principal amount of $200,000. Interest accrues on the principal balance of the prime rate as of the date of the note. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Our company was considered a development stage company until January 2001, when we began to recognize revenues as result of our acquisition of Edge Technologies. We are in the business of developing and providing Internet eBusiness application software and services for small to mid-sized accounting software customers. Since our company's inception in April 1996, our efforts have been devoted to the development of its principal product and raising capital. Our future additional revenues and profits, if any, will depend upon various factors, including the ability to successfully expand, our ability to raise additional financing as required, and general economic conditions. Our company is in the early stages of introducing our products to the market. We may require additional funds that may not be available. We are subject to risks and uncertainties common to growing technology-based companies, including rapid technological change, growth and commercial acceptance of the Internet, dependence on suppliers and users for product, new product development, new product introductions and other activities of competitors, dependence on key personnel, security and privacy issues, dependence on strategic relationships and limited operating history. Components of selling, general and administrative expenses include all corporate and administrative functions that serve to support existing operations and provide an infrastructure to support future growth. Salaries, employee benefits, rent and marketing expenses are major items in this category. The following discussion and analysis of financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto 23 26 included in our Reports on Form 10-Q filed on August 14, 2001 and Form 8-K filed on June 15, 2001, which are incorporated by reference into this prospectus, as well as our audited financial statements and related notes for the years ended December 31, 2000 and December 31, 1999 included in our Report on Form 8-K filed on May 14, 2001, which is also incorporated by reference into this prospectus. RESULTS OF OPERATIONS - MARCH 31, 2001 COMPARED TO MARCH 31, 2000 Revenues. Revenues for the quarter ended March 31, 2001 were $35,311 compared to no revenue for the same quarter in 2000. During 2000, our company was in the development stage and had not yet generated any significant revenue. The revenues generated in 2001 related to revenues from the fully integrated eBusiness website service called "Account Wizard." Selling, General and Administrative Expenses. Selling, general and administrative expenses for the quarter ended March 31, 2001 were $782,311 compared to $287,843 for the same quarter in 2000. The 172 percent increase in selling, general and administrative expenses was primarily due to the increased corporate overhead structure for the development of our Internet eBusiness software and services. Depreciation and Amortization. Depreciation and amortization for the quarter ended March 31, 2001 was $188,984 compared to zero for the same quarter in 2000. Depreciation and amortization for the quarter ended March 31, 2001 principally related to amortization of goodwill recorded on the January 2001 merger of Edge Technologies, Incorporated. Product Development. Product development expenses for the quarter ended March 31, 2001 were $198,195 compared to $86,385 for the same quarter in 2000. The 129% increase in product development expenses was primarily due to continued development for our Internet eBusiness application software. Loss from Operations. Loss from operations totaled $1,134,179 for the quarter ended March 31, 2001, compared to $374,228 for the same quarter in 2000. The change in loss from operations from 2000 to 2001 is attributable to the changes in expenses as discussed previously. Other Income (Expense). The increase in interest income for the quarter ended March 31, 2001 compared to the quarter ended March 31, 2000 of $23,836 represents interest income earned on short-term investments on the proceeds we received related to the sale of our common stock. Net Loss. For the quarter ended March 31, 2001, we had a net loss of $1,115,734, compared to a net loss of $379,050 for the same quarter in 2000. The net loss for 2001 is largely attributable to continued concept development as well as additional general and administrative expenses as we increased our corporate overhead structure. Basic and diluted net loss per common share for the quarter ended March 31, 2001 was $0.25 on 4,472,300 shares compared to $1.01 on 375,190 shares for the same quarter in 2000. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive. Financial Condition, Liquidity and Capital Resources. During the quarter ended March 31, 2001, our company's operations used $961,279 of cash compared to a use of $414,765 in the same quarter in 2000. This increase of $546,514 is primarily attributable to our selling, general and administrative expenses resulting in a greater net loss. Our company's investments used cash of $353,915 as compared to $111,246 in the same quarter in 2000. We used $308,016 for the acquisition of Edge Technologies, Incorporated. Also during the quarter ended March 31, 2001, $45,460 of a new capital lease was added for office equipment and furniture as compared to the same quarter in 2000 when purchases of $111,246 of office equipment and furniture occurred. We sold 400,000 shares of our common stock resulting in net proceeds of $1,100,000 during the quarter ended March 31, 2001 as compared to $201,000 of cash generated in the same quarter in 2000. 24 27 During the quarter ended March 31, 2001, our balance of cash and cash equivalents decreased by $217,373 to $1,132,084 from the December 31, 2000 balance. On January 16, 2001, we completed our merger with privately held Edge Technologies Incorporated ("Edge Technologies"), the creator of a fully integrated eBusiness website service called Account Wizard. The merger was accounted for under the purchase method of accounting with the operations of Edge Technologies included in our company's financial statements as of that date. The former stockholders of Edge received $300,000 in cash and 325,000 shares of our common stock. Terms of the merger agreement required an additional cash payment and issuance of stock upon a capital raising event. With the completion of the Meteor Industries, Inc. merger on April 30, 2001, the former stockholders of Edge Technologies received the final consideration as specified in the merger agreement of 225,000 shares of our common stock on April 30, 2001, and $400,000 in cash on May 2, 2001, in settlement of the earnout provisions. The additional consideration will be recorded in the quarter ending June 30, 2001. RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2000 COMPARED TO DECEMBER 31, 1999 Revenues. There were not any revenues for the years ended December 31, 2000 and 1999. Our company was in the development stage and had not yet generated any significant revenue. Selling, General and Administrative. Selling, general and administrative expenses for the year ended December 31, 2000 were $1,978,697 compared to $393,149 for the year ended December 31, 1999. The 403 percent increase in selling, general and administrative expenses was primarily due to the increased corporate overhead structure for the development of our company's Internet eBusiness software and services. Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 2000 was $112,544 compared to $20,833 for the year ended December 31, 1999. The 440% increase in depreciation and amortization relates to depreciation of property and equipment in the approximate amount of $80,000 and amortization of a license agreement. Product and Development. Product development expenses for the year ended December 31, 2000 were $609,344 compared to zero for the year ended December 31, 1999. During 2000, we began the product development for their Internet eBusiness application software. Loss on Disposal of Assets. Loss on disposal of assets for the year ended December 31, 2000 was $105,360 compared to zero for the year ended December 31, 1999. During 2000, we recorded an impairment charge of $100,000 on the remaining unamortized balance of a license agreement. Loss from operations. Loss from operations totaled $2,805,945 for the year ended December 31, 2000, compared to $413,982 for the year ended December 31, 1999. The change in loss from operations from 1999 to 2000 is attributable to the changes in expenses as discussed previously. Other Income (Expense). The increase in interest expense for the year ended December 31, 2000 compared to the year ended December 31, 1999 of $17,529 represents interest expense on bank financing. Net Loss. For the year ended December 31, 2000, we had a net loss of $2,840,419, compared to a net loss of $461,981 for the year ended December 31, 1999. The net loss for 2000 is largely attributable to continued concept development as well as additional general and administrative expenses as we increased our corporate overhead structure. Basic and diluted net loss per common share for the year ended December 31, 2000 was $1.65 on 1,717,731 shares compared to $1.92 on 240,394 shares for the 25 28 year ended December 31, 1999. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive. Financial Condition, Liquidity and Capital Resources. During the year ended December 31, 2000, our company's operations used $2,236,896 of cash compared to a use of $292,736 for the year ended December 31, 1999. This increase of $1,944,160 is primarily attributable to our selling, general and administrative expenses resulting in a greater net loss. Our investments used cash of $267,103 as compared to $15,342 for the year ended December 31, 1999. This increase of $251,761 represents additional office equipment and furniture purchases. We generated cash from financing for the year ended December 31, 2000 of $3,443,539 as compared to $679,323 for the year ended December 31, 1999. This increase of $2,764,216 is primarily attributable to the sale of our company's common stock. During the year ended December 31, 2000, our balance of cash and cash equivalents increased by $939,540 to $1,349,457 from the December 31, 1999 balance. RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 1998 Revenues. There were not any revenues for the years ended December 31, 1999 and 1998. Our Company was in the development stage and had not yet generated any significant revenue. Selling, General and Administrative. Selling, general and administrative expenses for the year ended December 31, 1999 were $393,149 compared to $12,305 for the year ended December 31, 1998. The increase in selling, general and administrative expenses was primarily due to the increased corporate overhead. Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 1999 was $20,833 compared to zero for the year ended December 31, 1998. During 1999 the depreciation and amortization relates to amortization of other assets. Net Loss. For the year ended December 31, 1999, we had a net loss of $461,981, compared to a net loss of $144,492 for the year ended December 31, 1998. The net loss for 1999 is largely attributable to continued concept development as well as additional general and administrative expenses as we increased our corporate overhead structure. Basic and diluted net loss per common share for the year ended December 31, 1999 was $1.92 on 240,394 shares compared to $0.79 on 183,667 shares for the year ended December 31, 1998. The impact of common stock equivalents has been excluded from the computation of weighted average common shares outstanding, as the net effect would be antidilutive. Financial Condition, Liquidity and Capital Resources. During the year ended December 31, 1999, our company's operations used $292,736 of cash compared to the company generating cash of $41,232 for the year ended December 31, 1998. The additional cash used is primarily attributable to our selling, general and administrative expenses resulting in a greater net loss. Our company's investments used cash of $15,342 as compared to the company generating cash of $111,378 for the year ended December 31, 1998. We generated $132,253 from the sale of available-for-sale securities for the year ended December 31, 1998. We generated cash from financing for the year ended December 31, 1999 of $679,323 as compared to cash used of $182,501 for the year ended December 31, 1998. The cash generated during the year ended December 31, 1999, is primarily attributable to the sale of our common stock. The cash used during the year ended December 31, 1998, was related to the reduction of our bank line of credit. During the year ended December 31, 1999, our balance of cash and cash equivalents increased by $371,245 to $409,917 from the December 31, 1998 balance. MARKET RISK SENSITIVITY 26 29 There has been no material change in our company's market risks associated with debt obligations during the quarter 27 30 USE OF PROCEEDS We will not receive any proceeds from the resale of any of the shares or warrants offered by this prospectus by the selling security holders. SELLING SECURITY HOLDERS The following table sets forth the number of Class B Redeemable Warrants owned by the selling security holders listed below as of the date of this prospectus and after giving effect to this offering. Unless otherwise noted, all warrants offered by this prospectus were issued as consideration to the former shareholders of Old AIQ in connection with the merger transaction with Meteor Industries.
Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- ------------ --------------- ----------- -------- Andcor Companies, Inc. 43,919 * 43,919 * Avery Family Limited Partnership 26,667 * 26,667 * Christian L. Babo 800 * 800 * Mitchell F. Berg 6,667 * 6,667 * Paul F. Berg 3,334 * 3,334 * Constance Berman 800 (1) * 800 * Gregory Bertagnoli 3,334 * 3,334 * Earle & Florence L. Bester, as JTWROS 6,667 * 6,667 * Barbara A. Blanco 13,334 * 13,334 * Boston Financial Partners, Inc. (a) 180,000 (2) 3.6 180,000 * Barbara Bowman, as custodian for Jennifer Lynn Mower under the MN UGTMA 1,112 * 1,112 * Barbara Bowman, as custodian for Rachel Hannah Mower under the MN UGTMA 1,112 * 1,112 * James W. and Barbara A. Bowman, JTWROS 14,001 * 14,001 * Gregory Boyle 13,334 * 13,334 * Jon Braufman 210 (1) * 210 * Miles Braufman 877 (1) * 877 * Phil & Cindy Breckman, as JTWROS 3,334 * 3,334 * Kenneth W. Brimmer & Jaye M. Snyder, as JTWROS (b) 206,667 4.2 206,667 * Thomas Brazil (a) 225,000 (3) 4.5 225,000 * Brimstone Ltd. 120,000 (2) 2.4 120,000 * Randy R. Brown 6,667 * 6,667 * Timothy E. & Patricia L. Buffham, as JTWROS 8,400 * 8,400 * Timothy E. & Patricia L. Buffham, as trustees of the Minnetonka Real Estate Services, Inc. Money Purchase Plan u/a dtd 12/30/96 10,000 * 10,000 * Joseph Buska 1,460 (1) * 1,460 * Jose R. & Pamela Jo Charles, as trustees of the Charles Family Revocable Trust u/a/d 6/17/98 8,000 * 8,000 * Dr. Charles F. Chesney 6,667 * 6,667 *
28 31
Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- ------------ --------------- ----------- -------- John M. Christopherson 8,000 * 8,000 * Jay N. Cohn, M.D. 6,667 * 6,667 * James W. Cox, as trustee of the Ari M. Lederman Irrevocable Trust u/a/d 6/15/99 445 * 445 * James W. Cox, as trustee of the Sara C. Lederman Irrevocable Trust u/a/d 6/15/99 445 * 445 * Regis Dahl 50,000 (4) 1.0 50,000 * Stephen R. Dahl 3,334 * 3,334 * Brion J. & Laura J. Demski, as JTWROS 3,334 * 3,334 * Richard J. & Carole E. Demski, as JTWROS 3,334 * 3,334 * Richard J. & Karen L. Demski, as JTWROS 3,334 * 3,334 * Gerald L. Dettinger 6,667 * 6,667 * Steven D. Dix and Debra J. Dix, JTWROS 1,000 * 1,000 * Jeff Dobbs 13,334 * 13,334 * Dan Dryer 3,334 * 3,334 * Stephen M. Duncan as Trustee of Stephen M. Duncan Revocable Trust u/a/d 2/25/98 6,667 * 6,667 * Ronald E. Eibensteiner (c) 233,334 (5) 4.6 100,000 2.6 Erla M. Fallenstein 3,334 * 3,334 * John C. Feltl 2,512 (1) * 2,512 * Leo Fong, ttee for the 1998 Leo Fong Irrevocable Trust 90,000 (6) 1.8 90,000 * Christopher Francis 1,590 (1) * 1,590 * John T. Gianfagna 1,000 * 1,000 * Adele J. Goldberg (d) 50,000 1.0 50,000 * Scott Grams 2,000 * 2,000 * Wes Gugnet 2,000 * 2,000 * Gulfstream Financial Partners, LLC 615,000 (7) 12.3 615,000 * Glen W. Gust 6,667 * 6,667 * Charles & Kim Hale, as JTWROS 445 * 445 * Frank & Kathy Hamel, as JTWROS 3,334 * 3,334 * Lamar & Judy Hamilton, as JTWROS 4,000 * 4,000 * Cory Hanscom 1,000 * 1,000 * Vernon J. Hanzlik (e) 33,334 * 33,334 * Steven J. Harmon 13,334 * 13,334 * Hiroyoshi Hashimoto (f) 27,778 * 27,778 * Takashi Hashimoto 1,112 * 1,112 * Yuriko Hashimoto 1,112 * 1,112 * John P. Hickey 6,667 * 6,667 * Michael L. & Janice M. Hildebrand, as JTWROS 2,667 * 2,667 * Barry Hollander 25,000 (7) * 25,000 * Mark C. Hoonsbeen 6,667 * 6,667 * Chuck Howard 3,334 * 3,334 * Gordon Hulbert 11,222 * 11,222 * IntraNet Solutions, Inc. 320,982 (5) 6.4 320,982 *
29 32
Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- ------------ --------------- ----------- -------- Charles Jameson, Jr. 12,840 * 12,840 * Geri L. Jameson (g) 173,250 3.5 173,250 * Timothy G. Jameson (h) 173,250 3.5 173,250 * Samuel L. Kaplan 6,667 * 6,667 * Stephen R. Kellogg 6,667 * 6,667 * Key West Associates, LLC 210,000 (7) 4.2 210,000 * Husam Kinawi 24,445 * 24,445 * Gerald Klassen 5,134 * 5,134 * Robert & Carolyn K. Koemptgen, as JTWROS 6,667 * 6,667 * Mark Kroeger 50,000 (4) 1.0 50,000 * William J. Lambert (i) 8,889 * 8,889 * David Lantz 800 (1) * 800 * Alfred E. LaTour, Jr. 223 * 223 * Eric V. Lawrence 3,334 * 3,334 * Richard C. Lockwood 30,000 (6) * 30,000 * Dylan P. Lohonen 800 * 800 * Maslon Edelman Borman & Brand, LLP (j) 11,984 (8) * 11,984 * Kevin McHale 6,667 * 6,667 * Lawrence McMillan 1,837 * 1,837 * Michael & Mary Mesarchik, as JTWROS 13,334 * 13,334 * Miller Johnson Steichen Kinnard, Inc. 10,955 (1) * 10,955 * Miller, Johnson & Kuehn 30,667 (1) * 30,677 * Wayne W. Mills 298,334 (9) 6.1 298,334 * Brian Mower 2,000 * 2,000 * Joan B. Mower 1,134 * 1,134 * William M. Mower (k) 220,958 4.5 220,958 * James Murphy 6,667 * 6,667 * Joshua Neren 6,000 * 6,000 * Steven Neren 79,445 (10) 1.6 79,445 * R. Vito Nicastro, Jr. 22,812 * 22,812 * Dean L. & Kathleen Nicholson, as JTWROS 6,667 * 6,667 * Fred Nielsen 6,667 * 6,667 * Kevin W. Nielson 13,908 * 13,908 * Nikolai, Mersereau & Dietz, P.A. 134 * 134 * North American Capital LLC 3,334 * 3,334 * D. Bradly Olah (l) 203,334 (11) 4.1 203,334 * D. Bradly Olah Irrevocable Trust (l) 10,000 * 10,000 * Terri Olah 110,000 (12) 2.2 110,000 * Robert F. Olson 60,000 1.2 60,000 * Robert E. Pasquarella 13,334 * 13,334 * Mark A. Payne 667 * 667 * Barry D. Pellecchia 6,667 * 6,667 * Mary Beckman Quinn 4,000 * 4,000 * Gary & Wendy Jo Raak, JTWROS 6,667 * 6,667 * Bruce Reichert 7,296 (1) * 7,296 * RFL Asset Management, LLC 10,000 (6) * 10,000 * Linda J. Rickard 2,223 * 2,223 * Philip C. Rickard (m) 11,537 * 11,537 * Philip J. Rickard 20,000 * 20,000 * Kathleen R. Ricketson 6,667 * 6,667 * Pete & Susan Rockers, as JTWROS (n) 100,000 2.0 100,000 * Sean M. Rosser 8,000 * 8,000 *
30 33
Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- ------------ --------------- ----------- -------- Frank & Susan Russell 10,000 * 10,000 * Daniel Ryan 2,162 * 2,162 * C. Gregory Sagan & Martha L. Walker, as JTWROS 6,667 * 6,667 * Andrew N. Salmen 3,334 * 3,334 * Michael Salmen 10,000 * 10,000 * Sandra A. Salmen 3,334 * 3,334 * T.J. Salmen and Associates, Inc. 3,334 * 3,334 * Tom P. Sampir 3,334 * 3,334 * Joseph M. Schaefer 6,667 * 6,667 * Paul Schaffer 6,667 * 6,667 * Barbara M. Schaper 25,000 (5) * 25,000 * Peter Schmit 3,334 * 3,334 * Stephen Schwalbach 6,667 * 6,667 * Joseph Schwartzbauer 10,000 * 10,000 * Ted & Ruth Warren Schwartzrock, as JTWROS 13,334 * 13,334 * Robert Shuman 5,492 * 5,492 * Nicole Silverhus 8,000 * 8,000 * Sharon B. & M. Philip Snyder, as JTWROS 6,667 * 6,667 * John F. Stapleton 150,000 (6) 3.0 150,000 * William Stesin 1,334 * 1,334 * George K. Stewart 6,667 * 6,667 * William B. Stewart 6,667 * 6,667 * John M. Styrbicki 6,667 * 6,667 * Thomas M. Sullivan 6,667 * 6,667 * Tetsu Takashima 3,334 * 3,334 * Gary & Tamara Tesar, JTWROS 3,334 * 3,334 * John M. & Janice M. Tesar, JTWROS 3,334 * 3,334 * Mark W. Thomas 5,600 * 5,600 * U.S. Bank Trust N.A., as trustee FBO Michael Noble IRA 3,334 * 3,334 * U.S. Bank Trust N.A., as trustee FBO Paul Schaffer IRA 6,667 * 6,667 * US Bank Trust National Association, as Trustee for the James M. Farrell SEP IRA 3,334 * 3,334 * US Bank Trust National Association, as Trustee of the Cindy J. Bray IRA 6,667 * 6,667 * US Bank Trust National Association, as Trustee of the Kevin Berg IRA 3,334 * 3,334 * US Bank Trust National Association, as TTEE of the Paul K. Cavanor IRA 3,334 * 3,334 * Gregg Waldon 6,667 * 6,667 * Tim & Sandy Warner, as JTWROS 4,000 * 4,000 * Bernard Weber 3,480 (1) * 3,480 * Martin Weber 3,141 (1) * 3,141 * Carsten Weiss 10,000 * 10,000 * Malcolm H. & Sandra Weiss, as JTWROS 2,000 * 2,000 * Steven A. & Mary Sue K. Weiss, as JTWROS (o) 8,000 * 8,000 *
31 34
Warrants Percentage Number of Percentage Beneficially Beneficial Warrants Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- ------------ --------------- ----------- -------- Wendover I, LLP 8,000 * 8,000 * Jeffrey I. Warbalowsky 50,000 (7) 1.0 50,000 * Joseph Hixon Whitney 10,000 * 10,000 * Michael J. Wier 6,667 * 6,667 * Thomas J. Williams 6,667 * 6,667 * Brian Wilson 2,667 * 2,667 * Wyncrest Capital, Inc. 233,334 (5) 4.7 133,334 2.0 Jeffrey A. Zinnecker 4,000 * 4,000 * - ---------------------------------------------------------------------------------------------------------------------
*Less than 1%. (a) The president and principal owner of Boston Financial Partners, inc. is Thomas Brazil. The warrants held by Mr. Brazil and which are included in this offering are not reflected in the number of warrants beneficially owned by Boston Financial Partners. (b) Mr. Brimmer is our Chairman, Chief Executive Officer and Chief Financial Officer. (c) Mr. Eibensteiner is a director of our company. (d) Ms. Goldberg was a director of Old AIQ until March 2001. (e) Mr. Hanzlik was a director of Old AIQ until March 2001. (f) Mr. Hashimoto was a director of Old AIQ until March 2001. (g) Ms. Jameson is vice-president of customer service. (h) Mr. Jameson is vice-president of engineering and development. (i) Mr. Lambert was the chief executive officer of Old AIQ until June 2000. (j) Maslon Edelman Borman & Brand, LLP provides legal services to our company and is expected to continue to provide such services in the future. (k) Mr. Mower, a partner in the law firm of Maslon Edelman Borman & Brand, LLP, is currently an assistant secretary of our company. He was also a director of Old AIQ until April 2001, its chief financial officer from May 6, 1999 until August 2000, and its secretary from May 6, 1999 to December 6, 2000. (l) Mr. Olah is our President and Chief Operating Officer, as well as a director of our company. (m) Mr. Rickard is an executive vice president of our company. (n) Mr. Rockers formerly served as the president and chief operating officer of Old AIQ from August 2000 until April 2001. (o) Mr. Weiss is a director of our company. ------------------- (1) Represents warrants issuable upon the exercise of a warrant to purchase shares of our common stock (at a price of $2.75 per share), which was issued to a selling agent in connection with a 2000 private placement. (2) Represents warrants issued in connection with a June 2001 private placement. (3) Represents warrant issued in connection with consulting services rendered to our company. (4) Represents warrants issued by Meteor Industries, Inc. as consideration for consulting services, which warrants were then exchanged for Class B Redeemable Warrants. (5) Represents 133,334 warrants held by Wyncrest Capital, Inc., of which Mr. Eibensteiner is the president and sole owner, and 100,000 warrants held by Mr. Eibensteiner. (6) Represents warrants issued by Meteor Industries, Inc. in connection with a January 2001 private placement, which warrants were then exchanged for the same number of Class B Redeemable Warrants. (7) Represents warrants issued to financial advisors in connection with the Meteor Industries, Inc. - activeIQ Technologies Inc. merger, which were then exchanged for the same number of Class B Redeemable Warrants. (8) Represents warrants issued upon the exercise of a warrant issued by Old AIQ in consideration of legal services rendered. (9) Includes 90,000 warrants issued by Meteor Industries in connection with a January 2001 private placement, which warrants were then exchanged for Class B Redeemable Warrants. (10) Includes 75,000 warrants issued to financial advisors in connection with the Meteor Industries-activeIQ Technologies merger, which were then exchanged for Class B Redeemable Warrants. (11) Does not include 110,000 warrants held by Mr. Olah's spouse and 10,000 warrants held by the D. Bradly Olah Irrevocable Trust. (12) Does not include 203,334 warrant held by D. Bradly Olah, Ms. Olah's spouse, as well as 10,000 warrants held by the D. Bradly Olah Irrevocable Trust. 32 35 The following table sets forth the number of shares of the common stock owned by the selling security holders as of August 1, 2001, and after giving effect to this offering.
Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- -------- --------------- ----------- -------- Carole Adams 6,071 * 6,071 * Robert G. Allison 20,000 * 20,000 * Andcor Companies, Inc. 109,797 1.1 43,919 (1) * Avery Family Limited Partnership 66,667 * 26,667 (1) * Christian L. Babo 2,001 * 800 (1) * Beartooth Capital, LLC 216,667 (2) 2.2 66,667 1.5 Bonnie Benda 1,676 * 1,676 * Mitchell F. Berg 16,667 * 6,667 (1) * Paul F. Berg 8,334 * 3,334 (1) * Constance Berman 2,000 * 2,000 (3) * Gregory Bertagnoli 8,334 * 3,334 (1) * Earle & Florence L. Bester, as JTWROS 16,667 * 6,667 (1) * Blake Capital Partners, LLC 2,031,334 (4) 19.6 500,000 (5) 14.9 Barbara A. Blanco 33,334 * 13,334 (1) * Boston Financial Partners, Inc. 830,000 (6) 8.0 480,000 (7) 3.4 Barbara Bowman, as custodian for Jennifer Lynn Mower under the MN UGTMA 2,779 * 1,112 (1) * Barbara Bowman, as custodian for Rachel Hannah Mower under the MN UGTMA 2,779 * 1,112 (1) * James W. and Barbara A. Bowman, JTWROS 21,001 * 14,001 (1) * Gregory Boyle 33,334 * 13,334 (1) * Jon Braufman 525 * 525 (8) * Miles Braufman 2,192 * 2,192 (9) * Thomas Brazil 830,000 (10) 8.0 350,000 (11) 4.6 Phil & Cindy Breckman, as JTWROS 8,334 * 3,334 (1) * Kenneth W. Brimmer & Jaye M. Snyder, as JTWROS (a) 637,835 (12) 6.3 206,667 (1) 4.2 Brimstone Ltd. 320,000 3.1 320,000 (13) * Randy R. Brown 16,667 * 6,667 (1) * Timothy E. & Patricia L. Buffham, as JTWROS 21,000 * 8,400 (1) * Timothy E. & Patricia L. Buffham, as trustees of the Minnetonka Real Estate Services, Inc. Money Purchase Plan u/a dtd 12/30/96 25,000 * 10,000 (1) * Buska, Joseph 3,649 * 3,649 (14) * Wilbur Cant 1,214 * 1,214 * Jose R. & Pamela Jo Charles, as trustees of the Charles Family Revocable Trust u/a/d 6/17/98 20,001 * 8,000 (1) * Dr. Charles F. Chesney 16,667 * 6,667 (1) * John M. Christopherson 20,000 * 8,000 (1) *
33 36
Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- -------- --------------- ----------- -------- Jay N. Cohn, M.D. 16,667 * 6,667 (1) * James W. Cox, as trustee of the Ari M. Lederman Irrevocable Trust u/a/d 6/15/99 1,112 * 445 (1) * James W. Cox, as trustee of the Sara C. Lederman Irrevocable Trust u/a/d 6/15/99 1,112 * 445 (1) * Tony Crawford 3,946 * 3,946 * Wes Cugnet 5,000 * 2,000 (1) * Regis Dahl 184,600 (15) 1.8 50,000 (16) 1.3 Stephen R. Dahl 8,334 * 3,334 (1) * Brion J. & Laura J. Demski, as JTWROS 8,334 * 3,334 (1) * Richard J. & Carole E. Demski, as JTWROS 8,334 * 3,334 (1) * Richard J. & Karen L. Demski, as JTWROS 8,334 * 3,334 (1) * Gerald L. Dettinger 16,667 * 6,667 (1) * Carol Dicke 12,143 * 12,143 * Steven D. Dix and Debra J. Dix, JTWROS 2,500 * 1,000 (1) * Jeff Dobbs 33,334 * 13,334 (1) * Dan Dryer 8,334 * 3,334 (1) * Stephen M. Duncan, as Trustee of Stephen M. Duncan Revocable Trust u/a/d 2/25/98 16,667 * 6,667 (1) * Ronald E. Eibensteiner (b) 683,334 (17) 6.6 300,000 (18) 3.7 Ellis Family Limited Partnership 20,000 * 20,000 * Thomas Erdmann 12,446 * 12,446 * Erla M. Fallenstein 8,334 * 3,334 (1) * John C. Feltl 6,298 * 6,298 (19) * Robert Fiss 1,214 * 1,214 * Leo Fong, ttee for the 1998 Leo Fong Irrevocable Trust 480,000 4.7 330,000 (20) 1.5 Christopher Francis 3,975 * 3,975 (21) * Genesis Select Corporation 80,000 * 80,000 (22) * John T. Gianfagna 2,500 * 1,000 (1) * Adele J. Goldberg (c) 137,500 (23) 1.4 50,000 (1) * Dennis D. Gonyea 10,000 * 10,000 * Scott Grams 5,001 * 2,000 (1) * Tom Guettler 486 * 486 * Gulfstream Financial Partners LLC 730,000 (24) 7.0 615,000 (25) 1.1 Glen W. Gust 16,667 * 6,667 (1) * Charles & Kim Hale, as JTWROS 1,112 * 445 (1) * Frank & Kathy Hamel, as JTWROS 8,334 * 3,334 (1) * Lamar & Judy Hamilton, as JTWROS 10,000 * 4,000 (1) * Cory Hanscom 2,500 * 1,000 (1) * Vernon J. Hanzlik (d) 83,334 * 33,334 (1) *
34 37
Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- -------- --------------- ----------- -------- Steven J. Harmon 33,333 * 13,334 (1) * Hiroyoshi Hashimoto (e) 76,111 (26) * 27,778 (1) * Takashi Hashimoto 2,778 * 1,112 (1) * Yuriko Hashimoto 2,778 * 1,112 (1) * Angela Warrington Healy 12,143 * 12,143 * John P. Hickey 16,667 * 6,667 (1) * Michael L. & Janice M. Hildebrand, as JTWROS 6,667 * 2,667 (1) * Barry Hollander 25,000 * 25,000 (27) * Gladys Holst 1,821 * 1,821 * Mark C. Hoonsbeen 16,667 * 6,667 (1) * Chuck Howard 8,334 * 3,334 (1) * Gordon Hulbert 28,055 * 11,222 (1) * Industricorp & Co., Inc. FBO Twin City Carpenters Pension Plan 50,000 * 50,000 * IntraNet Solutions, Inc. 939,119 9.2 340,982 (28) 6.1 Jon Isackson 115,354 1.2 115,354 * Charles Jameson, Jr. 32,099 * 12,840 (1) * Geri L. Jameson (f) 458,124 (29) 4.6 173,250 (1) 2.8 Timothy G. Jameson (g) 458,124 (29) 4.6 173,250 (1) 2.8 Raymond R. Johnson 10,000 * 10,000 * Samuel L. Kaplan 16,667 * 6,667 (1) * Stephen R. Kellogg 16,667 * 6,667 (1) * James and Barbara Kelm 16,393 * 16,393 * Amy Goggin Kemmerer 3,036 * 3,036 * Key West Associates, LLC 210,000 2.1 210,000 (27) * LeRoy Kimmes 1,214 * 1,214 * Husam Kinawi 61,112 * 24,445 (1) * Gerald Klassen 12,833 * 5,134 (1) * Robert & Carolyn Koemptgen, as JTWROS 16,667 * 6,667 (1) * Mark Kroeger 85,000 (30) * 50,000 (16) * William J. Lambert (h) 82,224 (31) * 8,889 (1) * David Lantz 2,000 * 2,000 (32) * Alfred E. LaTour, Jr. 557 * 223 (1) * Eric V. Lawrence 8,334 * 3,334 (1) * Richard C. Lockwood 135,000 1.4 30,000 (33) 1.1 Dylan P. Lohonen 2,001 * 800 (1) * Mark Machtemes 12,143 * 12,143 * Maslon Edelman Borman & Brand LLP 29,960 * 29,960 (34) * Sandra Mayasich (fka Sandra A. Salmen) 8,334 * 3,334 (1) * Kevin McHale 16,667 * 6,667 (1) * Laurence McMillan 4,592 * 1,837 (1) * Michael & Mary Mesarchik, as JTWROS 23,334 * 13,334 (1) * Miller Johnson & Kuehn, Inc. 76,667 * 76,667 (35) *
35 38
Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- -------- --------------- ----------- -------- Miller Johnson Steichen Kinnard, Inc. 27,387 * 27,387 (36) * Marvin Miller 32,985 * 32,985 * Wayne W. Mills 2,131,334 (37) 19.6 498,334 (38) 15.8 Brian Mower 5,001 * 2,000 (1) * Joan B. Mower 2,835 * 1,134 (1) * William M. Mower (i) 582,394 (39) 5.8 220,958 (1) 3.6 James Murphy 16,667 * 6,667 (1) * Joshua Neren 15,000 * 6,000 (1) * Steven Neren 86,112 * 79,445 (40) * R. Vito Nicastro, Jr. 57,208 * 22,812 (1) * Dean L. & Kathleen Nicholson, as JTWROS 16,667 * 6,667 (1) * Fred Nielsen 16,667 * 6,667 (1) * Kevin W. Nielson 34,770 * 13,908 (1) * Nikolai, Mersereau & Dietz, P.A. 334 * 134 (1) * North American Capital LLC 8,334 * 3,334 (1) * Jerry O'Brien 3,036 * 3,036 * D. Bradly Olah (j) 766,667 (41) 7.5 203,334 (1) 5.5 D. Bradly Olah Irrevocable Trust 25,000 * 10,000 (1) * Terri Olah (k) 766,667 (42) 7.5 110,000 (1) 6.4 Robert F. Olson 216,667 (43) 2.2 60,000 (1) 1.6 Robert E. Pasquarella 33,334 * 13,334 (1) * Mark A. Payne 1,667 * 667 (1) * Pegasus Investment Holdings Ltd. 50,000 * 50,000 (44) * Barry D. Pellecchia 16,667 * 6,667 (1) * Perkins Capital Management, Inc. Profit Sharing Plan & Trust U/A dtd 12/15/86 12,500 * 12,500 * Daniel S. and Patrice M. Perkins, JTWROS 25,000 * 25,000 * Richard C. Perkins 25,000 * 25,000 * Charlie Pruitt 3,036 * 3,036 * Pyramid Partners, L.P. 100,000 1.0 100,000 * Mary Beckman Quinn 10,000 * 4,000 (1) * Gary & Wendy Jo Raak, JTWROS 16,667 * 6,667 (1) * Bruce Reichert 18,239 * 18,239 (45) * RFL Asset Management LLC 266,667 2.7 250,000 (46) * Linda J. Rickard 5,557 * 2,223 (1) * Philip C. Rickard (l) 88,842 (47) * 11,537 (1) * Philip J. Rickard 50,001 * 20,000 (1) * Kathleen R. Ricketson 16,667 * 6,667 (1) * Pete & Susan Rockers, JTWROS (m) 350,000 (48) 3.5 100,000 (1) 2.5 Nick Rolfes 4,553 * 4,553 * Sean M. Rosser 20,001 * 8,000 (1) * Frank & Susan Russell, JTWROS 49,500 (49) * 10,000 (1) * Daniel Ryan 5,396 * 2,162 (1) * C. Gregory Sagan & Martha L. Walker, as JTWROS 16,667 * 6,667 (1) *
36 39
Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- -------- --------------- ----------- -------- Mike Salisbury 1,214 * 1,214 * Andrew N. Salmen 8,334 * 3,334 (1) * Michael Salmen 25,000 * 10,000 (1) * Tom P. Sampir 8,334 * 3,334 (1) * Joseph M. Schaefer 16,667 * 6,667 (1) * Paul Schaffer 16,667 * 6,667 (1) * Barbara M. Schaper 25,000 * 25,000 (27) * Peter Schmit 8,334 * 3,334 (1) * Stephen Schwalbach 16,667 * 6,667 (1) * Joseph Schwartzbauer 25,000 * 10,000 (1) * Ted & Ruth Warren Schwarzrock, as JTWROS 33,334 * 13,334 (1) * Robert Shuman 13,730 * 5,492 (1) * Nichole Silverhus 20,000 * 8,000 (1) * Sharon B. & M. Philip Snyder, as JTWROS 16,667 * 6,667 (1) * John F. Stapleton 400,000 4.0 400,000 (50) 2.5 William Stesin 3,334 * 1,334 (1) * George K. Stewart 16,667 * 6,667 (1) * William B. Stewart 16,667 * 6,667 (1) * John M. Styrbicki 16,667 * 6,667 (1) * Thomas M. Sullivan 16,667 * 6,667 (1) * Tetsu Takashima 8,666 (51) * 3,334 (1) * Gary & Tamara Tesar, JTWROS 8,334 * 3,334 (1) * John M. & Janice M. Tesar, JTWROS 8,334 * 3,334 (1) * Mark W. Thomas 14,000 * 5,600 (1) * Steve Thompson 30,356 * 30,356 * T.J. Salmen and Associates, Inc. 8,334 * 3,334 (1) * U.S. Bank Trust N.A., as trustee FBO Michael Noble IRA 8,334 * 3,334 (1) * U.S. Bank Trust N.A., as trustee FBO Paul Schaffer IRA 16,667 * 6,667 (1) * US Bank Trust National Association, as Trustee for the James M. Farrell SEP IRA 8,334 * 3,334 (1) * US Bank Trust National Association, as Trustee of the Cindy J. Bray IRA 16,667 * 6,667 (1) * US Bank Trust National Association, as Trustee of the Kevin Berg IRA 8,334 * 3,334 (1) * US Bank Trust National Association, as TTEE of the Paul K. Cavanor IRA 8,334 * 3,334 (1) * USB Piper Jaffray as Custodian FBO Bradley A. Erickson IRA 15,000 * 15,000 * USB Piper Jaffray as Custodian FBO Dave H. Potter IRA 15,000 * 15,000 * USB Piper Jaffray as Custodian FBO James G. Peters IRA 10,000 * 10,000 *
37 40
Shares Percentage Number of Percentage Beneficially Beneficial Shares Offered Beneficial Owned Before Ownership by Selling Ownership After Name Offering Before Offering Shareholder Offering - ---- -------- --------------- ----------- -------- George Vogel 3,036 * 3,036 * Marjorie Vogel 2,428 * 2,428 * Gregg Waldon 16,667 * 6,667 (1) * Tim & Sandy Warner, as JTWROS 10,000 * 4,000 (1) * Larry Warrington 18,821 * 18,821 * Mark Warrington 486 * 486 * Mitzi Warrington 88,452 * 88,452 * Stuart Warrington, 10,297 * 10,297 * Bernard Weber 8,700 * 8,700 (52) * Martin Weber 7,852 * 7,852 (53) * Shawn P. Weinand 10,000 * 10,000 * Carsten Weiss 25,000 * 10,000 (1) * Malcolm H. & Sandra Weiss, as JTWROS 5,001 * 2,000 (1) * Steven A. & Mary Sue K. Weiss, as JTWROS (n) 20,001 * 8,000 (1) * Wendover I, LLP 20,001 * 8,000 (1) * Jeffrey I. Werbalowsky 50,000 * 50,000 (27) * David M. Westrum, TTEE FBO David M. Westrum Revocable Living Trust u/a dtd 6-1-97 10,000 * 10,000 * Joseph Hixon Whitney 25,000 * 10,000 (1) * Michael J. Wier 16,667 * 6,667 (1) * Thomas J. Williams 16,667 * 6,667 (1) * Brian Wilson 6,667 * 2,667 (1) * Wyncrest Capital, Inc. 683,334 (54) 7.2 333,334 (55) 5.8 Jeffrey A. Zinnecker 10,000 * 4,000 (1) *
- ------------- * Less than 1%. (a) Mr. Brimmer is our Chairman, Chief Executive Officer and Chief Financial Officer. (b) Mr. Eibensteiner is a director of our company. (c) Ms. Goldberg was a director of Old AIQ until March 2001. (d) Mr. Hanzlik was a director of Old AIQ until March 2001. (e) Mr. Hashimoto was a director of Old AIQ until March 2001. (f) Ms. Jameson is vice president of sales and marketing of our Edge Technologies subsidiary. (g) Mr. Jameson is vice president of engineering of our Edge Technologies subsidiary. (h) Mr. Lambert was the chief executive officer of Old AIQ until June 2000. (i) Mr. Mower, a partner in the law firm of Maslon Edelman Borman & Brand, LLP, is currently an assistant secretary of our company. He was also a director of Old AIQ until April 2001, its chief financial officer from May 6, 1999 until August 2000, and its secretary from May 6, 1999 to December 6, 2000. (j) Mr. Olah is our President, Chief Operating Officer and Secretary of our company, as well as a member of our board of directors. (k) Ms. Olah is the spouse of D. Bradly Olah. (l) Mr. Rickard is an executive vice president of our company. (m) Mr. Rockers was president and chief operating officer of Old AIQ from August 2000 until April 2001. (n) Mr. Weiss is a director of our company. 38 41 --------------------- (1) Represents shares issuable upon the exercise of Class B Redeemable Warrants. (2) Includes 150,000 shares held by Robert F. Olson, the principal owner of Beartooth Capital, LLC, 60,000 shares of which are issuable upon the exercise of Class B Redeemable Warrants. (3) Represents 2,000 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling agents in connection with a 2000 private placement, and 1,334 shares issuable upon the exercise of Class B Redeemable Warrants, which become issuable upon the exercise of the selling agent warrant. (4) Includes 500,000 shares issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. Also includes 15,000 shares issuable upon exercise of publicly traded warrants. Also includes 30,000 shares owned by Sea Spray, Ltd., a foreign corporation of which Mr. Mills is the sole shareholder, 150,000 shares owned by Mr. Mills' spouse. Mr. Mills disclaims beneficial ownership of his spouse's shares. Also includes 923,000 shares owned by Wayne Mills (sole director of Blake Capital Partners, LLC) plus 100,000 shares issuable upon the conversion of Series B Preferred Stock; 100,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued in connection with the Series B Preferred Stock; 90,000 shares issuable upon the exercise (at a price of $5.50 per share) of warrants issued in connection with a January 2001 private placement and exchanged for Class B Redeemable Warrants; and 208,334 shares issuable upon the exercise (at a price of $5.50 per share) of Class B Redeemable Warrants, (5) Represents 500,000 shares issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. (6) Includes 350,000 shares issuable upon the exercise of warrants issued to Thomas Brazil, president of Boston Financial Partners, Inc., in connection with a financial advisory services agreement with our company. Of the 350,000 shares, all of which are also being offered hereby, 225,000 shares are exercisable at a price of $5.50 per share and 125,000 shares are exercisable at a price of $7.50 per share. (7) Represents 180,000 shares issuable upon the exercise of Class B Redeemable Warrants. (8) Represents 315 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling agents in connection with a 2000 private placement, and 210 shares issuable upon the exercise of Class B Redeemable Warrants issuable upon the exercise of the selling agent warrants. (9) Represents 1,315 shares issuable upon the exercise (at a price of $2.75 per share) of warrants issued to selling agents in connection with a 2000 private placement, and 877 shares issuable upon the exercise of Class B Redeemable Warrants issuable upon the exercise of the selling agent warrants. (10) Includes 480,000 shares held by Boston Financial Partners, Inc., of which 180,000 shares are issuable upon the exercise of Class B Warrants issued in connection with a private placement. Mr. Brazil is the president and principal owner of Boston Financial Partners, Inc. (11) Includes 225,000 shares issuable upon the exercise of Class B Warrants and 125,000 shares issuable upon the exercise (at a price of $7.50 per share) of a warrant, all of which warrants were issued in connection with a financial advisory services agreement with our company. (12) Includes (i) 120,000 shares issuable to Mr. Brimmer upon the exercise (at a price of $1.00 per share) of options, (ii) 1,167 shares issuable upon the exercise (at a price of $37.50 per share) of a warrant, and (iii) 206,667 shares issuable upon the exercise of Class B Redeemable Warrants. (13) Includes 120,000 shares issuable upon the exercise of Class B Redeemable Warrants issued in connection with a June 2001 private placement. (14) Represents 2,189 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 1,460 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (15) Includes (i) 122,900 shares issuable upon the exercise (at a price of $7.15 per share) of our currently outstanding public warrants, and (ii) 50,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued as payment for consulting services rendered to Meteor Industries, Inc. (16) Represents shares issuable upon the exercise of Class B Warrants issued in exchange for a warrant to purchase such number of shares (at a price of $5.50 per share) issued in January 2001 as payment for consulting services rendered to Meteor Industries, Inc. (17) Includes (i) 100,000 shares issuable within 60 days upon the exercise (at a price of $1.00 per share) of an option, (ii) 100,000 shares issuable upon the exercise of Class B Redeemable Warrants, and (iii) 333,334 shares beneficially owned by Wyncrest Capital, Inc., of which Mr. Eibensteiner is the president and 39 42 principal owner, including 133,334 shares issuable upon the exercise of Class B Redeemable Warrants, all of which are also offered hereby. (18) Includes 100,000 shares issuable upon the exercise of Class B Redeemable Warrants. (19) Represents 3,786 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 2,524 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (20) Represents 120,000 shares issuable upon the conversion of 120,000 shares of our Series B Convertible Preferred Stock and 120,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issuable upon conversion of our Series B Convertible Preferred Stock and 90,000 shares issuable upon exercise of Class B Redeemable Warrants, which were issued in exchange for a warrant to purchase 90,000 shares (at a price of $5.50 per share) issued in connection with a January 2001 private placement by Meteor Industries. (21) Represents 2,385 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 1,590 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (22) Represents shares issuable upon the exercise of an option issued as payment for consulting services rendered to Meteor Industries, Inc., of which 20,000 shares are purchasable at $3.95 per share, 20,000 shares are purchasable at $4.73 per share, 20,000 shares are purchasable at $5.52 and 20,000 shares are purchasable at $6.31 per share. (23) Includes 12,500 shares issuable upon the exercise (at a price of $1.00 per share) of an option and 50,000 shares issuable upon the exercise of Class B Redeemable Warrants. (24) Includes 615,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered and exchanged for Class B Redeemable Warrants. (25) Represents 615,000 shares issuable upon the exercise Class B Warrants, which were issued in exchange (at a price of $5.50 per share) of a warrant issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered. (26) Includes 6,667 shares issuable upon the exercise (at a price of $15.00 per share) of an option and 27,778 shares issuable upon the exercise of Class B Redeemable Warrants. (27) Represents shares issuable upon the exercise of Class B Warrants issued in exchange for warrants to purchase (at a price of $5.50 per share) such number of shares (at a price of $5.50 per share) issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered. (28) Represents (i) 307,648 shares issuable upon the exercise of Class B Redeemable Warrants, (ii) 20,000 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued in connection with an August 2000 financing, and (iii) 13,334 shares issuable upon the exercise of Class B Redeemable Warrants that are issuable upon exercise of the warrant described in (ii). (29) Includes 25,000 shares issuable within 60 days upon the exercise (at a price of $2.75 per share) of options and 173,250 shares issuable upon exercise of Class B Redeemable Warrants. (30) Includes 35,000 shares issuable upon the exercise (at a price of $2.75 per share) of options issued in connection with consulting services rendered to Meteor Industries, Inc. (31) Includes 60,000 shares issuable upon the exercise (at a price of $1.00 per share) of an option and 8,890 shares issuable upon the exercise of Class B Redeemable Warrants. (32) Represents 1,200 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 800 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (33) Represents shares issuable upon the exercise (at a price of $5.50 per s hare) of a warrant issued in connection with a January 2001 Meteor Industries, Inc. private placement. (34) Represents 17,976 shares issued upon the exercise of a warrant, which was issued as payment for legal services rendered to our company, and 11,984 shares issuable upon the exercise of Class B Redeemable Warrants. (35) Represents 46,000 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 30,667 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. 40 43 (36) Represents 16,432 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 10,955 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (37) Includes 30,000 shares owned by Sea Spray, Ltd., a foreign corporation of which Mr. Mills is the sole shareholder, 150,000 shares owned by Mr. Mills' spouse. Mr. Mills disclaims beneficial ownership of his spouse's shares. Also includes 100,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued in connection with the Series B Preferred Stock; 90,000 shares issuable upon the exercise (at a price of $5.50 per share) of warrants issued in connection with a January 2001 private placement and exchange for Class B Redeemable Warrants; and 208,334 shares issuable upon the exercise (at a price of $5.50 per share) of Class B Redeemable Warrants, Includes 500,000 shares issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. Also includes 500,000 shares owned By Blake Capital Partners, LLC, a limited liability company whose sole director is Wayne Mills, issuable upon exercise (at a price of $3.00 per share) of warrants issued to financial advisors in connection with our merger with active IQ Technologies, Inc. Also includes 15,000 shares owned by Blake Capital and publicly traded warrants to purchase 15,000 shares (at an exercise price of $7.15 per share). (38) Includes 100,000 shares issuable upon the conversion of Series B Convertible Preferred Stock; 100,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issued in connection with the Series B Preferred Stock; 90,000 shares issuable upon the exercise (at a price of $5.50 per share) of warrants issued in connection with a January 2001 private placement and exchange for Class B Redeemable Warrants; and 208,334 shares issuable upon the exercise (at a price of $5.50 per share) of Class B Redeemable Warrants. Does not include any shares or warrants owned by Blake Capital Partners, LLC, a company of which Mr. Mills is sole shareholder, which is listed separately in this table. (39) Includes 30,000 shares issuable upon the exercise (at a price of $3.00 per share) of an option. (40) Represents 75,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued by Meteor Industries upon the merger with Old AIQ in consideration of financial advisory services rendered and 4,445 shares issuable upon the exercise of Class B Redeemable Warrants. (41) Includes (i) 203,334 shares issuable upon the exercise of Class B Redeemable Warrants, (ii) 275,000 shares held by Mr. Olah's spouse, of which 110,000 shares are issuable upon the exercise of Class B Redeemable Warrants, (iii) 25,000 shares held by the D. Bradly Olah Irrevocable Trust, of which 10,000 shares are issuable upon the exercise of Class B Redeemable Warrants, (iv) 70,000 shares issuable upon the exercise (at a price of $1.00 per share) of an option, and (v) 3,333 shares issuable upon the exercise (at a price of $15.00 per share) of a warrant. (42) Includes shares held by Ms. Olah's spouse, D. Bradly Olah, as described in note (41). (43) Includes 66,667 shares held by Beartooth Capital, LLC, an entity owned and controlled by Mr. Olson, and 60,000 shares issuable upon the exercise of Class B Redeemable Warrants. (44) Represents 25,000 shares issuable upon the conversion of our Series B Convertible Preferred Stock and 25,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issuable upon conversion of the Series B Convertible Preferred Stock. (45) Represents 10,943 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 7,296 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (46) Represents (i) 120,000 shares issuable upon the conversion of our Series B Convertible Preferred Stock, (ii) 120,000 shares issuable upon the exercise (at a price of $2.50 per share) of a warrant issuable upon conversion of the Series B Convertible Preferred Stock, and (iii) 10,000 shares issuable upon the exercise of Class B Warrants issued in exchange for a warrant to purchase 10,000 shares (at a price of $5.50 per share) issued in connection with a January 2001 Meteor Industries, Inc. private placement. (47) Includes (i) 60,000 shares issuable upon the exercise (at a price of $1.00 per share) of an employee option, (ii)11,537 shares issuable upon the exercise of Class B Redeemable Warrants. (48) Includes (i) 100,000 shares issuable upon the exercise (at a price of $2.00 per share) of an employee option and 100,000 shares issuable upon the exercise of Class B Redeemable Warrants. (49) Includes 24,500 shares issuable upon the exercise (at price of $2.00 per share) of an employee option and 10,000 shares issuable upon the exercise of our Class B Redeemable Warrants. 41 44 (50) Includes 150,000 shares issuable upon the exercise (at a price of $5.50 per share) of a warrant issued in connection with a January 2001 Meteor Industries, Inc. private placement. (51) Includes 333 shares issuable upon the exercise (at a price of $37.50 per share) of a warrant. (52) Represents 5,220 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 3,480 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (53) Represents 4,711 shares issuable upon the exercise (at a price of $2.75 per share) of a warrant issued to selling agents in connection with a 2000 private placement, as well as 3,141 shares issuable upon the exercise of Class B Redeemable Warrants, which are issuable upon the exercise of the selling agent warrants. (54) Includes 133,334 shares issuable upon the exercise of Class B Redeemable Warrants. Also includes (i) 100,000 shares issuable upon the exercise (at a price of $1.00 per share) within 60 days of an option held by Ronald E. Eibensteiner, the president and sole owner of Wyncrest Capital, (ii) 100,000 shares issuable upon the exercise of Class B Redeemable Warrants held by Ronald E. Eibensteiner, (iii) 200,000 shares held by Mr. Eibensteiner. (55) Includes 133,334 shares issuable upon the exercise of Class B Redeemable Warrants. 42 45 PLAN OF DISTRIBUTION We are registering the shares offered by this prospectus in part on behalf of the selling security holders. We agreed to file a registration statement under the Securities Act of 1933, as amended covering resale by the selling security holders and, with respect to some of the selling security holders, use our best efforts to cause the registration statement to be declared effective as soon as possible thereafter. As used in this prospectus, the term "selling security holders" means the persons identified in the tables in the section of this prospectus entitled "Selling Security Holders," and each of their respective donees, pledgees, transferees and other successors in interest selling securities received from a selling security holder after the date of this prospectus. We will pay all costs and expenses in connection with the preparation of this prospectus and the registration of the shares offered by it. Any brokerage commissions and similar selling expenses attributable to the sale of shares will be borne by the selling shareholders. Sales of our Class B Redeemable Warrants and common stock may be effected by the selling security holders at various times in one or more types of transactions (which may include block transactions) on the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of such methods of sale at market prices prevailing at the time of sale or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling security holders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of the securities, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of securities by the selling security holders. In certain instances, we have agreed to indemnify the selling security holders and their officers, directors, employees and agents, and each person who controls any selling security holders, against certain liabilities, including liabilities arising under the Securities Act. Some of the selling security holders have agreed to indemnify us and our directors and officers in certain circumstances against certain liabilities, including liabilities arising under the Securities Act. The selling security holders and any broker-dealers that act in connection with the sale of securities might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers and any profit on the resale of the securities sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. Because selling security holders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, the selling security holders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling security holders that the anti-manipulative provisions of Regulation M promulgated under the Securities Exchange Act of 1934, as amended, may apply to their sales in the market. Selling security holders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of that Rule. LOCK UP AGREEMENTS Certain of our shareholders have entered into agreements by which they agree not to sell their shares of our common stock for a period of time. Edward Names, a former officer and director of Meteor Industries, Inc. (our predecessor), and Capco Energy Inc., a large shareholder and a company whose president was a director of Meteor Industries, both signed agreements whereby they agreed that prior to April 30, 2002, they would not sell, offer to sell, transfer, hypothecate, 43 46 contract to sell, grant any option to purchase, or otherwise dispose of common stock including convertible preferred stock or the common shares after conversion, except by operation of law, by bona fide gift or by bona fide pledge, and except that Capco may sell or otherwise dispose of less than 1% of the total number of outstanding shares per month and Mr. Names may sell up to 20,000 shares per month commencing September 15, 2001. The remaining former directors of Meteor and the officers and directors of Old AIQ have entered into agreements whereby they agree not to sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of common stock issued or issuable upon the exercise of options held by such persons at the time of the Meteor Industries-Old AIQ merger, except by operation of law, by bona fide gift or by bona fide pledge, and except that they may sell or otherwise dispose of less than 10% of the total number of outstanding shares per month until April 30, 2002. In connection with the stock purchase agreement dated as of June 6, 2001 with Red Wing Business Systems, Inc. ("Red Wing"), the former shareholders of Red Wing agreed that, following the date that a registration statement registering the shares received in the transaction becomes effective, such shareholders will not sell, offer to sell, transfer, hypothecate, contract to sell, grant any option to purchase, or otherwise dispose of 75 percent of the aggregate number of shares of our common stock received in the transaction, except by operation of law, by bona fide gift or by bona fide pledge. Every three months following the effective date of a registration statement covering the resale of such shares, 12.5 percent of the aggregate number of shares issued to the former Red Wing shareholders become free of these restrictions. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering and assuming the issuance of all of the shares covered by this prospectus that are issuable upon the exercise or conversion of convertible securities, there will be 11,576,245 shares of our common stock issued and outstanding, not including the shares issuable upon exercise of the Class B Redeemable Warrants. The shares purchased in this offering will be freely tradable without registration or other restriction under the Securities Act, except for any shares purchased by an "affiliate" of our company (as defined in the Securities Act). Our currently outstanding shares that were issued in reliance upon the "private placement" exemptions provided by the Act are deemed "restricted securities" within the meaning of Rule 144. Restricted securities may not be sold unless they are registered under the Securities Act or are sold pursuant to an applicable exemption from registration, including an exemption under Rule 144 of the Securities Act. It is expected that the 4,385,931 restricted shares of our common stock that were issued in connection with the merger with Old AIQ will become eligible for sale on April 30, 2002, assuming all of the other requirements of Rule 144 have been satisfied. In general, under Rule 144 as currently in effect, any person (or persons whose shares are aggregated) including persons deemed to be affiliates, whose restricted securities have been fully paid for and held for at least one year from the later of the date of issuance by us or acquisition from an affiliate, may sell such securities in broker's transactions or directly to market makers, provided that the number of shares sold in any three month period may not exceed the greater of 1 percent of the then-outstanding shares of our common stock or the average weekly trading volume of the shares of common stock in the over-the-counter market during the four calendar weeks preceding the sale. Sales under Rule 144 are also subject to certain notice requirements and the availability of current public information about our company. After two years have elapsed from the later of the issuance of restricted securities by us or their acquisition from an affiliate, such securities may be sold without limitation by persons who are not affiliates under the rule. Rule 701 promulgated under the Securities Act as currently in effect, allows for any employee, consultant or advisor of our company who purchases shares from us by exercising a stock option 44 47 outstanding on the date of this prospectus is eligible to resell such shares 90 days after the date of this prospectus in reliance on Rule 144, but need not comply with certain restrictions contained in Rule 144, including the holding period requirement. In addition, the holders of options issued pursuant to plans maintained by Old AIQ and assumed by us following the merger with Meteor Industries may sell at any time the shares issued or issuable under such options pursuant to Rule 701. Subject to vesting requirements under the applicable option agreements, there are approximately 1,246,501 shares issuable upon the exercise of currently outstanding options granted under the Old AIQ plans. Concurrently with the filing of the registration statement which contained this prospectus, we intend to register 250,000 shares of our common stock that are reserved for issuance under the 2000 Director Stock Option Plan. After the effective date of such registration statement, shares issued upon exercise of outstanding options would generally be eligible for immediate resale in the public market, subject to vesting under the applicable option agreements. Following the date of this prospectus, we cannot predict the effect, if any, that sales of our common stock or the availability of our common stock for sale will have on the market price prevailing from time to time. Nevertheless, sales by existing shareholders of substantial amounts of our common stock could adversely affect prevailing market prices for our stock. MINNESOTA ANTI-TAKEOVER LAW Through our articles of incorporation, we have elected not to be governed by the provisions of Sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act. In general, Section 302A.671 provides that the shares of a corporation acquired in a "control share acquisition" have no voting rights unless voting rights are approved in a prescribed manner. A "control share acquisition" is an acquisition, directly or indirectly, of beneficial ownership of shares that would, when added to all other shares beneficially owned by the acquiring person, entitle the acquiring person to have voting power of 20% or more in the election of directors. In general, Section 302A.673 prohibits a publicly-held Minnesota corporation from engaging in a "business combination" with an "interested shareholder" for a period of four years after the date of transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. "Business combination" includes mergers, asset sales and other transactions resulting in a financial benefit to the interested shareholder. An "interested shareholder" is a person who is the beneficial owner, directly or indirectly, or 10% or more of the corporation's voting stock or who is an affiliate or associate of the corporation and at any time within four years prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the corporation's voting stock. DESCRIPTION OF CAPITAL STOCK The following description summarizes the material terms and provisions of our capital stock, but is not complete. For the complete terms of our capital stock, please refer to our articles of incorporation and our by-laws, which are included in or incorporated by reference into the registration statement that includes this prospectus. COMMON STOCK Our common stock is quoted on the Nasdaq Small Cap Market System under the symbol "AIQT." The Transfer Agent and Registrar of our common stock is Firstar Bank, N.A., Milwaukee, Wisconsin. As of August 16, 2001, there were 10,025,567 shares of our common stock outstanding, held by approximately 500 shareholders. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of our common stock are entitled to receive dividends out of the assets legally available at the time and in the amounts that our board of directors may 45 48 determine from time to time. To date, however, no dividends have been paid to our shareholders and we do not anticipate paying any dividends for the foreseeable future. The common stock has no preemptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding-up of our company, the holder of our common stock are entitled to share all assets legally available for distribution to our shareholders after payment of all liabilities and the liquidation preferences of any outstanding preferred stock. Each outstanding share of our common stock is, and any shares of our common stock offered by this prospectus are, fully paid and nonassessable. SERIES B CONVERTIBLE PREFERRED STOCK Our articles of incorporation have designated 365,000 shares of our capital stock as "Series B Convertible Preferred Stock," par value $1.00 per share. All 365,000 outstanding shares of our Series B Convertible Preferred Stock are held by five shareholders. The holders of our Series B Convertible Preferred Stock are entitled to one vote per share. Such holders shall have the same voting rights as the holders of our common stock. No dividends will be paid on the Series B Convertible Preferred Stock and such shares may not be redeemed. In the event of a liquidation, dissolution or winding up of the affairs of our company, the holders of the Series B Convertible Preferred Stock shall be entitled to receive out of our company's assets available for distribution to shareholders and before any payment on any other class of capital stock, $2.00 per share. If our assets are insufficient to provide for a $2.00 liquidation preference to the holders of the Series B Convertible Preferred Stock, then the entire assets and funds of our company shall be paid to such holders. Each share of Series B Convertible Preferred Stock is convertible into one share of our common stock and a warrant to purchase one share of common stock at a price of $2.50 per share. The warrants issuable upon conversion of the Series B Convertible Preferred Stock expire on May 15, 2005. DESCRIPTION OF CLASS B REDEEMABLE WARRANTS The following discussion of certain terms and provisions of our Class B Redeemable Warrants is qualified in its entirety by reference to the warrant agreement dated August 1, 2001 (the "Warrant Agreement") between us and Firstar Bank, N.A., Milwaukee, Wisconsin (the "Warrant Agent") and also the detailed provisions of the form of warrant certificate attached to the Warrant Agreement. The Warrant Agreement is an exhibit to the Registration Statement that includes this prospectus. Each of our Class B Redeemable Warrants entitles the holder to purchase, at a price of $5.50 subject to adjustment, one share of our common stock at any time until April 30, 2006. The Company may redeem the warrants at a price of $.01 per warrant upon 30 days' prior written notice any time after April 30, 2002 following a period of 14 consecutive days in which the average closing bid price of our common stock exceeds $7.50 per share. In addition to the foregoing conditions, the Class B redeemable Warrants may only be redeemed if the shares of common stock issuable upon exercise of the Class B Redeemable Warrants have been registered under the Securities Act or are otherwise freely transferable. Any holder of our Class B Redeemable Warrants who does not exercise prior to the redemption date, as set forth in our notice of redemption, will forfeit the right to purchase the shares of our common stock underlying the warrants and, after the redemption date, any outstanding Class B Redeemable Warrants will become void and be of no further force or effect. The Class B Redeemable Warrants have been issued pursuant to the Warrant Agreement between us and the Warrant Agent. The Company has authorized and reserved for issuance the shares of common 46 49 stock issuable upon exercise of the Class B Redeemable Warrants. When delivered, all shares of common stock issued upon exercise of the Redeemable Warrants will be duly and validly authorized and issued, fully paid and nonassessable, and no preemptive rights or rights of first refusal will exist with respect thereto. The Class B Redeemable Warrants may be exercised upon surrender of the warrant certificate on or prior to its expiration date (or earlier redemption date) at the offices of the Warrant Agent, with the Purchase Form on the reverse side of the Warrant certificate completed and executed as indicated, accompanied by payment of the full exercise price (by certified check or bank check payable to the order of the Company) for the number of shares with respect to which such Warrant is being exercised. The exercise price of the Redeemable Warrants and the number of shares to be obtained upon exercise of such Warrant are subject to adjustment in certain circumstances including a stock split of, or stock dividend on, or a subdivision, combination, or recapitalization of the Common Stock. In the event of liquidation, dissolution or winding up of our company, holders of the Class B Redeemable Warrants, unless exercised, will not be entitled to participate in the assets of our company. Holders of the Class B Redeemable Warrants will have no voting, preemptive, liquidation or other rights of a shareholder, and no dividends will be declared on the Class B Redeemable Warrants. 47 50 DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Minnesota Statutes Section 302A.521 provides that a corporation shall indemnify any person made or threatened to be made a party to any proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorney's fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person has not been indemnified by another organization or employee benefit plan for the same expenses with respect to the same acts or omissions; acted in good faith; received no improper personal benefit and Section 302A.255, if applicable, has been satisfied; in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and in the case of acts or omissions by persons in their official capacity for the corporation, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions by persons in their capacity for other organizations, reasonably believed that the conduct was not opposed to the best interests of the corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes provides that a corporation's articles of incorporation or by-laws may prohibit such indemnification or place limits upon the same. The Company's articles and by-laws do not include any such prohibition or limitation. As a result, the Company is bound by the indemnification provisions set forth in Section 302A.521 of the Minnesota Statutes. As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of Incorporation of the Company provide that a director shall, to the fullest extent permitted by law, have no personal liability to the Company and its shareholders for breach of fiduciary duty as a director. To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL MATTERS Legal matters in connection with the validity of the securities offered by this prospectus will be passed upon by Maslon Edelman Borman & Brand, LLP, Minneapolis, Minnesota. EXPERTS The balance sheet of activeIQ Technologies Inc. ("Old AIQ") as of December 31, 2000 and 1999, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000 and for the period from inception (April 11, 1996) to December 31, 2000 incorporated by reference in this prospectus and elsewhere in the registration statement to the extent and for the periods indicated in their report have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. Reference is made to said report, which includes an explanatory paragraph with respect to the uncertainty regarding the Company's ability to continue as a going concern as discussed in Note 1 to the financial statements. 48 51 5,008,101 CLASS B REDEEMABLE WARRANTS 8,525,922 SHARES OF COMMON STOCK ACTIVE IQ TECHNOLOGIES, INC. ---------------------- PROSPECTUS ---------------------- _______ ___, 2001 52 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses in connection with the issuance and distribution of the securities registered hereby are set forth in the following table: SEC registration fee .............................. $ 17,500 Legal fees and expenses ........................... 30,000 Accounting fees and expenses ...................... 12,000 Miscellaneous ..................................... 15,000 -------------- Total ............................................. $ 74,500 ==============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company is governed by Minnesota Statutes Chapter 302A. Minnesota Statutes Section 302A.521 provides that a corporation shall indemnify any person made or threatened to be made a party to any proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorney's fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person has not been indemnified by another organization or employee benefit plan for the same expenses with respect to the same acts or omissions; acted in good faith; received no improper personal benefit and Section 302A.255, if applicable, has been satisfied; in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and in the case of acts or omissions by persons in their official capacity for the corporation, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions by persons in their capacity for other organizations, reasonably believed that the conduct was not opposed to the best interests of the corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes provides that a company's articles of incorporation or by-laws may prohibit such indemnification or place limits upon the same. The Company's articles and by-laws do not include any such prohibition or Limitation. As a result, the Company is bound by the indemnification provisions set forth in Section 302A.521 of the Minnesota Statutes. As permitted by Section 302A.251 of the Minnesota Statutes, the Articles of Incorporation of the Company provide that a director shall have no personal liability to the Company and its shareholders for breach of his fiduciary duty as a director, to the fullest extent permitted by law. ITEM 16. EXHIBITS. The following exhibits are filed as part of this Registration Statement: EXHIBIT DESCRIPTION OF DOCUMENT ------- ----------------------- 4.1 Articles of Incorporation* 4.2 By-laws 4.3 Warrant Agreement dated August 1, 2001 4.4 Form of Class B Redeemable Warrant Certificate 5.1 Opinion of Maslon Edelman Borman & Brand, LLP 10.1 Employment agreement by and between Kenneth W. Brimmer and the Company dated as of May 1, 2001. 10.2 Employment agreement by and between D. Bradly Olah and the Company dated as of May 1, 2001. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Maslon Edelman Borman & Brand, LLP (included as a part of Exhibit 5.1) 24.1 Power of Attorney (included on signature page hereof) 50 53 * Incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K filed on May 14, 2001 ITEM 17. UNDERTAKINGS. (a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and (4) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 51 54 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minnetonka, State of Minnesota, on August 16, 2001. ACTIVE IQ TECHNOLOGIES, INC. By: /s/ Kenneth W. Brimmer ------------------------------------------- Kenneth W. Brimmer Chairman, Chief Executive Officer and Chief Financial Officer POWER OF ATTORNEY Each person whose signature to this Registration Statement appears below hereby constitutes and appoints Kenneth W. Brimmer and D. Bradly Olah, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution, to sign on his or her behalf individually and in the capacity stated below and to perform any acts necessary to be done in order to file all amendments to this Registration Statement and any and all instruments or documents filed as part of or in connection with this Registration Statement or the amendments thereto and each of the undersigned does hereby ratify and confirm all that said attorney-in-fact and agent, or his substitutes, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1933, this Registration Statement has been signed as of the 16th day of August, 2001, by the following persons in the capacities indicated. NAME TITLE ---- ----- /s/ Kenneth W. Brimmer Chairman, Chief Executive Officer and - ----------------------------------- Chief Financial Officer (Principal Kenneth W. Brimmer Executive Officer and Principal Financial Officer) /s/ D. Bradly Olah President, Chief Operating Officer and - ----------------------------------- Director D. Bradly Olah /s/ Mark D. Dacko Controller (Principal Accounting Officer) - ----------------------------------- Mark D. Dacko /s/ Ronald E. Eibensteiner Director - ----------------------------------- Ronald E. Eibensteiner - ----------------------------------- Director Steven A. Weiss - ----------------------------------- Director Steven R. Levine /s/ Ken S. Kaufman Director - ----------------------------------- Ken S. Kaufman 52 55 EXHIBIT INDEX EXHIBIT DESCRIPTION OF DOCUMENT ------- ----------------------- 4.1 Articles of Incorporation* 4.2 By-laws 4.3 Warrant Agreement dated August 1, 2001 4.4 Form of Class B Redeemable Warrant Certificate 5.1 Opinion of Maslon Edelman Borman & Brand, LLP 10.1 Employment agreement by and between Kenneth W. Brimmer and the Company dated as of May 1, 2001. 10.2 Employment agreement by and between D. Bradly Olah and the Company dated as of May 1, 2001. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of Maslon Edelman Borman & Brand, LLP (included as a part of Exhibit 5.1) 24.1 Power of Attorney (included on signature page hereof) - ----------------- * Incorporated by reference to Exhibit 3.1 of Registrant's Form 8-K filed on May 14, 2001 53 EX-4.2 3 c64205ex4-2.txt BY-LAWS 1 EXHIBIT 4.2 BY-LAWS OF AIQ ACQUISITION CORP. -1- 2 TABLE OF CONTENTS ARTICLE 1. OFFICES....................................................................................... 1 1.1 Registered Office............................................................................. 1 1.2 Offices....................................................................................... 1 ARTICLE 2 CORPORATE SEAL................................................................................ 1 2.1 Corporate Seal................................................................................ 1 ARTICLE 3 SHAREHOLDERS.................................................................................. 1 3.1 Regular Meetings.............................................................................. 1 3.2 Special Meeting............................................................................... 2 3.3 Quorum........................................................................................ 2 3.4 Voting........................................................................................ 2 3.5 Notice of Meeting............................................................................. 2 3.6 Proxies....................................................................................... 2 3.7 Closing Transfer Books........................................................................ 3 3.8 Record Date................................................................................... 3 3.9 Presiding Officer............................................................................. 3 3.10 Written Action by Shareholders................................................................ 3 ARTICLE 4 DIRECTORS..................................................................................... 3 4.1 General Powers................................................................................ 3 4.2 Number........................................................................................ 3 4.3 Qualifications and Term of Office............................................................. 3 4.4 Quorum........................................................................................ 4 4.5 Action of Directors........................................................................... 4 4.6 Meetings...................................................................................... 4 4.7 Meeting by Electronic Communications.......................................................... 4 4.8 Compensation.................................................................................. 4 4.9 Committee..................................................................................... 4 4.10 Action by Absent Director..................................................................... 5 4.11 Removal of Directors by Board of Directors.................................................... 5 4.12 Vacancies..................................................................................... 5 4.13 Written Action by All of the Directors........................................................ 5 4.14 Dissent from Action........................................................................... 5 ARTICLE 5 OFFICERS...................................................................................... 5 5.1 Election of Officers.......................................................................... 5 5.2 Term of Office................................................................................ 5 5.3 President/Chief Executive Officer............................................................. 6 5.4 Treasurer/Chief Financial Officer............................................................. 6 5.5 Vice President................................................................................ 6 5.6 Secretary..................................................................................... 7
-i- 3 5.7 Chairman of the Board......................................................................... 7 5.8 Assistant Officers............................................................................ 7 ARTICLE 6 INDEMNIFICATION............................................................................... 7 ARTICLE 7 SHARES AND THEIR TRANSFER..................................................................... 7 7.1 Certificates of Shares........................................................................ 7 7.2 Uncertificated Shares......................................................................... 7 7.3 Issuance of Shares............................................................................ 8 7.4 Transfer of Shares............................................................................ 8 7.5 Lost Certificates............................................................................. 8 7.6 Transfer Agent and Registrar.................................................................. 8 7.7 Facsimile Signature........................................................................... 8 ARTICLE 8 FINANCIAL AND PROPERTY MANAGEMENT............................................................. 9 8.1 Checks........................................................................................ 9 8.2 Deposits...................................................................................... 9 8.3 Voting Securities Held by Corporation......................................................... 9 8.4 "S" Corporation Status........................................................................ 9 8.5 Minimum Annual Distribution................................................................... 9 ARTICLE 9 AMENDMENTS.................................................................................... 9
-ii- 4 BY-LAWS OF AIQ ACQUISITION CORP. ARTICLE 1 OFFICES 1.1 REGISTERED OFFICE. The registered office of the Corporation shall be located within the State of Minnesota as set forth in the Articles of Incorporation. The Board of Directors shall have authority to change the registered office of the Corporation and a statement evidencing any such change shall be filed with the Secretary of State of Minnesota as required by law. 1.2 OFFICES. The Corporation may have other offices, including its principal business office, either within or without the State of Minnesota. ARTICLE 2 CORPORATE SEAL 2.1 CORPORATE SEAL. The Board of Directors shall determine whether or not the Corporation will adopt a corporate seal. If a corporate seal is adopted, inscribed on the corporate seal shall be the name of the Corporation and the words "Corporate Seal," and when so directed by the Board of Directors, a duplicate of the seal may be kept and used by the Secretary of the Corporation. ARTICLE 3 SHAREHOLDERS 3.1 REGULAR MEETINGS. Regular meetings of the shareholders shall be held at the Corporation's registered office or at such other place within or without the State of Minnesota as is designated by the Board of Directors. Regular meetings may be held annually or on a less frequent periodic basis, as established by a resolution of the Board of Directors, or may be held on call by the Board of Directors from time to time as and when the Board determines. At each regular meeting, the shareholders shall elect qualified successors for directors who serve for an indefinite term or whose terms have expired or are due to expire within six (6) months after the date of the meeting, and may transact such other business which properly comes before them. -1- 5 Notwithstanding the foregoing, if a regular meeting of the shareholders has not been held for a period of fifteen (15) months, a shareholder or group of shareholders holding three percent (3%) or more of the issued and outstanding voting shares of the Corporation may demand that a regular meeting of the shareholders be held by giving written notice to the President or Treasurer of the Corporation. Within thirty (30) days after receipt of the notice, the Board shall cause a regular meeting of the shareholders to be called and held within ninety (90) days after receipt of the notice. Any regular meeting held pursuant to such a demand by a shareholder or shareholders shall be held within the county where the principal executive office of the Corporation is located. 3.2 SPECIAL MEETING. Special meetings of the shareholders may be called by the President, by a Vice-President in the absence of the President, by the Treasurer, or by the Board of Directors or any two or more members thereof. Special meetings may also be called by one or more shareholders holding ten percent (10%) or more of the issued and outstanding voting shares of the Corporation by delivering to the President or Treasurer a written demand for a special meeting, which demand shall state the purposes of such meeting. Within thirty (30) days after receipt of the written demand, the Board of Directors shall call a special meeting of the shareholders to be held within ninety (90) days after receipt of the written demand. Any special meeting held pursuant to such written demand shall be held within the county where the principal executive office of the Corporation is located. 3.3 QUORUM. Business may be transacted at any duly held meeting of the shareholders at which a quorum is present. The holders of a majority of the voting power of the shares entitled to vote at a meeting are a quorum. The shareholders present at the meeting may continue to transact business until adjournment, even though a number of shareholders withdraw leaving less than a quorum. If a quorum is not present at any meeting, those shareholders present have the power to adjourn the meeting from time to time until the requisite number of voting shares are present. The date, time and place of the reconvened meeting shall be announced at the time of adjournment and notice of the reconvened meeting shall be given to all shareholders who were not present at the time of adjournment. Any business which might have been transacted at the meeting which was adjourned may be transacted at the reconvened meeting. 3.4 VOTING. At each shareholders' meeting, every shareholder having the right to vote is entitled to vote in person or by proxy. Shareholders have one (1) vote for each share having voting power standing in their name on the books of the Corporation, unless otherwise provided in the Articles of Incorporation, or these By-Laws, or in the terms of the shares. All elections and questions shall be decided by a majority vote of the number of shares entitled to vote and represented at any meeting at which there is a quorum, except as otherwise required by statute, the Articles of Incorporation, these By-Laws, or by agreement among the shareholders. 3.5 NOTICE OF MEETING. Notice of regular or special meetings of the shareholders shall be given by an officer or agent of the Corporation to each shareholder shown on the books of the Corporation to be the holder of record of shares entitled to vote at the meeting. If the notice is to be mailed, then the notice must be mailed to each shareholder at the shareholder's address as shown on the books of the Corporation at least five (5) calendar days prior to the -2- 6 meeting. If the notice is not mailed, then the notice must be given at least forty-eight (48) hours prior to the meeting. The notice must contain the date, time and place of the meeting, and in the case of a special meeting, must also contain a statement of the purpose of the meeting. In no event shall notice be given more than sixty (60) days prior to the meeting. If a plan of merger, exchange, sale or other disposition of all or substantially all of the assets of the Corporation is to be considered at a meeting of shareholders, notice of such meeting shall be given to every shareholder, whether or not entitled to vote, not less than fourteen (14) days prior to the date of such meeting. 3.6 PROXIES. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxies must be filed with an officer of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. 3.7 CLOSING TRANSFER BOOKS. The Board of Directors may close the stock transfer books for a period of time which does not exceed sixty (60) days preceding any of the following: the date of any meeting of shareholders; the payment of dividends; the allotment of rights; or the change, conversion, or exchange of shares. 3.8 RECORD DATE. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date, not exceeding sixty (60) days preceding the date of any of the events described in Section 3.7, as a record date for the determination of which shareholders are entitled (i) to notice of and to vote at any meeting and any meeting subsequent to adjournment, (ii) to receive any dividend or allotment of rights, or (iii) to exercise the rights in respect to any change, conversion, or exchange of shares. If a record date is fixed by the Board of Directors, only those shareholders of record on the record date shall be entitled to receive notice of and to vote at the meeting and any meeting subsequent to adjournment or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date so fixed. If the share transfer books are not closed and no record date is fixed for determination of the shareholders of record, then the date on which notice of the meeting is mailed or the date of adoption of a resolution of the Board of Directors declaring a dividend, allotment of rights, change, conversion or exchange of shares, as the case may be, shall be the record date for such determination. 3.9 PRESIDING OFFICER. The Chief Executive Officer of the Corporation shall preside over all meetings of the shareholders. In the absence of the Chief Executive Officer, the shareholders may choose any person present to act as presiding officer. 3.10 WRITTEN ACTION BY SHAREHOLDERS. Any action which may be taken at a meeting of the shareholders may be taken without a meeting and notice if a consent in writing, setting forth the action so taken, is signed by all of the shareholders entitled to notice of a meeting for such purpose. -3- 7 ARTICLE 4. DIRECTORS 4.1 GENERAL POWERS. The property, affairs and business of the Corporation shall be managed by the Board of Directors which shall initially consist of seven (7) directors. In addition to the powers and authorities by these By-Laws expressly conferred upon it, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Articles of Incorporation or these By-Laws directed or required to be exercised or done by the shareholders. 4.2 NUMBER. The number of directors may be either increased or decreased by resolution of the shareholders at their regular meetings or at a special meeting called for that purpose. The number of directors may be increased by resolution adopted by the affirmative vote of a majority of the Board of Directors. Any newly created directorships established by the Board of Directors shall be filled by a majority vote of the directors serving at the time of increase. 4.3 QUALIFICATIONS AND TERM OF OFFICE. Directors need not be shareholders or residents of the State of Minnesota. The Board of Directors shall be elected by the shareholders at their regular meeting and at any special shareholders' meeting called for that purpose. A director shall hold office until the annual meeting for the year in which his or her term expires and until the director's successor is elected and qualifies, or until the earlier death, resignation, removal, or disqualification of the director. 4.4 QUORUM. A majority of the Board of Directors constitutes a quorum for the transaction of business; provided, however, that if any vacancies exist by reason of death, resignation, or otherwise, a majority of the remaining directors constitutes a quorum. If less than a quorum is present at any meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. 4.5 ACTION OF DIRECTORS. The acts of a majority of the directors present at a meeting at which a quorum is present are the acts of the Board of Directors. 4.6 MEETINGS. Meetings of the Board of Directors may be held from time to time at any place, within or without the State of Minnesota, that the Board of Directors may select. If the Board of Directors fails to select a place for a meeting, the meeting shall be held at the principal executive office of the Corporation. The President or any director may call a meeting of the Board of Directors by giving notice to all directors of the date, time and place of the meeting. If the notice is to be mailed, then the notice must be mailed to each director at least five (5) calendar days prior to the meeting. If the notice is not to be mailed, then the notice must be given at least forty-eight (48) hours prior to the meeting. If the date, time and place of the meeting of the Board of Directors has been announced at a previous meeting of the Board of Directors, no additional notice of such meeting is required, except that notice shall be given to all directors who were not present at the previous meeting. Notice of the meeting of the Board of Directors need not state the purpose of the meeting. A director may orally or in writing waive -4- 8 notice of the meeting. Attendance by a director at a meeting of the Board of Directors also constitutes a waiver of notice of such meeting, unless the director objects at the beginning of the meeting to the transaction of business because the meeting allegedly is not lawfully called or convened and such director does not participate thereafter in the meeting. 4.7 MEETING BY ELECTRONIC COMMUNICATIONS. A conference among directors by any means of communication through which the directors may simultaneously hear each other during the conference constitutes meeting of the Board of Directors if the number of directors participating in the conference would be sufficient to constitute a quorum at a meeting, and if the same notice is given of the conference as would be required for a Board of Directors meeting under these By-Laws. In any Board of Directors meeting, a director may participate by any means of communication through which the director, other directors so participating, and all directors physically present at the meeting may simultaneously hear each other during the meeting. 4.8 COMPENSATION. Directors may receive such compensation as may be determined from time to time by resolution of the Board of Directors. 4.9 COMMITTEE. By the affirmative vote of a majority of the directors, the Board of Directors may establish a committee or committees having the authority of the Board of Directors in the management of the business of the Corporation to the extent provided in the resolution adopted by the Board of Directors. A committee shall consist of one or more persons, who need not be directors, that have been appointed by affirmative vote of a majority of the directors present. A majority of the members of the committee present at any meeting of the committee is a quorum for the transaction of business, unless a larger or smaller proportion or number is provided in the resolution approved by the Board of Directors. Minutes of any meetings of committees created by the Board of Directors shall be available upon request to members of the committee and to any director. 4.10 ACTION BY ABSENT DIRECTOR. A director may give advance written consent or opposition to a proposal to be acted upon at a Board of Directors meeting by giving a written statement to the President, Treasurer, or any director which sets forth the proposal to be voted on and contains a statement of the director's voting preference with regard to the proposal. An advance written statement does not constitute presence of the director for purposes of determining a quorum, but the advance written statement shall be counted in the vote on the subject proposal provided that the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal set forth in the advance written statement. The advance written statement by a director on a proposal shall be included in the records of the Board of Directors' action on the proposal. 4.11 REMOVAL OF DIRECTORS BY BOARD OF DIRECTORS. Any director who has been elected by the Board of Directors to fill a vacancy on the Board of Directors, or to fill a directorship created by action of the Board of Directors, and who has not subsequently been reelected by the shareholders, may be removed by a majority vote of all directors constituting the Board, exclusive of the director whose removal is proposed. -5- 9 4.12 VACANCIES. Any vacancy on the Board of Directors may be filled by vote of the remaining directors, even though less than a quorum. 4.13 WRITTEN ACTION BY ALL OF THE DIRECTORS. Any action which may be taken at a meeting of the Board of Directors may be taken without a meeting and notice thereof if a consent in writing setting forth the action taken is signed by the number of directors required to take the same action at a duly held meeting of the Board of Directors at which all of the directors are present. If a written action is signed by less than all the directors, any director not signing the action will be notified as soon as reasonably possible of the content of the action and the effective date of the action. Failure to provide the notice does not invalidate the written action. A director who does not sign or consent to the written action has no liability for the action or actions so taken. 4.14 DISSENT FROM ACTION. A director of the Corporation who is present at a meeting of the Board of Directors at which any action is taken shall be presumed to have assented to the action taken unless the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter, or unless the director votes against the action at the meeting, or is prohibited from voting on the action. ARTICLE 5. OFFICERS 5.1 ELECTION OF OFFICERS. The Board of Directors shall from time to time, elect a Chief Executive Officer, who may also be designated as President, and a Chief Financial Officer, who may also be designated as Treasurer. The Board of Directors may elect, but shall not be required to elect, a Secretary, one or more Vice Presidents, and a Chairman of the Board. In addition, the Board of Directors may elect such other officers and agents as it may deem necessary. The officers shall exercise such powers and perform such duties as are prescribed by applicable statutes, the Articles of Incorporation, the By-Laws, or as may be determined from time to time by the Board of Directors. Any number of offices may be held by the same person. 5.2 TERM OF OFFICE. The officers shall hold office until their successors are elected and qualify; provided, however, that any officer may be removed with or without cause by the affirmative vote of a majority of the directors present at a Board of Directors meeting at which a quorum is present. 5.3 PRESIDENT/CHIEF EXECUTIVE OFFICER. The President/Chief Executive Officer shall: (a) Have general active management of the business of the Corporation; (b) When present, preside at all meetings of the shareholders; -6- 10 (c) When present, and if there is not a Chairman of the Board, preside at all meetings of the Board of Directors; (d) See that all orders and resolutions of the Board of Directors are carried into effect; (e) Sign and deliver in the name of the Corporation any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the Corporation, except in cases in which the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the Articles of Incorporation or By-Laws or by the Board of Directors to some other officer or agent of the Corporation; (f) Maintain records of and, whenever necessary, certify all proceedings of the Board of Directors and the shareholders; and (g) Perform all other duties prescribed by the Board of Directors. All other officers shall be subject to the direction and authority of the President/Chief Executive Officer. 5.4 TREASURER/CHIEF FINANCIAL OFFICER. The Treasurer/Chief Financial Officer shall: (a) Keep accurate financial records for the Corporation; (b) Deposit all money, drafts and checks in the name of and to the credit of the Corporation in the banks and depositories designated by the Board of Directors; (c) Endorse for deposit all notes, checks and drafts received by the Corporation as ordered by the Board of Directors, making proper vouchers therefor; (d) Disburse corporate funds and issue checks and drafts in the name of the Corporation, as ordered by the Board of Directors; (e) Render to the President/Chief Executive Officer and the Board of Directors, whenever requested, an account of all transactions by the Treasurer/Chief Financial Officer and of the financial condition of the Corporation; and (f) Perform all other duties prescribed by the Board of Directors or by the President/Chief Executive Officer. -7- 11 5.5 VICE PRESIDENT. Each Vice President, if any, shall have such powers and perform such duties as may be specified in these By-Laws or prescribed by the Board of Directors. If the President/Chief Executive Officer is absent or disabled, the Vice President shall succeed to the President's powers and duties. If there are two or more Vice Presidents, the order of succession shall be determined by seniority of election or as otherwise prescribed by the Board of Directors. 5.6 SECRETARY. The Secretary, if any, shall attend all meetings of the shareholders and the Board of Directors. The Secretary shall act as clerk and shall record all the proceedings of the meetings in the minute book of the Corporation and shall give proper notice of meetings of shareholders and the Board of Directors. The Secretary shall keep the seal of the Corporation, if any, and shall affix the seal to any instrument requiring it and shall attest the seal, and shall perform such other duties as may be prescribed from time to time by the Board of Directors. 5.7 CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and shall perform such other duties as may from time to time be assigned by the Board of Directors. 5.8 ASSISTANT OFFICERS. In the event of absence or disability of any Vice President, Secretary or the Treasurer/Chief Financial Officer, the assistant to such officer, if any, shall succeed to the powers and duties of the absent officer until the principal officer resumes his duties or a replacement is elected by the Board of Directors. If there are two or more assistants, the order of succession shall be determined through seniority by the order in which elected or as otherwise prescribed by the Board of Directors. The assistant officers shall exercise such other powers and duties as may be delegated to them from time to time by the Board of Directors or the principal officer under whom they serve, but at all times shall remain subordinate to the principal officers they are designated to assist. ARTICLE 6. INDEMNIFICATION The Corporation shall indemnify its officers, directors, employees and agents to the full extent permitted by the laws of the State of Minnesota, as now in effect, or as the same may be hereafter modified. ARTICLE 7. SHARES AND THEIR TRANSFER 7.1 CERTIFICATES OF SHARES. Unless the Board of Directors has provided that the Corporation's shares are to be uncertified, every owner of shares of the Corporation shall be entitled to a certificate, to be in such form as the Board of Directors prescribes, certifying the number of shares owned by such shareholder. The certificates for shares shall be numbered in the order in which they are issued and shall be signed in the name of the Corporation by the President/Chief Executive Officer or a Vice President and by the Secretary or Assistant Secretary, or the Treasurer/Chief Financial Officer, or any other officer of the Corporation authorized by the Board of Directors and shall have the corporate seal, if any, affixed thereto. A record shall be kept of the name of the person owning the -8- 12 shares represented by each certificate, the respective issue dates thereof, and in the case of cancellation, the respective dates of cancellation. Except as provided in Section 7.5 of this Article, every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no other certificate shall be issued in exchange for any existing certificate until such existing certificate is cancelled. 7.2 UNCERTIFICATED SHARES. The Board of Directors by a majority vote of directors present at a duly called meeting may provide that any or all shares of classes or series of shares are to be uncertificated shares. In that case, any shareholder who is issued uncertificated shares shall be provided with the information legally required to be disclosed in a certificate. 7.3 ISSUANCE OF SHARES. The Board of Directors is authorized to issue shares of the capital stock of the Corporation up to the number of shares authorized by the Articles of Incorporation. Shares may be issued for any consideration (including, without limitation, money or other tangible or intangible property received by the Corporation or to be received by the Corporation under a written agreement, or services rendered to the Corporation or to be rendered to the Corporation under a written agreement) which is authorized by a resolution approved by the affirmative vote of a majority of the directors present, valuing all nonmonetary consideration and establishing a price in money or other consideration, or a minimum price, or a general formula or method by which the price will be determined. Upon authorization by resolution approved by the affirmative vote of a majority of the directors present, the Corporation may, without any new or additional consideration, issue shares of its authorized and unissued capital stock in exchange for or in conversion of its outstanding shares, or issue its own shares pro rata to its shareholders or the shareholders of one or more classes or series, to effectuate share dividends or splits, including reverse share splits. No shares of a class or series shall be issued to the holder of the shares of another class or series, unless issuance is either expressly provided for in the Articles of Incorporation or is approved at a meeting by the affirmative vote of the holders of a majority of the voting power of all shares of the same class or series as the shares to be issued. 7.4 TRANSFER OF SHARES. An owner of shares of common stock of the Corporation or any subsequent shareholder may not sell, transfer, assign, pledge or encumber all or any part of any shares owned by the shareholder (the "Shares") without first offering such Shares to the Corporation. The Corporation may repurchase the Shares for an amount which is the lesser of the of the proposed sale price or the "book value" of the Shares. "Book Value" per share shall be the book value of the Corporation divided by the number of shares outstanding. The Corporation shall have thirty (30) days to exercise its right to purchase the Shares. A restrictive legend outlining any restriction will be placed upon the certificate representing the Shares purchased hereby. In the event of the death of a shareholder, the Corporation shall have the option to redeem shares held by the deceased shareholder. The option shall expire ninety (90) days after the Corporation receives notice that a personal representative has been appointed for the estate of a deceased shareholder. The redemption price shall be the Book Value of the Shares. Unless otherwise specifically stated, the terms and conditions of this Section shall be superseded by the terms of any Buy-Sell Agreement adopted by the Corporation and its shareholders. 7.5 LOST CERTIFICATES. Any shareholder claiming a certificate for shares has been lost or destroyed shall make an affidavit or affirmation of that fact in such form as the Board of Directors may -9- 13 require and shall, if the directors so require, give the Corporation a bond of indemnity in form and with one or more sureties satisfactory to the Board of Directors and in an amount determined by the Board of Directors, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of the certificate. A new certificate may then be issued in the same tenor for the same number of shares as the one alleged to have been lost or destroyed. 7.6 TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates for shares to bear the signature or signatures of any of them. 7.7 FACSIMILE SIGNATURE. When any certificate is manually signed by a transfer agent, a transfer clerk, or a registrar appointed by the Board of Directors to perform such duties, a facsimile or engraved signature of the officers and a facsimile corporate seal, if any, may be inscribed on the certificate in lieu of the actual signatures and seal. ARTICLE 8. FINANCIAL AND PROPERTY MANAGEMENT 8.1 CHECKS. All checks, drafts, other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by the President or Treasurer, or any other officer or officers, agent or agents of the Corporation, as may from time to time be determined by resolution of the Board of Directors. 8.2 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies, or other depositories as the Board of Directors may select. 8.3 VOTING SECURITIES HELD BY CORPORATION. The President, or other officer or agent designated by the Board of Directors, shall have full power and authority on behalf of the Corporation to attend, act at, and vote at any meeting of security or interest holders of other corporations or entities in which the Corporation may hold securities or interests. At the meeting, the President or other designated agent shall possess and exercise any and all rights and powers incident to the ownership of the securities or interest which the Corporation holds. ARTICLE 9 AMENDMENTS The Board of Directors of the Corporation is expressly authorized to make By-Laws of the Corporation and from time to time to adopt, amend or repeal By-Laws so made to the extent and in the manner prescribed in the Minnesota Statutes. The Board of Directors shall not adopt, amend, or repeal a By-Law fixing a quorum for meetings of shareholders, prescribing procedures for removing directors or filling vacancies in the Board of Directors, or fixing the number of directors or their classifications, qualifications, or terms of office, but may adopt or amend a By-Law to increase the number of directors, nor shall the Board of Directors adopt, amend or repeal Sections 7.4, 8.4 or 8.5. The -10- 14 authority in the Board of Directors is subject to the power of the voting shareholders to adopt, change or repeal the By-Laws by a vote of shareholders holding a majority of the shares entitled to vote and present or represented at any regular meeting or special meeting called for that purpose. Date of Adoption: January 30, 2001 /s/ William M. Mower --------------------- ------------------------------------ Secretary -11- EX-4.3 4 c64205ex4-3.txt WARRANT AGREEMENT DATED 8/1/01 1 Exhibit 4.3 WARRANT AGREEMENT WARRANT AGREEMENT dated as of August 1, 2001 by and between Active IQ Technologies, Inc., a Minnesota corporation (the "Company"), and Firstar Bank, N.A., as Warrant Agent (the "Warrant Agent"). A. In connection with the Company's merger transaction with activeIQ Technologies Inc., the Company is obligated to issue to the former shareholders of such corporation up to 5,008,101 Redeemable Class B Warrants (the "Warrants") evidencing the right to purchase an aggregate of up to 5,008,101 authorized but previously unissued shares of Common Stock, $.01 par value per share, of the Company (the "Common Stock"). B. The Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent desires so to act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants. NOW THEREFORE, it is agreed as follows: ARTICLE I. APPOINTMENT OF WARRANT AGENT; ISSUANCE, FORM AND EXECUTION OF WARRANT CERTIFICATES Section 1.1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company, and the Warrant Agent hereby accepts the agency established herein and agrees to perform its agency duties in accordance with the terms and conditions of this Warrant Agreement. Section 1.2. Warrant Certificates. The Company shall execute and deliver to the Warrant Agent certificates which the Company has authorized to represent the Warrants ("Warrant Certificates"). The Warrant Certificates shall be substantially as set forth in Exhibit A hereto and may have such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Warrant Agreement, or as may be required to comply with any law or with any rule or regulation relating to listing of the Warrants on the Nasdaq Stock Market, including the Nasdaq Small Cap Market System, or on any stock exchange or to conform to usage. The Warrant Certificates shall be dated with the date of their issuance. Section 1.3. Execution of Warrant Certificates. The Warrant Certificates shall be executed on behalf of the Company by a duly authorized officer of the Company, either manually or by facsimile signature printed thereon. The Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. Any Warrant Certificate may be signed on behalf of the Company by the person who at the actual date of the signing of such Warrant Certificate shall have been the proper officer of the Company, although at the date of issuance of such Warrant Certificate any such person has ceased to be such officer of the Company. ARTICLE II. EXERCISE OF WARRANTS Section 2.1. Exercise. Any or all of the Warrants represented by each Warrant Certificate may be exercised, in whole or in part, by the holder thereof on or before 5:00 p.m., Minneapolis time, on April 30, 2006, unless extended by the Company, by surrender of the Warrant Certificate with the Purchase Form, 2 which is printed on the reverse thereof (or a reasonable facsimile thereof) duly executed by such holder, to the Warrant Agent at its principal office in Milwaukee, Wisconsin, accompanied by payment, in cash or by certified or official bank check payable to the order of the Company, in an amount equal to the product of the number of shares of Common Stock issuable upon exercise of the Warrants represented by such Warrant Certificate, as adjusted pursuant to the provisions of Article III hereof, multiplied by the exercise price of Five and 50/100 Dollars ($5.50), as adjusted pursuant to the provisions of Article III hereof (such price as so adjusted from time to time being herein called the "Exercise Price"), and such holder shall be entitled to receive such number of fully paid and nonassessable shares of Common Stock, as so adjusted, at the time of such exercise. Section 2.2. Time of Exercise. Each exercise of Warrants shall be deemed to have been effective immediately prior to the close of business on the business day on which the Warrant Certificate relating to such Warrants shall have been surrendered to the Warrant Agent as provided in Section 2.1, and at such time the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise as provided in Section 2.3, shall be deemed to have become the holder or holders of record thereof. Section 2.3. Issuance of Shares of Common Stock; No Fractional Shares. As soon as practicable after the exercise of any Warrant, and in any event within ten (10) days after receipt by the Warrant Agent of the notice of exercise under Section 2.1, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder thereof or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, (a) a certificate or certificates for the number of fully paid and nonassessable shares of Common Stock to which such holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such holder would otherwise be entitled, an amount in cash equal to such fraction multiplied by the then current value of a share of Common Stock, such current value to be determined as follows: (i) if the Common Stock shall be listed or admitted to unlisted trading privileges on any single national securities exchange, then such current value shall be computed on the basis of the last reported sale price of the Common Stock on such exchange on the last business day prior to the date of the exercise of such Warrant upon which a sale shall have been effected; or (ii) if the Common Stock shall not be so listed or admitted to unlisted trading privileges and bid and asked prices therefor in the over-the-counter market shall be reported by Nasdaq, including the SmallCap Market System, then such current value shall be the last reported sale on the last business day prior to the date of the exercise of such Warrant, or, in the event the last reported sale is unavailable, the average of the closing bid and asked prices on the last business day prior to the date of the exercise of such Warrant as so reported; or (iii) if the Common Stock shall be listed or admitted to unlisted trading privileges on more than one national securities exchange or one or more national securities exchanges and in the over-the-counter market, then such current value shall, if different as a result of calculation under the applicable method(s) described above in this Section, be deemed to be the higher number calculated in connection therewith; or 2 3 (iv) if the Common Stock shall not be so listed or admitted to unlisted trading privileges and such bid and asked prices shall not be so reported, then such current value shall be computed on the basis of the book value of Common Stock as of the close of business on the last day of the month immediately preceding the date upon which such Warrant was exercised, as determined by the Company, and (b) in case such exercise includes only part of the Warrants represented by any Warrant Certificate, a new Warrant Certificate or Warrant Certificates of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment therein) to the number of such shares called for on the face of such Warrant Certificate minus the number of such shares designated by the holder for such exercise as provided in Section 2.1. Warrants, represented by a properly assigned Warrant Certificate, may be exercised by a new holder without first having a new Warrant Certificate issued. Section 2.4. Extension of Exercise Period; Change of Exercise Price. The Company may, upon notice given to the Warrant Agent, and without the consent of the holders of the Warrant Certificates, (i) reduce the Exercise Price during all or any portion of the originally stated exercise period, or (ii) extend the period over which the Warrants are exercisable beyond April 30, 2006, and increase the Exercise Price for any period the Warrant exercise period is extended. In the case of the extension of the exercise period or a change in the Exercise Price, the Company must provide the Warrant Agent and the Warrantholders of record notice of such extension of the exercise period, specifying, as the case may be, the time to which such exercise period is extended, or specifying the new Exercise Price and the periods for which such new Exercise Price is in effect, a reasonable time prior to the date such extension or new Exercise Price is to take effect, such reasonable time to be commercially reasonable and consistent with applicable securities laws and regulations. ARTICLE III. ANTIDILUTION PROVISIONS Section 3.1. Adjustment of Exercise Price. (a) The Exercise Price shall be subject to the following adjustments. In the event that: (i) any dividends on any class of stock of the Company payable in Common Stock or securities convertible into Common Stock shall be paid by the Company; (ii) the Company shall subdivide its then outstanding shares of Common Stock into a greater number of shares; or (iii) the Company shall combine outstanding shares of Common Stock, by reclassification or otherwise; then, in any such event, the Exercise Price in effect immediately prior to such event shall (until adjusted again pursuant hereto) be adjusted immediately after such event to a price (calculated to the nearest full cent) determined by dividing (A) the number of shares of Common Stock outstanding immediately prior to such event, multiplied by the then existing Exercise Price, by (B) the total number of shares of Common Stock outstanding immediately after such event (including the 3 4 maximum number of shares of Common Stock issuable in respect of any securities convertible into Common Stock), and the resulting quotient shall be the adjusted Exercise Price per share. (b) No adjustment of the Exercise Price shall be made if the amount of such adjustments shall be less than one cent per share, but in such case any adjustment that would otherwise be required to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one cent per share. Section 3.2. Adjustment of Number of Shares Purchasable on Exercise of Warrants. Upon each adjustment of the Exercise Price pursuant to Section 3.1, the registered holder of each Warrant shall thereafter (until another such adjustment) be entitled to purchase at the adjusted Exercise Price the number of shares, calculated to the nearest full share, obtained by multiplying the number of shares specified in such Warrant (as adjusted as a result of all adjustments in the Exercise Price in effect prior to such adjustment) by the Exercise Price in effect prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. Section 3.3. Notice as to Adjustment. Upon any adjustment of the Exercise Price and an increase or decrease in the number of shares of Common Stock purchasable upon the exercise of the Warrants, then, and in each such case, the Company shall within twenty (20) days after the effective date of such adjustment give written notice thereof, by first class mail, postage prepaid, addressed to each registered Warrantholder at the address of such Warrantholder as shown on the books of the Company, which notice shall state the adjusted Exercise Price and the increased or decreased number of shares purchasable upon the exercise of the Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Section 3.4. Effect of Reorganization, Reclassification, Merger, Etc. If at any time while any Warrant is outstanding there should be any capital reorganization or reclassification of the capital stock of the Company (other than the issue of any shares of Common Stock in subdivision of outstanding shares of Common Stock by reclassification or otherwise and other than a combination of shares provided for in Section 3.1 hereof) or any consolidation or merger of the Company with another corporation or any sale, conveyance, lease or other transfer by the Company of all or substantially all of its assets to any other corporation, the holder of any Warrant shall, during the remainder of the period such Warrant is exercisable, be entitled to receive, upon payment of the Exercise Price, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such consolidation or merger, or of the corporation to which the assets of the Company has been sold, conveyed, leased or otherwise transferred, as the case may be, to which the Common Stock (and any other securities and property) of the Company, deliverable upon the exercise of such Warrant, would have been entitled upon such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer if such Warrant had been exercised immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, conveyance, lease or other transfer; and, in any such case, appropriate adjustment (as determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth in this Warrant Agreement with respect to the rights and interests thereafter of the Warrantholders to the end that the provisions set forth in this Warrant Agreement (including the adjustment of the Exercise Price and the number of shares issuable upon the exercise of the Warrants) shall thereafter be applicable, as near as may be reasonably practicable, in relation to any shares or other property thereafter deliverable upon the exercise of the Warrants as if the Warrants had been exercised immediately prior to such capital reorganization, reclassification of capital stock, such consolidation, merger, sale, conveyance, lease or other transfer and the Warrantholders had carried out the terms of the exchange as provided for by such capital reorganization, reclassification, consolidation or merger. The Company shall 4 5 not effect any such capital reorganization, consolidation, merger or transfer unless, upon or prior to the consummation thereof, the successor corporation or the corporation to which the property of the Company has been sold, conveyed, leased or otherwise transferred shall assume by written instrument the obligation to deliver to the holder of each Warrant such shares of stock, securities, cash or property as in accordance with the foregoing provisions such holder shall be entitled to purchase. Section 3.5. Prior Notice as to Certain Events. In case at any time: (a) The Company shall pay any dividend upon its Common Stock payable in stock or make any distribution (other than cash dividends) to the holders of its Common Stock; or (b) The Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other rights; or (c) There shall be any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale, conveyance, lease or other transfer of all or substantially all of its assets to, another corporation; or (d) There shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then in any one or more of such cases, the Company shall give prior written notice, by first class mail, postage prepaid, addressed to each registered Warrantholder at the address of such Warrantholder as shown on the books of the Company, of the date on which (i) the books of the Company shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in such dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up, as the case may be. Such written notice shall be given at least twenty (20) days prior to the action in question and not less than twenty (20) days prior to the record date or the date on which the Company's transfer books are closed in respect thereto. Section 3.6. Certain Obligations of the Company. The Company will not, by amendment of its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Agreement or the Warrant Certificate, but will at all times in good faith assist in the carrying out of all such terms. Without limiting the generality of the foregoing, the Company (a) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of such stock upon the exercise of all Warrants from time to time outstanding, and (b) will not (i) transfer all or substantially all of its properties and assets to any other person or entity, or (ii) consolidate with or merge into any other entity where the Company is not the continuing or surviving entity, or (iii) permit any other entity to consolidate with or merge into the Company where the Company is the continuing or surviving entity but, in connection with such consolidation or merger, the Common Stock then issuable upon the exercise of the Warrants shall be changed into or exchanged for shares or other securities or property of any other entity unless, in any such case, the other entity acquiring such properties and assets, continuing or surviving after such consolidation or merger or issuing or distributing such shares or other securities or property, as the case may be, shall expressly assume in writing and be bound by all the terms of this Warrant Agreement and the Warrant Certificates. 5 6 Section 3.7. Reservation and Listing of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of the Warrants, all shares of Common Stock from time to time issuable upon such exercise. All such shares shall be authorized and, when issued upon such exercise, shall be validly issued, fully paid and nonassessable with no liability on the part of the holder thereof. The Company, at its expense, will list on each national securities exchange on which any Common Stock may at any time be listed, subject to official notice of issuance, and will maintain such listing of, the shares of Common Stock from time to time issuable upon the exercise of the Warrants. Section 3.8. Registration Rights; Registration or Exemption for Common Stock. (a) If at any time the Company shall propose to file any registration statement (other than a registration statement on Form S-4, Form S-8 or any similarly inappropriate form, or any successor forms thereto) under the Securities Act of 1933, as amended (the "Securities Act") covering a public offering of the Company's Common Stock (a "Registration Statement"), it will notify the holder of the Warrants at least twenty (20) days prior to each such filing (a "Registration Notice") and will use its best efforts to include in such Registration Statement (to the extent permitted by applicable regulation), the shares of Common Stock issuable to the Warrantholders upon exercise of the Warrants to the extent requested by such holder within ten (10) days after receipt of notice of such filing (which request shall specify the interest in the Warrants or the shares issuable upon exercise thereof intended to be sold or disposed of by such holder and describe the nature of any proposed sale or other disposition thereof); provided, however, that if a greater number of shares of Common Stock issuable upon exercise of the Warrants is offered for participation in the proposed offering that in the reasonable opinion of the managing underwriter(s) of the proposed offering can be accommodated without adversely affecting the proposed offering, then the amount of shares of Common Stock issuable upon exercise of the Warrants proposed to be offered by such holders for registration, as well as the number of securities of any other selling shareholders participating in the registration, shall be proportionately reduced to a number deemed satisfactory by the managing underwriter(s). The Company shall bear all expenses incurred in connection with the preparation, filing and amendment of any Registration Statements, except that the Warrantholders shall pay all fees, disbursements and expenses of any counsel or expert retained by such holders and all underwriting discounts and commissions, filing fees and any transfer or other taxes relating to the shares of Common Stock issuable upon exercise of the Warrants included in such Registration Statements. The Warrantholders agree to cooperate with the Company in the preparation and filing of any such Registration Statements, and in the furnishing of information concerning the Warrantholder for inclusion therein, or in any efforts by the Company to establish that the proposed sale is exempt from the Securities Act as to any proposed distribution. Notwithstanding the foregoing, the Company shall be under no obligation to include any of the shares of Common Stock issuable upon exercise of the Warrants with respect to any Warrantholder that has not provided such information requested by the Company in the registration notice within ten (10) days after any such holders' receipt thereof, the Company shall have no obligation to include any of such holders' shares of Common Stock issuable upon exercise of the Warrants in the Registration Statement. (b) The Company will use its best efforts (a) at all times the Warrants are exercisable to maintain an effective registration statement under the Securities Act covering Common Stock issuable upon exercise of the Warrants, (b) from time to time to amend or supplement the prospectus contained in such registration statement to the extent necessary in order to comply with applicable law, (c) to qualify for exemption from the registration requirements of the Act the Common Stock issuable upon exercise of the Warrants, and (d) to maintain exemptions or qualifications, in those jurisdictions in which the original registration statement relating to the Warrants was initially qualified, to permit the exercise of the Warrants and the issuance of the Common Stock pursuant to such exercise. The Warrant Agent shall have no responsibility for the maintenance of such exemptions or qualifications or for liabilities arising from the exercise or attempted exercise of Warrants in jurisdictions where exemptions or qualifications have not been maintained or are otherwise unavailable. 6 7 ARTICLE IV. REDEMPTION OF WARRANTS Section 4.1. Redemption Price. The Warrants may be redeemed at the option of the Company, at any time after April 30, 2002 following a period of 14 consecutive trading days where the per share average closing bid price of the Common Stock exceeds Seven and 50/100 Dollars ($7.50), on notice as set forth in Section 4.2, and at a redemption price equal to $.01 per Warrant; provided, however, that the Warrants may not be redeemed by the Company unless the Common Stock issuable upon exercise of the Warrants has been registered with the Securities and Exchange Commission or are otherwise freely tradable. For purposes of this Section, the closing bid price of the Common Stock shall be determined by the closing bid price as reported by Nasdaq so long as the Common Stock is quoted on the Nasdaq National Market or Small Cap Market Systems and, if the Common Stock is listed on a national securities exchange, shall be determined by the last reported sale price on the primary exchange on which the Common Stock is traded. Section 4.2. Notice of Redemption. In the case of any redemption of Warrants, the Company or, at its request, the Warrant Agent in the name of and at the expense of the Company shall give notice of such redemption to the holders of the Warrants to be redeemed as hereinafter provided in this Section 4.2. Notice of redemption to the holders of Warrants shall be given by mailing by first-class mail a notice of such redemption not less than thirty (30) days prior to the date fixed for redemption. Any notice which is given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives the notice. In any case, failure duly to give such notice, or any defect in such notice, to the holder of any Warrant Certificate shall not affect the validity of the proceedings for the redemption of Warrants represented by any other Warrant Certificate. Each such notice shall specify the date fixed for redemption, the place of redemption and the redemption price of $.01 at which each Warrant is to be redeemed, and shall state that payment of the redemption price of the Warrants will be made on surrender of the Warrants at such place of redemption, and that if not exercised by the close of business on the date fixed for redemption, the exercise rights of the Warrants identified for redemption shall expire unless extended by the Company. Such notice shall also state the current Exercise Price and the date on which the right to exercise the Warrants will expire unless extended by the Company. Section 4.3. Payment of Warrants on Redemption; Deposit of Redemption Price. If notice of redemption shall have been given as provided in Section 4.2, the redemption price of $.01 per Warrant shall, unless the Warrant is theretofore exercised pursuant to the terms hereof, become due and payable on the date and at the place stated in such notice. On and after such date of redemption, provided that cash sufficient for the redemption thereof shall then be deposited by the Company with the Warrant Agent for that purpose, the exercise rights of the Warrants identified for redemption shall expire. On presentation and surrender of Warrant Certificates at such place of payment in such notice specified, the Warrants identified for redemption shall be paid and redeemed at the redemption price of $.01 per Warrant. Prior to the date fixed for redemption, the Company shall deposit with the Warrant Agent an amount of money sufficient to pay the redemption price of all the Warrants identified for redemption. Any monies which shall have been deposited with the Warrant Agent for redemption of Warrants and which are not required for that purpose by reason of exercise of Warrants shall be repaid to the Company upon delivery to the Warrant Agent of evidence satisfactory to it of such exercise. ARTICLE V. CERTAIN OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANT CERTIFICATES Section 5.1. No Rights of Shareholders. The Warrant Certificates shall be issued in registered form only. No Warrant Certificate shall entitle the holder thereof to any of the rights of a holder of shares of 7 8 Common Stock of the Company, including, without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of holders of Common Stock or any other proceedings of the Company. Section 5.2. Loss, Theft, Destruction or Mutilation of Warrant Certificates. Upon receipt by the Warrant Agent of evidence reasonably satisfactory to the Warrant Agent of the loss, theft, destruction or mutilation of any Warrant Certificate, and (a) in the case of any such loss, theft, or destruction, upon delivery to the Warrant Agent of an indemnity bond in form and amount, and issued by a bonding company, reasonably satisfactory to the Company, or (b) in the case of any such mutilation, upon surrender to and cancellation by the Warrant Agent of such Warrant Certificate, the Company at its expense will execute and cause the Warrant Agent to countersign and deliver, in lieu thereof, a new Warrant Certificate of like tenor. Section 5.3. Transfer Agent; Cancellation of Warrant Certificates; Unexercised Warrants. Firstar Bank, N.A. (and any successor), as transfer agent (the "Transfer Agent"), is hereby irrevocably authorized and directed at all times to reserve such number of authorized and unissued shares of Common Stock as shall be sufficient to permit the exercise in full of all Warrants from time to time outstanding. The Company will keep a copy of this Agreement on file with the Transfer Agent. The Warrant Agent, and any successor thereto, is hereby irrevocably authorized to requisition from time to time from the Transfer Agent certificates for shares of Common Stock required for exercise of Warrants. The Company will supply the Transfer Agent with duly executed certificates for shares of Common Stock for such purpose and will make available any cash required in settlement of fractional share interests. All Warrant Certificates surrendered upon the exercise or redemption of Warrants shall be cancelled by the Warrant Agent and shall thereafter be delivered to the Company; such cancelled Warrant Certificates, with the Purchase Form on the reverse thereof duly filled in and signed, shall constitute conclusive evidence as between the parties hereto of the numbers of shares of Common Stock which shall have been issued upon exercises of Warrants. Promptly after the last day on which the Warrants are exercisable (set forth in Section 2.1 above), the Warrant Agent shall certify to the Company the aggregate number of Warrants then outstanding and unexercised. No shares of Common Stock shall be subject to reservation with respect to Warrants not exercised prior to the time and date identified in Section 2.1 above as the last time and date at which Warrants may be exercised. ARTICLE VI. TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES Section 6.1. Warrant Register; Transfer or Exchange of Warrant Certificates. The Warrant Agent shall cause to be kept at the principal office of the Warrant Agent a register (the "Warrant Register") in which, subject to such reasonable regulations as the Company may prescribe, provisions shall be made for the registration of transfers and exchanges of Warrant Certificates. Upon surrender for transfer or exchange of any Warrant Certificates, properly endorsed, to the Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver to or upon the order of the holder thereof a new Warrant Certificate or Warrant Certificates of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face of the Warrant Certificate so surrendered. Any Warrant Certificate surrendered for transfer or exchange shall be cancelled by the Warrant Agent and shall thereafter be delivered to the Company. Section 6.2. Identity of Warrantholders. Until a Warrant Certificate is transferred in the Warrant Register, the Company and the Warrant Agent may treat the person in whose name the Warrant Certificate is registered as the absolute owner thereof and of the Warrants represented thereby for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant Certificate is properly assigned in blank, the Company and the Warrant Agent may (but shall not be obligated to) treat the bearer 8 9 thereof as the absolute owner of the Warrant Certificate and of the Warrants represented thereby for all purposes, notwithstanding any notice to the contrary. ARTICLE VII. CONCERNING THE WARRANT AGENT Section 7. 1. Taxes. The Company will, from time to time, promptly pay to the Warrant Agent, or make provision satisfactory to the Warrant Agent for the payment of, all taxes and charges that may be imposed by the United States or any State upon the Company or the Warrant Agent upon the transfer or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any tax imposed in connection with any transfer involved in the delivery of a certificate for shares of Common Stock in any name other than that of the registered holder of the Warrant Certificate surrendered in connection with the purchase thereof. Section 7.2. Replacement of Warrant Agent in Certain Circumstances. (a) The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder after giving thirty (30) days' notice in writing to the Company, except that such shorter notice may be given as the Company shall, in writing, accept as sufficient. The Company may discharge the Warrant Agent at any time with or without reason, effective upon thirty (30) days written notice to the Warrant Agent or such shorter period as the Warrant Agent shall, in writing, accept as sufficient. If the office of Warrant Agent becomes vacant by resignation, discharge, incapacity to act or otherwise, the Company shall appoint in writing a new Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the holder of a Warrant Certificate, then the holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent. Any new Warrant Agent, whether appointed by the Company or by such a court, shall be a corporation organized, doing business and in good standing under the laws of the United States or of the State of Minnesota, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal or State authority. Any new Warrant Agent appointed hereunder shall execute, acknowledge and deliver to the Company an instrument accepting such appointment hereunder and thereupon such new Warrant Agent without any further act or deed shall become vested with all the rights, powers, duties and responsibilities of the Warrant Agent hereunder with like effect as if it had been named as the Warrant Agent; but if for any reason it becomes necessary or expedient to have the former Warrant Agent execute and deliver any further assurance, conveyance, act or deed, the same shall be done and shall be legally and validly executed and delivered by the former Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the former Warrant Agent. The Company shall promptly give notice of any such appointment to the holders of the Warrant Certificates by mail to their addresses as shown in the Warrant Register. Failure to file or give such notice, or any defect therein, shall not affect the legality or validity of the appointment of the successor Warrant Agent. (b) Any company into which the Warrant Agent or any new Warrant Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Warrant Agreement without any further act; provided that if such company would not be eligible for appointment as a successor Warrant Agent under the provisions of paragraph (a) of this Section 7.2 the Company shall forthwith appoint a new Warrant Agent in accordance with such provisions. Any such successor Warrant Agent may adopt the prior countersignature of any predecessor Warrant Agent and deliver Warrant Certificates countersigned 9 10 and not delivered by such predecessor Warrant Agent or may countersign Warrant Certificates either in the name of any predecessor Warrant Agent or the name of the successor Warrant Agent. Section 7.3. Remuneration of Warrant Agent. The Company will pay the Warrant Agent reasonable remuneration for its services as Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder. Section 7.4. Further Assurances. The Company will perform, exercise, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing by the Warrant Agent of the provisions of this Warrant Agreement. Section 7.5. Limitations on Liabilities of the Warrant Agent. (a) The Warrant Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection of the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever, in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any matter be proved or established, or that any instructions with respect to the performance of its duties hereunder be given, by the Company prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established, or such instructions may be given, by a certificate or instrument signed by an officer of the Company and delivered to the Warrant Agent; and such certificate or instrument shall be full authorization to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Warrant Agreement in reliance upon such certificate or instrument; but in its discretion the Warrant Agent may in lieu thereof accept other evidence of such matter or may require such further or additional evidence as it may deem reasonable. (c) The Warrant Agent shall be liable hereunder only for its own negligence or willful misconduct. The Warrant Agent shall act hereunder solely as agent, and its duties shall be determined solely by the provisions hereof. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement except as a result of the Warrant Agent's negligence or willful misconduct. (d) The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Warrant Agreement or in the Warrant Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Warrant Agent shall not be under any responsibility in respect to the validity or execution of any Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant Certificate; nor shall it be responsible for the making 10 11 of any adjustment in the Exercise Price, or number of shares issuable upon exercise of the Warrant Certificates or responsible for the manner, method or amount of any such adjustment or the facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant Certificate or as to whether any shares of Common Stock or other securities are or will be validly authorized and issued and fully paid and nonassessable. Section 7.6. Amendment and Modification. The Warrant Agent may, without the consent or concurrence of the holders of the Warrant Certificates, by supplemental agreement or otherwise, join with the Company in making any changes or corrections in this Warrant Agreement that they shall have been advised by counsel (a) are required to cure any ambiguity or to correct any defective or inconsistent provision or clerical omission or mistake or manifest error herein contained, (b) add to the obligations of the Company in this Warrant Agreement further obligations thereafter to be observed by it, or surrender any right or power reserved to or conferred upon the Company in this Warrant Agreement, or (c) do not or will not adversely affect, alter or change the rights, privileges or immunities of the holders of Warrant Certificates not provided for under this Warrant Agreement; provided, however, that any term of this Warrant Agreement or any Warrant Certificate may be changed, waived, discharged or terminated by an instrument in writing signed by each party against which enforcement of such change, waiver, discharge or termination is sought, or by which the same is to be performed or observed. ARTICLE VIII. OTHER MATTERS Section 8.1. Successors and Assigns. All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns. Section 8.2. Notices. Any notice or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant Certificate to or on the Company shall be sufficiently given or made if sent by first class or registered mail, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent) as follows: Active IQ Technologies, Inc. 601 Carlson Parkway, Suite 1550 Minnetonka, MN 55305 Any notice or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant Certificate or by the Company to or on the Warrant Agent shall be sufficiently given or made if sent by first class or registered mail, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) as follows: Firstar Bank, N.A. Corporate Trust Services 1555 North River Center Drive, Suite 301 Milwaukee, WI 53201 Section 8.3. Governing Law. This Warrant Agreement and the Warrant Certificates are being delivered in the State of Minnesota and shall be construed and enforced in accordance with and governed by the laws of such State. 11 12 Section 8.4. No Benefits Conferred. Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the Company, the Warrant Agent, and the holders of the Warrant Certificates, any right, remedy or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise or agreement herein; and all covenants, conditions, stipulations, promises and agreements in this Warrant Agreement contained shall be for the sole and exclusive benefit of the Company, the Warrant Agent, their respective successors and the holders of the Warrant Certificates. Section 8.5. Headings. The descriptive headings used in this Warrant Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written. ACTIVE IQ TECHNOLOGIES, INC. By /s/ Kenneth W. Brimmer -------------------------------------------- Its Chairman and Chief Executive Officer FIRSTAR BANK, N.A. By /s/ Philip Meyer -------------------------------------------- Its Trust Officer 12 EX-4.4 5 c64205ex4-4.txt FORM OF CLASS B REDEEMABLE WARRANT CERTIFICATE 1 EXHIBIT 4.4 No. _____________ Certificate for ______ Warrants EXERCISABLE ON OR BEFORE, AND VOID AFTER, 5:00 P.M. MINNEAPOLIS TIME, APRIL 30, 2006 ACTIVE IQ TECHNOLOGIES, INC. CLASS B REDEEMABLE WARRANTS TO PURCHASE COMMON STOCK OF ACTIVE IQ TECHNOLOGIES, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA THIS CERTIFIES that WARRANT CUSIP _________ or assigns, is the owner of the number of Warrants set forth above, each of which represents the right to purchase from Active IQ Technologies, Inc., a Minnesota corporation (the "Company"), at any time on or before 5:00 Minneapolis time, April 30, 2006, upon compliance with and subject to the conditions set forth herein and in the Warrant Agreement hereinafter referred to, one share (subject to adjustments referred to below) of the Common Stock of the Company (such shares or other securities or property purchasable upon exercise of the Warrants being herein called the "Shares"), by surrendering this Warrant Certificate, with the Purchase Form on the reverse side duly executed, at the principal office of Firstar Bank, N.A., or its successor, as warrant agent (the "Warrant Agent"), and by paying in full, in cash or by certified or official bank check payable to the order of the Company, the exercise price of $5.50 per share. Upon any exercise of less than all the Warrants evidenced by this Warrant Certificate, there shall be issued to the holder a new Warrant Certificate in respect of the Warrants as to which this Warrant Certificate was not exercised. Upon the surrender for transfer or exchange hereof, properly endorsed, to the Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver to the order of the holder hereof, a new Warrant Certificate or Warrant Certificates of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face hereof. 2 The Warrant Certificates are issued only as registered Warrant Certificates. Until this Warrant Certificate is transferred in the Warrant Register, the Company and the Warrant Agent may treat the person in whose name this Warrant Certificate is registered as the absolute owner hereof and of the Warrants represented hereby for all purposes, notwithstanding any notice to the contrary. This Warrant Certificate is issued under the Warrant Agreement dated as of August 1, 2001 between the Company and the Warrant Agent. The Warrant Agreement is hereby incorporated by reference into this Warrant Certificate and this Warrant Certificate is subject to the terms and provisions contained in said Warrant Agreement, to all of which terms and provisions the registered holder of this Warrant Certificate consents by acceptance hereof. Copies of said Warrant Agreement are on file at the principal office of the Warrant Agent in Milwaukee, Wisconsin, and may be obtained by writing to the Warrant Agent. The number of Shares receivable upon the exercise of the Warrants represented by this Warrant Certificate and the exercise price per share are subject to adjustment upon the happening of certain events specified in the Warrant Agreement. No fractional Shares of the Company's Common Stock will be issued upon the exercise of Warrants. As to any final fraction of a share which a holder of Warrants exercised in the same transaction would otherwise be entitled to purchase on such exercise, the Company shall pay a cash adjustment in lieu of any fractional Share determined as provided in the Warrant Agreement. The Warrants may be redeemed at the option of the Company, at any time following a period of 14 consecutive trading days where the per share average closing bid price of the Common Stock exceeds $7.50, on notice as set forth in the Warrant Agreement, and at a redemption price equal to $.01 per Warrant. If notice of redemption shall have been given as provided in the Warrant Agreement and cash sufficient for the redemption be deposited by the Company for that purpose, the exercise rights of the Warrants identified for redemption shall expire at the close of business on such date of redemption unless extended by the Company. This Warrant Certificate shall not entitle the holder hereof to any of the rights of a holder of Common Stock of the Company, including, without limitation, the right to vote, to receive dividends and other distributions, to exercise any preemptive right, or to receive any notice of, or to attend meetings of holders of Common Stock or any other proceedings of the Company. This Warrant Certificate shall be void and the Warrants and any rights represented hereby shall cease unless exercised on or before 5:00 p.m. Minneapolis time on April 30, 2006, unless extended by the Company. This Warrant Certificate shall not be valid for any purpose until it shall have been countersigned by the Warrant Agent. WITNESS the facsimile signatures of the Company's duly authorized officers. ACTIVE IQ TECHNOLOGIES, INC. COUNTERSIGNED: FIRSTAR BANK, N.A. By ----------------------------------- as Warrant Agent Chief Executive Officer Attest: By ------------------------------- ------------------------------------ Secretary Authorized Officer 3 [REVERSE OF WARRANT CERTIFICATE] THE CORPORATION WILL FURNISH ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A COPY OF THE ARTICLES OF INCORPORATION AND A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES. TO: Active IQ Technologies, Inc. c/o Firstar Bank, N.A. Warrant Agent PURCHASE FORM (To be Executed by the Registered Holder in Order to Exercise of Warrant Certificates) The undersigned hereby irrevocably elects to exercise ________________* of the Warrants represented by the Warrant Certificate and to purchase for cash the Shares issuable upon the exercise of said Warrants and requests that certificates for such Shares shall be issued in the name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF REGISTERED HOLDER OF CERTIFICATE - -------------------------------------------------------------------------------- (Print Name) - -------------------------------------------------------------------------------- (Address) - -------------------------------------------------------------------------------- Dated: Signature: -------------------------- --------------------------------- * Insert here the number of Warrants evidenced on the face of this Warrant Certificate (or, in the case of a partial exercise, the portion thereof being exercised), in either case without making any adjustment for additional Common Stock or any other securities or property or cash which, pursuant to the adjustment provisions referred to in this Warrant Certificate, may be deliverable upon exercise. 4 ASSIGNMENT FORM (To be Executed by the Registered Holder in Order to Transfer Warrant Certificates) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers ____________________________________ of the Warrants to purchase shares of Common Stock represented by this Warrant Certificate unto - -------------------------------------------------------------------------------- (Please print or typewrite name and address including postal zip code of assignee) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- and does hereby irrevocably constitute and appoint _____________________________ Attorney to transfer this Warrant Certificate on the records of the Company with full power of substitution in the premises. Dated: Signature(s) -------------------- ------------------------------------- SIGNATURE(S) GUARANTEED: - ------------------------------ NOTICE The signature(s) to the Purchase Form or the Assignment Form must correspond to the name as written upon the face of this Warrant Certificate in every particular without alteration or enlargement or any change whatsoever. EX-5.1 6 c64205ex5-1.txt OPINION OF MASLON EDELMAN BORMAN & BRAND, LLP 1 EXHIBIT 5.1 August 21, 2001 Active IQ Technologies, Inc. 1601 Carlson Parkway Suite 1550 Minnetonka, MN 55305-5224 RE: Registration Statement on Form S-3 Gentlemen: We have acted as counsel to Active IQ Technologies, Inc., a Minnesota corporation (the "Company") in connection with the preparation of a registration statement on Form S-3 (the "Registration Statement") to be filed by the Company with the Securities and Exchange Commission on or about August 21, 2001 relating to the registration under the Securities Act of 1933, as amended (the "1933 Act"), of 8,525,922 shares of the Company's common stock, $.01 par value (the "Shares") and Class B Redeemable Warrants to purchase 5,008,101 shares (the "Warrants"). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the 1933 Act. In connection with the rendering of this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement; (ii) the Articles of Incorporation and the Bylaws of the Company, as amended, each as currently in effect; (iii) certain resolutions adopted by the Board of Directors of the Company relating to the issuance of the Shares and Warrants, the preparation and filing of the Registration Statement and certain related matters; (iv) certain agreements, certificates of public officials, certificates of other officers or representatives of the Company or others; and (v) such other documents, certificates and records as we deemed necessary or appropriate as a basis for the opinions expressed herein. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such copies. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company and others. We are attorneys licensed to practice in the State of Minnesota and the opinions expressed herein are limited to the laws of the State of Minnesota and the federal securities laws of the United States. 2 Based upon and subject to the limitations, qualifications, exceptions and assumptions set forth herein, it is our opinion that: 1. The Company is a validly existing corporation in good standing under the laws of the State of Minnesota. 2. The Shares (exclusive of the Warrant Shares (as hereinafter defined)) have been duly authorized and are validly issued, fully paid and nonassessable. 3. The Warrants have been duly authorized and are validly issued, fully paid and nonassessable. 4. The Shares issuable upon exercise of the Warrants (the "Warrant Shares") have been duly authorized and, when issued against payment of the requisite exercise price, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We also consent to the reference to our name under the caption "Legal Matters" in the prospectus filed as part of the Registration Statement. This opinion is furnished to you in connection with the filing of the Registration Statement and, except as provided in the immediately preceding paragraph, is not to be used, circulated, quoted for any other purpose or otherwise referred to or relied upon by any other person without the express written permission of this firm. Very truly yours, /s/ MASLON EDELMAN BORMAN & BRAND, LLP EX-10.1 7 c64205ex10-1.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.1 Kenneth W. Brimmer ACTIVE IQ TECHNOLOGIES, INC. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective the 1st day of May 2001 by and between Kenneth W. Brimmer, a Minnesota resident ("Employee") and ACTIVE IQ TECHNOLOGIES, INC., a Minnesota corporation (the "Company"). WHEREAS, Employee desires to provide his services to the Company upon the terms and conditions hereinafter set forth; and WHEREAS, the Company desires to employ Employee upon the terms and conditions hereinafter set forth; and NOW, THEREFORE, in consideration of these premises and the mutual promises made herein and the mutual benefits to be derived here from, Employee and the Company, intending to be legally bound, hereby agree as follows: 1. Employment. The Company hereby employs Employee as CEO, and Employee hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. 2. Term. Employment shall be for an initial term of three (3) years commencing on May 1, 2001 and continuing until the earlier of (i) April 30, 2004; or (ii) the date Employee's employment terminates pursuant to Section 10 hereof. Unless Executive's employment has been terminated pursuant to Section 10, the term of this Agreement shall be automatically renewed and extended for an additional one year period (in addition to any remaining term) on each anniversary date hereof unless, at least sixty (60) days prior to such extension date, the Company provides written notice of its decision to not extend. Thus, absent notice by the Company, on May 1, 2002, an additional one (1) year shall be added to the remaining term, thereby extending this Agreement to April 30, 2005. It shall be similarly extended automatically annually absent notice. 3. Duties. Employee shall report to and take direction from the Board of Directors. Employee shall perform those duties that are usual and customary for a CEO of a software sales, service and development enterprise. He shall perform his duties in a manner reasonably expected of a CEO of such a company. 4. Compensation. During the term of his employment, Employee shall receive the following (collectively, the "Compensation"): 2 (a) An initial annual base salary of $125,000, commencing upon the execution of this agreement and subject to increase by the Board of Directors of the Company. Payments will be made in equal installments in accordance with the Company's payment policy (subject to standard withholding amounts for local, state and federal taxes); and (b) An annual bonus of up to seventy-five percent (75%) of the Employee's base salary, dependent upon the achievement of corporate objectives established by the Company's Board of Directors; (c) A bonus of $250,000 immediately following the completion of aggregate investor financing of $12 million (exclusive of pure debt financing including bank lines and non-convertible debt), and the Company hereby acknowledges the achievement to date of $9,035,340 toward such threshold; and (d) The Company also agrees to grant Employee, immediately following execution of this Agreement, an additional stock option for 250,000 shares of Company Common Stock (as attached in a separate agreement) with an exercis 1 e price of $5.00 with 20% vesting immediately and the balance vesting equally over a four-year period on each successive May 1, 2002, 2003, 2004 and 2005. This option grant is conditioned upon shareholder approval of an amendment to the Company's 1999 Stock Option Plan (the "Plan") increasing the number of shares reserved and available under the Plan; provided, however, that in the event such shareholder approval is not obtained, then this option will nonetheless be valid with respect to that number of shares available under the Plan without such amendment. 5. Expenses. Employee shall be reimbursed for travel and other out-of-pocket business expenses, provided they have been reasonably incurred in the performance of Employee's duties for the Company. Employee shall submit to the Company an itemized account detailing the expenses on a form provided to Employee by the Company, accompanied by receipts. The Company reserves the right to reject reimbursement of expense submissions not in compliance with the terms set forth in this Section or which are not in compliance with Internal Revenue Service statutes, rules, regulations or other controlling or interpretive authority 6. Benefits. The Company shall provide Employee with full participation in the Company's employee benefit plans under the same terms as provided to other similarly positioned employees of the Company from time to time. Such benefits are subject to change at any time without notice. Employee is entitled to four (4) weeks of vacation per year upon the same terms and conditions as provided to the other employees of the Company. Vacation time will be scheduled taking into account the Employee's duties and obligations at the Company. Sick leave, holiday pay and all other leaves of absence also will be in accordance with the Company's stated personnel policies. 7. Confidential Information. Employee acknowledges and agrees that in the course of, or incident to, his employment as an employee hereunder, the Company may provide to Employee, or Employee may otherwise be exposed to or obtain, confidential information. Without the prior written consent of the Board of Directors of the Company, except as shall be necessary in the performance of Employee's assigned duties, Employee shall not disclose or use 2 3 for Employee's direct or indirect benefit or the direct or indirect benefit of any third party, and Employee shall maintain, both during and after Employee's employment by the Company, the confidentiality of any Confidential Information (as hereinafter defined) of the Company. In general, "Confidential Information" means any and all information of the Company, including, but not limited to, any information relating to: research; processes; inventions; products; methods; computer codes or instructions and related documentation; and materials prepared by Employee in the course of, relating to or arising out of his employment by the Company, or prepared by any other employee or contractor for the Company or the Company's customers or clients; cost data; business and financial studies; business procedures; financial information; financial forecasts and projections; marketing and business development data, methods, plans and efforts; the identities of customers or clients, contractors and suppliers and prospective customers or clients, contractors and suppliers; the terms of contracts and agreements with customers or clients, contractors and suppliers; the Company's relationship with actual and prospective customers or clients, contractors and suppliers and the needs and requirements of, and the Company's course of dealing with, any such actual or prospective customers or clients, contractors and suppliers; personnel information; customer and vendor credit information; and any other materials that have not been made available to the general public. Failure to mark any of the Confidential Information as confidential or proprietary shall not affect its status as Confidential Information under the terms of this Agreement. The obligations of this Section shall survive the termination of this Agreement. 8. Inventions or Discoveries. Employee acknowledges that inventions, other discoveries, innovations, designs, improvements and software (whether or not they are in writing or reduced to practice) or works of authorship (whether or not they can be patented or copyrighted) related to the Company or its products may be developed, conceived or otherwise made by Employee during the term of this Agreement (collectively,"Inventions"). Employee agrees that all Inventions shall be the exclusive property of Company. With respect to all Inventions, Employee agrees to: (a) Keep accurate, complete and timely records, which shall be Company's property and shall be retained on Company's premises; and (b) Promptly and fully disclose and describe all Inventions to Company; and (c) Assign (and Employee does hereby assign) to Company all of Employee's rights to the Inventions, and to application for letters patent or copyrights in all countries and to letters patent or copyrights granted upon these Inventions in all countries; and (d) To do such other acts as may be necessary or helpful in the opinion of Company to preserve property rights to these Inventions against forfeiture, abandonment or loss and to obtain and maintain letters patent or copyrights and to vest the entire right and title thereto exclusively in Company. 3 4 The obligations of this Section shall continue beyond the termination of this Agreement with respect to Inventions conceived or otherwise developed during the term of this Agreement and for the one-year period following the termination of this Agreement and shall be binding upon assigns, executors, administrators and other legal representatives. Notwithstanding anything to the contrary contained herein, the foregoing Section 8 shall not apply to Employee's rights in any invention that the Employee developed entirely on his own time without using the Company's equipment, supplies, facilities or trade secret information except for those inventions that either: (1) relate at the time of conception or reduction to practice of the invention to the Company's business, or actual or demonstrable anticipated research or development of the Company; or (2) result from any work performed by Employee for the Company. 9. Property. During the term of this Agreement and thereafter, Employee shall not remove from the Company's offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda, computer tapes, computer disks or similar materials of or containing confidential information of the type identified in Section 7 hereof, or other materials or property of any kind, unless necessary in accordance with Employee's duties and responsibilities of employment, and in the event that any of such material or property is removed, all of the foregoing shall be returned to their proper files or places of safekeeping as promptly as possible after the removal shall have served its specific purpose; nor shall Employee make, retain, remove or distribute any copies of any of the foregoing for any reason whatsoever, except as may be necessary in the discharge of Employee's assigned duties; and upon the termination of Employee's employment by the Company, Employee shall leave with or return to the Company all originals and copies of the foregoing, then in Employee's possession, whether prepared by Employee or by others. 10. Termination of Employment. (a) Termination for Cause. The Company may terminate employment under this Agreement only for Cause. For the purposes of this Agreement, "Cause" shall mean (i) willful misconduct that is injurious to the Company monetarily or otherwise, including, but not limited to, misappropriation of funds; (ii) conviction of a crime punishable by imprisonment for a term in excess of one (1) year or involving moral turpitude; or (iii) failure of Employee to perform the duties assigned to Employee by the Board of Directors or their assignee, provided, however, that the Company shall have detailed in writing the specific duties the Employee has failed to perform and shall have provided Employee with a ninety (90) day period to cure such failure. Notwithstanding the foregoing, this Agreement shall terminate in its entirety immediately upon the death of Employee. (b) Disability. If Employee has become disabled such that he cannot perform the essential functions of his job with or without reasonable accommodation, and the disability continues for a period of more than ninety (90) days, the Board may, in its discretion, terminate his employment under this Agreement. 11. Effect of Termination of Employment. Except as expressly set forth herein, upon the termination of Employee's employment hereunder in accordance with Section 4 5 10, neither the Employee nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement or otherwise. 12. Covenant Not to Compete. (a) Prohibition on Direct Competition. Regardless of whether or not this Agreement or the Employee's employment is terminated, for the duration of Employee's employment and for the twelve (12) month period following the termination of Employee's employment (hereinafter, the "Restricted Period"), Employee shall not compete, directly or indirectly, in any geographic area in which the Company conducted business or in such area in which the Company conducts business within the six (6) month period following the termination of this Agreement, with the day-to-day business activities of the Company, which shall include, but shall not be limited to, the offering of services and/or products and/or other deliverables similar to products or services or other deliverables sold, offered, or proposed to be sold in the twelve (12) month period prior to the Restricted Period. For purposes of this Section 12, the term "Company" shall include all subsidiaries of the Company. (b) Prohibition on Indirect Competition. Employee shall be deemed to be competing (for the purposes of this Section 12), if Employee shall engage, directly or indirectly, in any business offering products or services similar to those offered or proposed to be offered by the Company in its day-to-day business, whether for his own account or that of any other person, firm, corporation, partnership or other business entity, and whether his participation shall be as a stockholder, general or limited partner, or investor possessing an ownership interest exceeding one percent (10%) in any such entity, or as a principal agent, proprietor, officer, director, employee, sales representative, consultant, lender or in any other capacity. (c) Non-Solicitation of Customers. Regardless of whether or not this Agreement or the Employee's employment is terminated, during the Restricted Period, neither Employee or his Affiliate shall directly or indirectly, solicit, divert, take away or induce customers or clients (wherever located) of the Company to avail themselves of the services or products of others that are competitive with any of the Company's services or products, it being agreed that such actions would require Employee to violate the Company's right to its secret or proprietary information. For purposes of this Agreement, "Affiliate" shall mean any person or entity controlled by Employee. (d) Non-Solicitation of Employees and Consultants. Regardless of whether or not this Agreement or the Employee's employment is terminated, during the Restricted Period, neither Employee or his Affiliate shall: (i) solicit, divert, take away or induce any employee or consultant of the Company to leave the employ of or sever the relationship with the Company; or (ii) employ or hire any person who was an employee or consultant of the Company at any time during the past twelve (12) rolling months. (e) Consideration. Employee agrees that the restrictions set forth in this Section 12 are given in consideration for Company's selection of Employee as CEO, Employee's continued employment and his being granted access to Confidential Information. 5 6 Employee agrees that these restrictions are reasonable under the circumstances, and Employee understands that the Company would not agree to employment without Employee's agreement to the restrictions set forth in this Section 12. Furthermore, in connection with Employees' employment with the Company, the restrictions set forth in this Section 12 are designed to protect the Company's proprietary rights and property rights including, but not limited to, customer lists and trade secrets. (f) Enforcement Generally. If the scope of the restrictions in this Section 12 is determined by a court of competent jurisdiction to be too broad to permit enforcement of such restrictions to their full extent, then such restrictions shall be construed or rewritten so as to be enforceable to the maximum extent permitted by law, and Employee hereby consents, to the extent he may lawfully do so, to the judicial modification of the scope of such restrictions in any proceeding brought to enforce them. (g) Enforcement After Termination of Employment. The restrictions of this Section 12 shall be enforceable provided this Agreement terminates through expiration or if the Company terminates Employee for Cause pursuant to Section 10 hereof. In the event that Employee's employment is terminated at any time prior to the expiration of the term of this Agreement without Cause, however, then the restrictions of this Section 12 shall be unenforceable. 13. Severance and Change in Control. (a) Termination for Cause. In the event that Employee is terminated for Cause pursuant to Section 10 hereof, Employee shall not be entitled to severance. (b) Termination Without Cause. In the event that Employee is terminated without Cause at any time (other than expiration of this Agreement by its own terms), then Employee shall be entitled to a lump sum payment equal to his most recent base salary. (c) Change in Control. In the event of any termination of the Employee's employment by the Company in connection with or within one year after a Change in Control or in the event of a resignation by Employee following a Change in Control under Section 13(c)(v) below, Employee shall receive his then-current base salary for a Twenty-four month period. If the Employee is still employed by the Company on the first anniversary of a Change in Control, then the Employee shall be entitled to a bonus equal to the Employee's then-current base salary in addition to any other bonuses that the Employee may have earned. This Section 13(c) does not apply to Company's proposed merger with Meteor Industries, Inc. or any subsidiary thereof. As used in this Agreement, "Change in Control" shall mean a change in control which would be required to be reported in response to item 6(e,) on Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement, including, without limitation, if: 6 7 (i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any affiliate or associate as defined in Rule 12(b)-2 under the Exchange Act of such person, other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (ii) less than a majority of the Board of Directors is comprised of the individuals described below; or (iii) the stockholders of the Company approve a definitive agreement to merge or consolidate the Company with or into another corporation or other enterprise in which the holders of outstanding stock of the Company entitled to vote in elections of directors immediately before such merger or consolidation hold less than 50% of the voting power of the survivor of such merger or consolidation or its parent, or approve a plan of liquidation; or (iv) at least 80% of the Company's assets are sold and transferred to another corporation or other enterprise that is not a subsidiary, direct or indirect, or other affiliate of the Company. (v) the assignment to Employee of any duties inconsistent in any respect with the CEO position (including status, offices, titles, and reporting requirements), authorities, duties, or other responsibilities or any other action of the Company which results in a diminishment of Employee's position, authority, compensation, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by Employee. "Board of Directors", for purposes of this Section 13, shall mean individuals who on the date hereof constituted the Board of the Company, and any new director who subsequently was elected or nominated for election by a majority of the individuals who on the date hereof constituted the Board of Directors and those individuals, if any, who were previously elected or nominated as provided for in this Section. 14. Intellectual Property. (a) Employee acknowledges that any and all writings, documents, inventions, discoveries, computer programs or instructions (whether in source code, object code, or any other form), algorithms, plans, memoranda, tests, research, designs, specifications, models, data, diagrams, flow charts, and/or techniques (whether reduced to written form or otherwise) that Employee makes, conceives, discovers or develops, either solely or jointly with any other person, at any time during the term of Employee's employment, whether during working hours or at the Company's facility or at any other time or location, and whether upon the 7 8 request or suggestion of the Company or otherwise, that relate to any business now or hereafter carried on by the Company (collectively, "Intellectual Work Product") shall be the sole and exclusive property of the Company. Employee shall promptly disclose to the Company all Intellectual Work Product, and Employee shall have no claim for additional compensation for the Intellectual Work Product. (b) Employee acknowledges that all the Intellectual Work Product that is copyrightable shall be considered a work made for hire under United States copyright law. To the extent that any copyrightable Intellectual Work Product may not be considered a work made for hire under the applicable provisions of copyright law, or to the extent that, notwithstanding the foregoing provisions, Employee may retain an interest in any Intellectual Work Product that is not copyrightable, Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that Employee may have in the Intellectual Work Product under copyright, patent, trade secret and trademark law in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company shall be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, and trademarks with respect thereto. (c) At the request and sole expense of the Company, either before or after the termination of Employee's employment, Employee shall assist the Company in acquiring and maintaining copyright, patent, trade secret, and trademark protection upon, and confirming the Company's title to, any Intellectual Work Product. Employee's assistance will include signing all applications for copyrights and patents and other papers, cooperating in legal proceedings, and taking any other steps considered desirable by the Company, provided however that the Employee shall be entitled to reasonable reimbursement for his time, efforts and expenses following the termination of his employment. 15. Indemnification. During the term of this Agreement, the Company shall indemnify the Employee against all judgments, penalties, fines, amounts paid in settlement and reasonable expenses (including, but not limited to, attorneys' fees) relating to his employment by the Company to the fullest extent permissible by law. 16. Disclosure. Employee hereby represents that Employee is not subject to any other agreement that Employee will violate by signing this Agreement. Employee shall disclose the existence and terms of this Agreement to any employer that Employee may work for during the Restricted Period after the termination of Employee's employment at the Company. 17. Conflicting Business. Employee agrees that he will not transact business with the Company personally, or as agent, owner, partner, or shareholder of any other entity. Employee further agrees that he will not engage in any business activity or outside employment that may be in conflict with the Company's proprietary or business interests. 18. Successors and Assigns. The Company may assign this Agreement to, and this Agreement shall bind and inure to the benefit of, any parent, subsidiary, affiliate or successor of the Company. This Agreement shall not be assignable by Employee. 8 9 19. Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties relating to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of every nature between them other than the Merger Agreement. This Agreement may not be changed or modified, except by an agreement in writing signed by both of the parties hereto. 20. Waiver. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement. Failure of a party to enforce any provision hereof shall not be deemed a waiver of such party's right to enforce such provision in the future. 21. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota, without regard to conflicts of law principles of Minnesota or any other jurisdiction. 22. Invalidity. In case any one or more of the provisions or portions of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the validity of any other provision or portion of any provision of this Agreement, and any such provision or any such portion of any provision shall be deemed modified to the extent necessary to make it enforceable. In the event that a court of competent jurisdiction determines that one or more of the provisions or portions of the provisions contained in this Agreement is over broad or over reaching, such provision or portion thereof shall be deemed modified to the extent necessary to make it enforceable to the maximum extent allowed by law. If any provision herein is not enforceable as written, the parties hereto agree that such court shall reform the provision to provide the maximum restriction enforceable against Employee and that the provision, as reformed, shall be enforceable. 23. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation 24. Gender; Number. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. 25. Enforcement. Employee acknowledges that it is impossible to measure fully, in money, the injury that will be caused to the Company in the event of a breach or threatened breach of this Agreement, and Employee waives the claim or defense that the Company has an adequate remedy at law. Employee shall not, in any action or proceeding to enforce the provisions of this Agreement, assert the claim or defense that such a remedy at law exists. The Company shall be entitled to injunctive relief to enforce the provisions of this Agreement, without prejudice to any other remedy the Company may have at law or in equity. 9 10 26. Consent to Suit. Except as otherwise provided by the last sentence of this Section 26, each of the Company and Employee irrevocably and unconditionally (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Agreement brought by either of them or any of their affiliates or any combination thereof, shall only be instituted in Minneapolis, Minnesota; (b) consents and submits to the jurisdiction of such courts in any suit, action or other legal proceeding arising out of or related to this Agreement; (c) consents to personal jurisdiction in such court and further agrees that service of process upon Employee may be effected by certified mail or by any other means permitted by law; (d) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court; and (e) waives any claim or defense of inconvenient forum. This Section 26 shall not prevent the Company from seeking to enforce this Agreement in any other court of competent jurisdiction. 27. Notices. All notices or other communications hereunder shall be in writing and shall be deemed given (i) on the same day if given in person; (ii) the next business day if sent by overnight courier service to the parties at the addresses set forth below or to such other addresses as shall be specified by notice to the other parties hereunder or (iii) the next business day if sent by telefax, electronic confirmation requested: If to the Company: with a copy to: Active lQ Technologies, Inc. William M. Mower 601 Carlson Parkway, Suite 1500 Maslon Edelman Borman & Brand, LLP Minnetonka, MN 55305 3300 Wells Fargo Center Attention: President 90 South 7th Street Telefax No: 952 449 5001 Minneapolis, MN 55402 Telephone No.: (612) 672-8358 Telefax No.: (612) 672-8397 To Employee: Kenneth W. Brimmer 11505 West Lakeview Lane Minnetonka, MN 55305 Telephone No.: (952) 544-5665 Telefax No.: (952) 591-9037 Social Security #: ###-##-#### 28. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. 10 11 29. Survival of Provisions. Sections 7 through 29 shall survive the termination of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. ACTIVE IQ TECHNOLOGIES, INC. By: /s/ D. Bradly Olah ------------------------------------- Title: President and COO /s/ Kenneth W. Brimmer - ------------------------------------- Kenneth W. Brimmer 11 EX-10.2 8 c64205ex10-2.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.2 D. Bradly Olah ACTIVE IQ TECHNOLOGIES, INC. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective the 1st day of May 2001 by and between D. Bradly Olah, a Minnesota resident ("Employee") and ACTIVE IQ TECHNOLOGIES, INC., a Minnesota corporation (the "Company"). WHEREAS, Employee desires to provide his services to the Company upon the terms and conditions hereinafter set forth; and WHEREAS, the Company desires to employ Employee upon the terms and conditions hereinafter set forth; and NOW, THEREFORE, in consideration of these premises and the mutual promises made herein and the mutual benefits to be derived here from, Employee and the Company, intending to be legally bound, hereby agree as follows: 1. Employment. The Company hereby employs Employee as President and COO, and Employee hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. 2. Term. Employment shall be for an initial term of three (3) years commencing on May 1, 2001 and continuing until the earlier of (i) April 30, 2004; or (ii) the date Employee's employment terminates pursuant to Section 10 hereof. Unless Executive's employment has been terminated pursuant to Section 10, the term of this Agreement shall be automatically renewed and extended for an additional one year period (in addition to any remaining term) on each anniversary date hereof unless, at least sixty (60) days prior to such extension date, the Company provides written notice of its decision to not extend. Thus, absent notice by the Company, on May 1, 2002, an additional one (1) year shall be added to the remaining term, thereby extending this Agreement to April 30, 2005. It shall be similarly extended automatically annually absent notice. 3. Duties. Employee shall report to and take direction from the Board of Directors. Employee shall perform those duties that are usual and customary for a President and COO of a software sales, service and development enterprise. He shall perform his duties in a manner reasonably expected of a President and COO of such a company. 4. Compensation. During the term of his employment, Employee shall receive the following (collectively, the "Compensation"): 2 (a) An initial annual base salary of $150,000, commencing upon the execution of this agreement and subject to increase by the Board of Directors of the Company. Payments will be made in equal installments in accordance with the Company's payment policy (subject to standard withholding amounts for local, state and federal taxes); and (b) An annual bonus of up to one hundred percent (100%) of the Employee's base salary, dependent upon the achievement of corporate objectives established by the Company's Board of Directors; (c) The Company also agrees to grant Employee, immediately following execution of this Agreement, an additional stock option for 300,000 shares of Company Common Stock (as attached in a separate agreement) with an exercise price of $5.00 with 20% vesting immediately and the balance vesting equally over a four-year period on each successive May 1, 2002, 2003, 2004 and 2005. This option grant is conditioned upon shareholder approval of an amendment to the Company's 1999 Stock Option Plan (the "Plan") increasing the number of shares reserved and available under the Plan; provided, however, that in the event such shareholder approval is not obtained, then this option will nonetheless be valid with respect to that number of shares available under the Plan without such amendment. 5. Expenses. Employee shall be reimbursed for travel and other out-of-pocket business expenses, provided they have been reasonably incurred in the performance of Employee's duties for the Company. Employee shall submit to the Company an itemized account detailing the expenses on a form provided to Employee by the Company, accompanied by receipts. The Company reserves the right to reject reimbursement of expense submissions not in compliance with the terms set forth in this Section or which are not in compliance with Internal Revenue Service statutes, rules, regulations or other controlling or interpretive authority. 6. Benefits. The Company shall provide Employee with full participation in the Company's employee benefit plans under the same terms as provided to other similarly positioned employees of the Company from time to time. Such benefits are subject to change at any time without notice. Employee is entitled to four (4) weeks of vacation per year upon the same terms and conditions as provided to the other employees of the Company. Vacation time will be scheduled taking into account the Employee's duties and obligations at the Company. Sick leave, holiday pay and all other leaves of absence also will be in accordance with the Company's stated personnel policies. 7. Confidential Information. Employee acknowledges and agrees that in the course of, or incident to, his employment as an employee hereunder, the Company may provide to Employee, or Employee may otherwise be exposed to or obtain, confidential information. Without the prior written consent of the Board of Directors of the Company, except as shall be necessary in the performance of Employee's assigned duties, Employee shall not disclose or use for Employee's direct or indirect benefit or the direct or indirect benefit of any third party, and Employee shall maintain, both during and after Employee's employment by the Company, the confidentiality of any Confidential Information (as hereinafter defined) of the Company. In general, "Confidential Information" means any and all information of the Company, including, 2 3 but not limited to, any information relating to: research; processes; inventions; products; methods; computer codes or instructions and related documentation; and materials prepared by Employee in the course of, relating to or arising out of his employment by the Company, or prepared by any other employee or contractor for the Company or the Company's customers or clients; cost data; business and financial studies; business procedures; financial information; financial forecasts and projections; marketing and business development data, methods, plans and efforts; the identities of customers or clients, contractors and suppliers and prospective customers or clients, contractors and suppliers; the terms of contracts and agreements with customers or clients, contractors and suppliers; the Company's relationship with actual and prospective customers or clients, contractors and suppliers and the needs and requirements of, and the Company's course of dealing with, any such actual or prospective customers or clients, contractors and suppliers; personnel information; customer and vendor credit information; and any other materials that have not been made available to the general public. Failure to mark any of the Confidential Information as confidential or proprietary shall not affect its status as Confidential Information under the terms of this Agreement. The obligations of this Section shall survive the termination of this Agreement. 8. Inventions or Discoveries. Employee acknowledges that inventions, other discoveries, innovations, designs, improvements and software (whether or not they are in writing or reduced to practice) or works of authorship (whether or not they can be patented or copyrighted) related to the Company or its products may be developed, conceived or otherwise made by Employee during the term of this Agreement (collectively,"Inventions"). Employee agrees that all Inventions shall be the exclusive property of Company. With respect to all Inventions, Employee agrees to: (a) Keep accurate, complete and timely records, which shall be Company's property and shall be retained on Company's premises; and (b) Promptly and fully disclose and describe all Inventions to Company; and (c) Assign (and Employee does hereby assign) to Company all of Employee's rights to the Inventions, and to application for letters patent or copyrights in all countries and to letters patent or copyrights granted upon these Inventions in all countries; and (d) To do such other acts as may be necessary or helpful in the opinion of Company to preserve property rights to these Inventions against forfeiture, abandonment or loss and to obtain and maintain letters patent or copyrights and to vest the entire right and title thereto exclusively in Company. The obligations of this Section shall continue beyond the termination of this Agreement with respect to Inventions conceived or otherwise developed during the term of this Agreement and for the one-year period following the termination of this Agreement and shall be binding upon assigns, executors, administrators and other legal representatives. Notwithstanding anything to the contrary contained herein, the foregoing Section 8 shall not 3 4 apply to Employee's rights in any invention that the Employee developed entirely on his own time without using the Company's equipment, supplies, facilities or trade secret information except for those inventions that either: (1) relate at the time of conception or reduction to practice of the invention to the Company's business, or actual or demonstrable anticipated research or development of the Company; or (2) result from any work performed by Employee for the Company. 9. Property. During the term of this Agreement and thereafter, Employee shall not remove from the Company's offices or premises any documents, records, notebooks, files, correspondence, reports, memoranda, computer tapes, computer disks or similar materials of or containing confidential information of the type identified in Section 7 hereof, or other materials or property of any kind, unless necessary in accordance with Employee's duties and responsibilities of employment, and in the event that any of such material or property is removed, all of the foregoing shall be returned to their proper files or places of safekeeping as promptly as possible after the removal shall have served its specific purpose; nor shall Employee make, retain, remove or distribute any copies of any of the foregoing for any reason whatsoever, except as may be necessary in the discharge of Employee's assigned duties; and upon the termination of Employee's employment by the Company, Employee shall leave with or return to the Company all originals and copies of the foregoing, then in Employee's possession, whether prepared by Employee or by others. 10. Termination of Employment. (a) Termination for Cause. The Company may terminate employment under this Agreement only for Cause. For the purposes of this Agreement, "Cause" shall mean (i) willful misconduct that is injurious to the Company monetarily or otherwise, including, but not limited to, misappropriation of funds; (ii) conviction of a crime punishable by imprisonment for a term in excess of one (1) year or involving moral turpitude; or (iii) failure of Employee to perform the duties assigned to Employee by the Board of Directors or their assignee, provided, however, that the Company shall have detailed in writing the specific duties the Employee has failed to perform and shall have provided Employee with a ninety (90) day period to cure such failure. Notwithstanding the foregoing, this Agreement shall terminate in its entirety immediately upon the death of Employee. (b) Disability. If Employee has become disabled such that he cannot perform the essential functions of his job with or without reasonable accommodation, and the disability continues for a period of more than ninety (90) days, the Board may, in its discretion, terminate his employment under this Agreement. 11. Effect of Termination of Employment. Except as expressly set forth herein, upon the termination of Employee's employment hereunder in accordance with Section 10, neither the Employee nor his beneficiary or estate shall have any further rights or claims against the Company under this Agreement or otherwise. 4 5 12. Covenant Not to Compete. (a) Prohibition on Direct Competition. Regardless of whether or not this Agreement or the Employee's employment is terminated, for the duration of Employee's employment and for the twelve (12) month period following the termination of Employee's employment (hereinafter, the "Restricted Period"), Employee shall not compete, directly or indirectly, in any geographic area in which the Company conducted business or in such area in which the Company conducts business within the six (6) month period following the termination of this Agreement, with the day-to-day business activities of the Company, which shall include, but shall not be limited to, the offering of services and/or products and/or other deliverables similar to products or services or other deliverables sold, offered, or proposed to be sold in the twelve (12) month period prior to the Restricted Period. For purposes of this Section 12, the term "Company" shall include all subsidiaries of the Company. (b) Prohibition on Indirect Competition. Employee shall be deemed to be competing (for the purposes of this Section 12), if Employee shall engage, directly or indirectly, in any business offering products or services similar to those offered or proposed to be offered by the Company in its day-to-day business, whether for his own account or that of any other person, firm, corporation, partnership or other business entity, and whether his participation shall be as a stockholder, general or limited partner, or investor possessing an ownership interest exceeding one percent (10%) in any such entity, or as a principal agent, proprietor, officer, director, employee, sales representative, consultant, lender or in any other capacity. (c) Non-Solicitation of Customers. Regardless of whether or not this Agreement or the Employee's employment is terminated, during the Restricted Period, neither Employee or his Affiliate shall directly or indirectly, solicit, divert, take away or induce customers or clients (wherever located) of the Company to avail themselves of the services or products of others that are competitive with any of the Company's services or products, it being agreed that such actions would require Employee to violate the Company's right to its secret or proprietary information. For purposes of this Agreement, "Affiliate" shall mean any person or entity controlled by Employee. (d) Non-Solicitation of Employees and Consultants. Regardless of whether or not this Agreement or the Employee's employment is terminated, during the Restricted Period, neither Employee or his Affiliate shall: (i) solicit, divert, take away or induce any employee or consultant of the Company to leave the employ of or sever the relationship with the Company; or (ii) employ or hire any person who was an employee or consultant of the Company at any time during the past twelve (12) rolling months. (e) Consideration. Employee agrees that the restrictions set forth in this Section 12 are given in consideration for Company's selection of Employee as President and COO, Employee's continued employment and his being granted access to Confidential Information. Employee agrees that these restrictions are reasonable under the circumstances, and Employee understands that the Company would not agree to employment without Employee's agreement to the restrictions set forth in this Section 12. Furthermore, in connection with 5 6 Employees' employment with the Company, the restrictions set forth in this Section 12 are designed to protect the Company's proprietary rights and property rights including, but not limited to, customer lists and trade secrets. (f) Enforcement Generally. If the scope of the restrictions in this Section 12 is determined by a court of competent jurisdiction to be too broad to permit enforcement of such restrictions to their full extent, then such restrictions shall be construed or rewritten so as to be enforceable to the maximum extent permitted by law, and Employee hereby consents, to the extent he may lawfully do so, to the judicial modification of the scope of such restrictions in any proceeding brought to enforce them. (g) Enforcement After Termination of Employment. The restrictions of this Section 12 shall be enforceable provided this Agreement terminates through expiration or if the Company terminates Employee for Cause pursuant to Section 10 hereof. In the event that Employee's employment is terminated at any time prior to the expiration of the term of this Agreement without Cause, however, then the restrictions of this Section 12 shall be unenforceable. 13. Severance and Change in Control. (a) Termination for Cause. In the event that Employee is terminated for Cause pursuant to Section 10 hereof, Employee shall not be entitled to severance. (b) Termination Without Cause. In the event that Employee is terminated without Cause at any time (other than expiration of this Agreement by its own terms), then Employee shall be entitled to a lump sum payment equal to his most recent base salary. (c) Change in Control. In the event of any termination of the Employee's employment by the Company in connection with or within one year after a Change in Control or in the event of a resignation by Employee following a Change in Control under Section 13(c)(v) below, Employee shall receive his then-current base salary for a Twenty-four month period. If the Employee is still employed by the Company on the first anniversary of a Change in Control, then the Employee shall be entitled to a bonus equal to the Employee's then-current base salary in addition to any other bonuses that the Employee may have earned. This Section 13(c) does not apply to Company's proposed merger with Meteor Industries, Inc. or any subsidiary thereof. As used in this Agreement, "Change in Control" shall mean a change in control which would be required to be reported in response to item 6(e,) on Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement, including, without limitation, if: (i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any affiliate or associate as defined in Rule 12(b)-2 under 6 7 the Exchange Act of such person, other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (ii) less than a majority of the Board of Directors is comprised of the individuals described below; or (iii) the stockholders of the Company approve a definitive agreement to merge or consolidate the Company with or into another corporation or other enterprise in which the holders of outstanding stock of the Company entitled to vote in elections of directors immediately before such merger or consolidation hold less than 50% of the voting power of the survivor of such merger or consolidation or its parent, or approve a plan of liquidation; or (iv) at least 80% of the Company's assets are sold and transferred to another corporation or other enterprise that is not a subsidiary, direct or indirect, or other affiliate of the Company. (v) the assignment to Employee of any duties inconsistent in any respect with the President and COO positions (including status, offices, titles, and reporting requirements), authorities, duties, or other responsibilities or any other action of the Company which results in a diminishment of Employee's position, authority, compensation, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by Employee. "Board of Directors", for purposes of this Section 13, shall mean individuals who on the date hereof constituted the Board of the Company, and any new director who subsequently was elected or nominated for election by a majority of the individuals who on the date hereof constituted the Board of Directors and those individuals, if any, who were previously elected or nominated as provided for in this Section. 14. Intellectual Property. (a) Employee acknowledges that any and all writings, documents, inventions, discoveries, computer programs or instructions (whether in source code, object code, or any other form), algorithms, plans, memoranda, tests, research, designs, specifications, models, data, diagrams, flow charts, and/or techniques (whether reduced to written form or otherwise) that Employee makes, conceives, discovers or develops, either solely or jointly with any other person, at any time during the term of Employee's employment, whether during working hours or at the Company's facility or at any other time or location, and whether upon the request or suggestion of the Company or otherwise, that relate to any business now or hereafter carried on by the Company (collectively, "Intellectual Work Product") shall be the sole and 7 8 exclusive property of the Company. Employee shall promptly disclose to the Company all Intellectual Work Product, and Employee shall have no claim for additional compensation for the Intellectual Work Product. (b) Employee acknowledges that all the Intellectual Work Product that is copyrightable shall be considered a work made for hire under United States copyright law. To the extent that any copyrightable Intellectual Work Product may not be considered a work made for hire under the applicable provisions of copyright law, or to the extent that, notwithstanding the foregoing provisions, Employee may retain an interest in any Intellectual Work Product that is not copyrightable, Employee hereby irrevocably assigns and transfers to the Company any and all right, title, or interest that Employee may have in the Intellectual Work Product under copyright, patent, trade secret and trademark law in perpetuity or for the longest period otherwise permitted by law, without the necessity of further consideration. The Company shall be entitled to obtain and hold in its own name all copyrights, patents, trade secrets, and trademarks with respect thereto. (c) At the request and sole expense of the Company, either before or after the termination of Employee's employment, Employee shall assist the Company in acquiring and maintaining copyright, patent, trade secret, and trademark protection upon, and confirming the Company's title to, any Intellectual Work Product. Employee's assistance will include signing all applications for copyrights and patents and other papers, cooperating in legal proceedings, and taking any other steps considered desirable by the Company, provided however that the Employee shall be entitled to reasonable reimbursement for his time, efforts and expenses following the termination of his employment. 15. Indemnification. During the term of this Agreement, the Company shall indemnify the Employee against all judgments, penalties, fines, amounts paid in settlement and reasonable expenses (including, but not limited to, attorneys' fees) relating to his employment by the Company to the fullest extent permissible by law. 16. Disclosure. Employee hereby represents that Employee is not subject to any other agreement that Employee will violate by signing this Agreement. Employee shall disclose the existence and terms of this Agreement to any employer that Employee may work for during the Restricted Period after the termination of Employee's employment at the Company. 17. Conflicting Business. Employee agrees that he will not transact business with the Company personally, or as agent, owner, partner, or shareholder of any other entity. Employee further agrees that he will not engage in any business activity or outside employment that may be in conflict with the Company's proprietary or business interests. 18. Successors and Assigns. The Company may assign this Agreement to, and this Agreement shall bind and inure to the benefit of, any parent, subsidiary, affiliate or successor of the Company. This Agreement shall not be assignable by Employee. 8 9 19. Entire Agreement; Amendments. This Agreement contains the entire agreement and understanding of the parties relating to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of every nature between them other than the Merger Agreement. This Agreement may not be changed or modified, except by an agreement in writing signed by both of the parties hereto. 20. Waiver. The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other or subsequent breach of this Agreement. Failure of a party to enforce any provision hereof shall not be deemed a waiver of such party's right to enforce such provision in the future. 21. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota, without regard to conflicts of law principles of Minnesota or any other jurisdiction. 22. Invalidity. In case any one or more of the provisions or portions of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the validity of any other provision or portion of any provision of this Agreement, and any such provision or any such portion of any provision shall be deemed modified to the extent necessary to make it enforceable. In the event that a court of competent jurisdiction determines that one or more of the provisions or portions of the provisions contained in this Agreement is over broad or over reaching, such provision or portion thereof shall be deemed modified to the extent necessary to make it enforceable to the maximum extent allowed by law. If any provision herein is not enforceable as written, the parties hereto agree that such court shall reform the provision to provide the maximum restriction enforceable against Employee and that the provision, as reformed, shall be enforceable. 23. Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. 24. Gender; Number. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. 25. Enforcement. Employee acknowledges that it is impossible to measure fully, in money, the injury that will be caused to the Company in the event of a breach or threatened breach of this Agreement, and Employee waives the claim or defense that the Company has an adequate remedy at law. Employee shall not, in any action or proceeding to enforce the provisions of this Agreement, assert the claim or defense that such a remedy at law exists. The Company shall be entitled to injunctive relief to enforce the provisions of this Agreement, without prejudice to any other remedy the Company may have at law or in equity. 26. Consent to Suit. Except as otherwise provided by the last sentence of this Section 26, each of the Company and Employee irrevocably and unconditionally (a) agrees that 9 10 any suit, action or other legal proceeding arising out of or relating to this Agreement brought by either of them or any of their affiliates or any combination thereof, shall only be instituted in Minneapolis, Minnesota; (b) consents and submits to the jurisdiction of such courts in any suit, action or other legal proceeding arising out of or related to this Agreement; (c) consents to personal jurisdiction in such court and further agrees that service of process upon Employee may be effected by certified mail or by any other means permitted by law; (d) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court; and (e) waives any claim or defense of inconvenient forum. This Section 26 shall not prevent the Company from seeking to enforce this Agreement in any other court of competent jurisdiction. 27. Notices. All notices or other communications hereunder shall be in writing and shall be deemed given (i) on the same day if given in person; (ii) the next business day if sent by overnight courier service to the parties at the addresses set forth below or to such other addresses as shall be specified by notice to the other parties hereunder or (iii) the next business day if sent by telefax, electronic confirmation requested: If to the Company: with a copy to: Active IQ Technologies, Inc. William M. Mower 601 Carlson Parkway, Suite 1500 Maslon Edelman Borman & Brand, LLP Minnetonka, MN 55305 3300 Wells Fargo Center Attention: CEO 90 South 7th Street Telefax No: 952 449 5001 Minneapolis, MN 55402 Telephone No.: (612) 672-8358 Telefax No.: (612) 672-8397 To Employee: D. Bradly Olah 5950 County Rd. 101 Plymouth, MN 55446 Telephone No.: 763 478 9246 Telefax No.: 612 281 5000 Social Security #: _________________ 28. Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement. 10 11 29. Survival of Provisions. Sections 7 through 29 shall survive the termination of this Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. ACTIVE IQ TECHNOLOGIES, INC. By: /s/ Kenneth W. Brimmer -------------------------------------- Title: Chief Executive Officer /s/ D. Bradly Olah - -------------------------------------- D. Bradly Olah 11 EX-23.1 9 c64205ex23-1.txt CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated March 23, 2001, included in Active IQ Technologies, Inc.'s Form 8-K filed May 14, 2001, and to all references to our firm included in this registration statement. /s/ Arthur Andersen LLP Minneapolis, Minnesota, August 17, 2001 -----END PRIVACY-ENHANCED MESSAGE-----