0000950137-01-503667.txt : 20011009
0000950137-01-503667.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950137-01-503667
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20010918
ITEM INFORMATION: Acquisition or disposition of assets
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20010921
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: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12401
FILM NUMBER: 1742016
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
8-K
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c65103e8-k.txt
CURRENT REPORT
1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 18, 2001
ACTIVE IQ TECHNOLOGIES, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Minnesota 0-27968 41-2004369
---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
601 Carlson Parkway, Suite 1550
Minnetonka, Minnesota 55305
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (952) 449-5000
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Agreement and Plan of Merger dated August 30, 2001 (the
"Merger Agreement"), by and among the Registrant; CBS Acquisition, Inc., a
Minnesota corporation and a wholly owned subsidiary of Registrant ("Merger
Sub"); and Champion Business Systems, Inc., a Colorado corporation,
("Champion"), Merger Sub merged with and into Champion, and Champion became a
wholly owned subsidiary of the Registrant. The merger became effective September
18, 2001 (the "Effective Date"). Prior to the date of the Agreement, there was
no relationship between Champion or its shareholders and the Registrant or its
affiliates, officers and directors or any of their respective associates.
Champion develops and markets small business desktop accounting software.
Pursuant to the Merger Agreement, as of the Effective Date, all of the
common stock of Champion, issued and outstanding immediately prior to the
Effective Date ("Champion's Shares") was converted into the right to receive an
aggregate of $3,000,000 in the form of: (i) such number of shares of Common
Stock of Registrant (the "Common Shares"), up to the number of shares equal to a
market value of no more than One Million Five Hundred Thousand Dollars
($1,500,000), determined by the average of the closing bid and ask prices during
the 10 trading days preceding the Effective Date, as reported on the Nasdaq
SmallCap Market System, and (ii) the remaining amount (the "Cash") payable as
follows: (i) One-third (1/3) of the Cash paid immediately, and (ii) the
remaining two-thirds (2/3) payable four equal installments, each due on the 4,
8, 12 and 16-month anniversaries of the Effective Date, as evidenced by
promissory notes, secured by Registrant's shares in Champion.
In accordance with the Merger Agreement, the Registrant is required to
file a registration statement covering the resale of the Common Shares (the
"Registration Statement"). In addition, all of the Champion Shareholders who
received the Common Shares entered into a lockup agreement with respect to the
Common Shares, pursuant to which 12.5 percent of the Common Shares shall become
available for transfer every 3 months following the effective date of the
Registration Statement.
The foregoing is qualified in its entirety by reference to the Merger
Agreement, which is filed as Exhibit 2.1 to this Form 8-K and is incorporated by
reference herein. The Registration Rights Agreement, the Form of Promissory Note
and the Registrant's press release dated September 18, 2001 announcing the
Champion Business Systems merger, are each filed as Exhibits 10.1, 10.2 and
99.1, respectively, to this Form 8-K, and are each incorporated herein by
reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Pursuant to Item 7(a)(4), financial statements of Champion Business
Systems, Inc. will be filed by amendment to this Form 8-K on or before
December 3, 2001.
(b) Pro Forma Financial Information.
Pursuant to Item 7(b)(2), pro forma financial information concerning
the Registrant's acquisition of Champion Business Systems, Inc., as
described in Item 2 of this Form 8-K, will be filed by amendment to
this Form 8-K on or before December 3, 2001.
(c) Exhibits
2.1 Agreement and Plan of Merger by and among Active IQ Technologies,
Inc., CBS Acquisition, Inc. and Champion Business Systems, Inc.
dated August 30, 2001.
10.1 Registration Rights Agreement by and between Active IQ
Technologies, Inc. and the several shareholders of Champion
Business Systems, Inc. dated September 14, 2001.
10.2 Form of Promissory Note dated September 14, 2001
99.1 Press Release dated September 18, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ACTIVE IQ TECHNOLOGIES, INC.
Date: September 20, 2001 By: /s/ Kenneth W. Brimmer
-------------------------------------
Kenneth W. Brimmer
Chairman, Chief Executive Officer and
Chief Financial Officer
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EXHIBIT INDEX
2.1 Agreement and Plan of Merger by and among Active IQ Technologies,
Inc., CBS Acquisition, Inc. and Champion Business Systems, Inc.
dated August 30, 2001.
10.1 Registration Rights Agreement by and between Active IQ
Technologies, Inc. and the several shareholders of Champion
Business Systems, Inc. dated September 14, 2001.
10.2 Form of Promissory Note dated September 14, 2001
99.1 Press Release dated September 18, 2001.
EX-2.1
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c65103ex2-1.txt
AGREEMENT AND PLAN OF MERGER
1
EXHIBIT 2.1
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 30, 2001
AMONG
ACTIVE IQ TECHNOLOGIES, INC.,
CBS ACQUISITION, INC.
AND
CHAMPION BUSINESS SYSTEMS, INC.
--------------------------------------------------------------------------------
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TABLE OF CONTENTS
Exhibit A Form of Buyer's Note
Exhibit B Form of Employment Agreement
Exhibit C Form of Pledge Agreement
Exhibit D Form of Letter of Investment Intent
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Lock-Up Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of August
30, 2001, is entered into by and among CHAMPION BUSINESS SYSTEMS, INC., a
Colorado corporation (the "Company"), ACTIVE IQ TECHNOLOGIES, INC., a Minnesota
corporation ("Buyer"), and CBS ACQUISITION, INC., a Minnesota corporation and a
wholly owned subsidiary of Buyer ("Merger Subsidiary").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Merger Subsidiary, Buyer
and the Company have each duly approved the merger of Merger Subsidiary with and
into the Company (the "Merger") in accordance with the Minnesota Business
Corporation Act (the "MBCA") and the Colorado Business Corporation Act (the
"CBCA"), upon the terms and subject to the conditions set forth below;
WHEREAS, the Board of Directors of the Company has determined to
recommend to the shareholders of the Company that it is advisable and in the
best interests of the Company and its shareholders to approve the Merger; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
A G R E E M E N T:
ARTICLE 1
THE MERGER AND RELATED MATTERS
1.1 The Merger.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in SECTION 1.2), in accordance with the MBCA and the
CBCA, Merger Subsidiary shall merge with and into the Company, the separate
existence of Merger Subsidiary shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation").
(b) From and after the Effective Time (as defined in SECTION 1.2), the
Articles of Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time; (ii) the Bylaws of the Surviving Corporation shall be the Bylaws of the
Company as in effect immediately prior to the Effective Time; (iii) the
directors of Merger Subsidiary shall become the directors of the Surviving
Corporation at and as of the Effective Time (retaining their respective terms of
office); (iv) the officers of Merger Subsidiary shall become the officers of the
Surviving Corporation at and as of the Effective Time (retaining their
respective positions); and (v) the name of the Surviving Corporation shall be
the name of the Company immediately prior to the Effective Time.
1.2 Effective Time of the Merger. Pursuant to SECTION 1.5, as soon as
practicable after each of the conditions set forth in ARTICLE 6 hereof (other
than the condition that articles of merger be filed and become effective) have
been satisfied or waived, the Company and Merger Subsidiary will file, or cause
to
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be filed, articles of merger with the Secretaries of State of the States of
Minnesota and Colorado which articles of merger shall be in the form required by
and executed in accordance with the applicable provisions of the MBCA and the
CBCA. The Merger shall become effective at the time the articles of merger for
such merger are filed with the Secretaries of State of Colorado and Minnesota,
whichever event shall occur last (the "Effective Time"). As used in this
Agreement, the term "Effective Date" shall mean the date on which the Effective
Time shall occur.
1.3 Conversion of Company Common Shares.
(a) At the Effective Time, all of the common stock of the Company, par
value $0.0001 per share, issued and outstanding immediately prior thereto (the
"Company Common Shares") shall, by virtue of the Merger and without any action
on the part of the holders thereof, be converted into the right to receive an
aggregate of Three Million Dollars ($3,000,000) (the "Merger Consideration") in
the following forms: (i) such number of shares of Common Stock of Buyer, par
value $0.01 per share (the "Buyer Common Shares"), up to the number of shares
equal to a market value of no more than One Million Five Hundred Thousand
Dollars ($1,500,000) which shall be determined by the average of the closing bid
and ask prices during the 10 trading days preceding the Effective Date, as
reported on the Nasdaq SmallCap Market System, subject to a minimum value of
$4.00 per share (the "Stock Consideration") and (ii) the remaining amount (the
"Cash Consideration") to be payable in accordance with this ARTICLE 1.
(b) The Cash Consideration shall be payable by Buyer to the Company
Shareholders, as follows:
(i) One-third (1/3) of the Cash Consideration shall be
delivered by Buyer at the Closing (the "Closing Payment"), subject to
adjustment in accordance with SECTION 8.5 hereof; and
(ii) The remaining two-thirds (2/3) of the Cash Consideration
shall be payable by Buyer in four (4) equal installments, each due on
the 4, 8, 12 and 16-month anniversaries of the Effective Date, as
evidenced by the promissory note to be delivered by Buyer in
substantially the form of EXHIBIT A attached hereto (the "Buyer's
Note"), secured by Buyer's shares in the Surviving Corporation as
provided below in SECTION 8.2.
(c) All of the shareholders of the Company as of the Effective Time
(the "Company Shareholders") identified on SCHEDULE 1.3 by not having an "A"
next to their name (the "Minority Shareholders") (who, to the Company's best
knowledge, do not meet the definition of "Accredited Investor" under Regulation
D of the Securities Act of 1933, as amended (the "Securities Act")) shall
receive their pro rata Merger Consideration in the following allocation:
(i) One-third (1/3) in cash as part of the Closing Payment;
(ii) Two-thirds (2/3) as part of the Buyer's Note.
(d) All Company Shareholders who have an "A" marked next to their name
on SCHEDULE 1.3 (the "Accredited Shareholders") (who, to the Company's best
knowledge, do meet the requirements of the definition of "Accredited Investor"
under Regulation D of the Securities Act, or who will have retained a purchaser
representative in connection with the offering of Buyer Common Shares
contemplated hereby) shall receive their pro rata Merger Consideration in the
following allocation:
(i) One-half (1/2) in Stock Consideration;
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(ii) One-sixth (1/6) in cash as part of the Closing Payment;
(iii) One-third (1/3) as part of the Buyer's Note.
(e) At and as of the Effective Time, the holders of certificates
representing the Company Common Shares at the Effective Time shall cease to have
any rights as shareholders of the Company, except the right to receive the
Merger Consideration in accordance with ARTICLE 1 hereof and such rights, if
any, as they may have pursuant to Colorado law. Except as provided above, until
certificates representing Company Common Shares are surrendered for exchange,
each such certificate shall, after the Effective Time, represent for all
purposes only the right to receive the Merger Consideration.
(f) If, between the date of this Agreement and the Effective Time, the
outstanding Buyer Common Shares or Company Common Shares, respectively, shall
have been changed into a different number of shares or a different class as a
result of any reclassification, recapitalization, combination, reverse stock
split, exchange of shares or stock dividend, the Stock Consideration shall be
appropriately adjusted.
1.4 Exchange of Company Common Shares.
(a) After the Effective Time, each Company Shareholder shall be
entitled, upon surrender of a certificate which immediately prior to the
Effective Time represented outstanding Company Common Shares (collectively, the
"Certificates"), along with the letter of transmittal described in SECTION
1.4(B), to receive the Merger Consideration from Buyer through such reasonable
procedures as Buyer may adopt (including but not limited to those set forth in
this Agreement).
(b) As soon as reasonably practicable after the Effective Time, Buyer
shall deliver to each Company Shareholder (i) a letter of transmittal in
customary form and containing such provisions as Buyer may reasonably specify
(including a provision confirming that delivery of the Certificates shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of such Certificates to Buyer), and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Promptly after the Effective Time, each Company Shareholder shall
surrender to Buyer each Certificate which immediately prior to the Effective
Time represented outstanding Company Common Shares together with a letter of
transmittal. Upon surrender by a Company Shareholder of the Certificate for
cancellation to Buyer, together with the letter of transmittal, duly executed,
the Company Shareholders shall be entitled to receive in exchange therefor the
Merger Consideration as described above. No interest shall accrue or be payable
with respect to any Merger Consideration which any person shall be so entitled
to receive, except as provided in the Buyer's Note.
(c) In the event any Certificates shall have been lost, stolen or
destroyed, Buyer shall deliver in exchange for such lost, stolen or destroyed
Certificate, upon the making of an affidavit of that fact by the holder thereof,
the Merger Consideration, as may be required pursuant hereto; provided, however,
that Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to
deliver a bond in such reasonable sum as it may direct as indemnity against any
claim that may be made against Buyer, Merger Subsidiary, the Company, or any
other party with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(d) Prior to the Effective Time, the Board of Directors of Buyer shall
authorize and reserve for issuance a sufficient number of Buyer Common Shares
for the purpose of issuing its shares to the Company Shareholders in accordance
herewith.
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(e) Each share of the Company's stock held in the treasury of the
Company shall be cancelled as of the Effective Time and no Merger Consideration
shall be payable with respect thereto.
1.5 The Closing. Subject to the terms of this Agreement, including but
not limited to the conditions to close, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the offices of
Maslon Edelman Borman & Brand, LLP, 3300 Wells Fargo Center, 90 South Seventh
Street, Minneapolis, Minnesota, at 10:00 a.m. on September 14, 2000 (the
"Closing Date"), or at such other place and on such other date as is mutually
agreeable to Buyer and the Company. The Closing will be effective upon filing
articles of merger with the Secretary of State of the States of Colorado and
Minnesota, whichever event shall occur last.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that, except as set forth
in the Disclosure Schedules attached hereto and delivered to Buyer on the date
hereof (the "Schedules" or when referring to a particular Schedule called for by
a section of this Agreement, "Schedule _._"), which schedules set forth the
exceptions to the representations and warranties contained in this ARTICLE 2:
2.1 Incorporation and Corporate Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Colorado and has the corporate power and authority and all
authorizations, licenses, permits and certifications necessary to own and
operate its properties and to carry on its business as now conducted and
presently proposed to be conducted. The copies of the Company's
Certificate/Articles of Incorporation and Bylaws which have been furnished by
the Company to Buyer prior to the date hereof reflect all amendments made
thereto and are correct and complete as of the date hereof. The Company is
qualified to do business as a foreign corporation in every jurisdiction in which
the nature of its business or its ownership of property requires it to be so
qualified except for those jurisdictions in which the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect on
the Company's business, operations, earnings, assets or financial condition
("Material Adverse Effect").
2.2 Execution, Delivery; Valid and Binding Agreements. Other than the
approval of the Merger by the Company Shareholders as contemplated in SECTION
4.3, the execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and no other proceedings on its part are necessary to
authorize the execution, delivery and performance of this Agreement. This
Agreement has been and the other agreements to be executed pursuant hereto will
be at Closing duly executed and delivered by the Company and constitute, or at
Closing will constitute, the valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as the same may be
subject to general principles of equity or limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws.
2.3 No Breach. Except as set forth on SCHEDULE 2.3, the execution,
delivery and performance of this Agreement and each Related Agreement (as
defined in SECTION 6.1(E)) to be executed by the Company in connection herewith
and the consummation by the Company of the transactions contemplated hereby do
not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, result in the creation of
a right of termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of the Company, or require any authorization,
consent, approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the Articles of Incorporation or
Bylaws of the Company or any indenture, mortgage, lease, loan agreement or other
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agreement or instrument by which the Company is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which the Company is
subject.
2.4 Governmental Authorities; Consents. The Company is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by the Company in connection with its
execution, delivery and performance of this Agreement or the transactions
contemplated hereby, except for filing of the Articles of Merger with the
Secretaries of State of Colorado and Minnesota.
2.5 Capital Stock. The authorized capital stock of the Company consists
of 50,000,000 shares of common stock, par value $.0001 per share and 600,000
shares of convertible preferred stock ("Preferred Stock"), par value $.0001 per
share, of which, as of the date hereof, 6,633,848 Company Common Shares and no
shares of Preferred Stock, are issued and outstanding, all of which are owned
beneficially and of record by the Company Shareholders. All of the Company
Common Shares have been duly authorized and are validly issued, fully paid and
nonassessable. Except as set forth on SCHEDULE 2.5, (i) the Company has no other
equity securities or securities containing any equity features authorized,
issued or outstanding; (ii) there are no agreements or other rights or
arrangements existing which provide for the sale or issuance of capital stock by
the Company, and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or otherwise
acquire from the Company any shares of capital stock or other securities of the
Company of any kind; and (iii) there are no agreements or other obligations
(contingent or otherwise) which may require the Company to repurchase or
otherwise acquire any shares of its capital stock.
2.6 Subsidiaries. The Company does not directly or indirectly have any
subsidiaries or any direct or indirect ownership interests in any partnership,
joint venture, corporation, organization or entity.
2.7 Financial Statements. The Company has delivered to Buyer copies of
(a) the unaudited balance sheet, as of June 30, 2001, of the Company (the
"Latest Balance Sheet" and the date of the Latest Balance Sheet shall be
referred to herein as the "Latest Balance Sheet Date") and the unaudited
statements of operations and cash flows of the Company for the six-month period
ended June 30, 2001, (such statements and the Latest Balance Sheet being herein
referred to as the "Latest Financial Statements") and (b) the unaudited balance
sheets, as of December 31, 2000, December 31, 1999 and December 31, 1998, of the
Company and the unaudited statements of operations, stockholders' equity and
cash flows of the Company for each of the years ended December 31, 2000,
December 31, 1999 and December 31, 1998 (collectively, the "Annual Financial
Statements"). The Latest Financial Statements and the Annual Financial
Statements are true and correct in all material respects, are based upon the
information contained in the books and records of the Company and fairly present
the financial condition of the Company as of the dates thereof and results of
operations, stockholders' equity and cash flows for the periods referred to
therein. The Latest Financial Statements have been prepared in accordance with
generally accepted accounting principles applicable to unaudited interim
financial statements (and thus may not contain all notes which are required to
be prepared in accordance with generally accepted accounting principles)
consistent with the Annual Financial Statements and reflect all adjustments
necessary to fairly present the financial position, results of operations and
cash flows for the interim period(s) presented.
2.8 Absence of Undisclosed Liabilities. Except as reflected in the
Latest Balance Sheet, the Company has no liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due and
regardless of when asserted) and there are no liabilities arising out of
transactions or
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events heretofore entered into, or any action or inaction, or any state of facts
existing, with respect to or based upon transactions or events heretofore
occurring, except (i) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit which in the aggregate exceeds $5,000), or (ii)
as otherwise set forth in SCHEDULE 2.8.
2.9 No Material Adverse Changes. Since the Latest Balance Sheet Date,
there has not been, and the Company has no reason to believe that from the date
hereof through the Closing Date, there will be, any material adverse change in
the Company's business, operations, earnings, assets or financial condition,
except for the losses reflected in the Latest Financial Statements and any
material adverse change resulting therefrom.
2.10 Absence of Certain Developments. Other than as disclosed on
SCHEDULE 2.10, since the Latest Balance Sheet Date, the Company has not:
(a) borrowed any amount or incurred or become subject to any liability,
except liabilities incurred in the ordinary course of business in an amount not
to exceed $25,000;
(b) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any of its assets, except (i) liens for current property taxes not
yet due and payable and (ii) liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers, warehousemen,
laborers, materialmen and the like;
(c) discharged or satisfied any lien or encumbrance or paid any
liability, other than current liabilities paid in the ordinary course of
business;
(d) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any tangible assets, or
canceled any debts or claims, in each case, except in the ordinary course of
business;
(e) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or shareholders) any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets;
(f) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience, whether or not in the
ordinary course of business or consistent with past practice;
(g) declared or paid any dividends or other distributions with respect
to any shares of the Company's capital stock or redeemed or purchased, directly
or indirectly, any shares of the Company's capital stock or any options;
(h) issued, sold or transferred any of its equity securities,
securities convertible into or exchangeable for its equity securities or
warrants, options or other rights to acquire its equity securities, or any bonds
or debt securities;
(i) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any
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"Insider" (as defined in SECTION 2.22 hereof) other than employment arrangements
otherwise disclosed in this Agreement and the Disclosure Schedule, or the
transactions contemplated by this Agreement;
(j) suffered any material theft, damage, destruction or loss of or to
any property or properties owned or used by it, whether or not covered by
insurance;
(k) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or consultant or made or granted any
increase in any employee benefit plan or arrangement, or amended or terminated
any existing employee benefit plan or arrangement, or adopted any new employee
benefit plan or arrangement or made any commitment or incurred any liability to
any labor organization;
(l) made any single capital expenditure or commitment therefor in
excess of $25,000;
(m) made any loans or advances to, or guaranties for the benefit of,
any persons; or
(n) made any change in accounting principles or practices or accounting
reserves from those utilized in the preparation of the Annual Financial
Statements.
2.11 Title to Properties.
(a) The Company does not own any real property. SCHEDULE 2.11 contains
a list of all of the leases (the "Leases") and a description of the Company's
leasehold interests in real property used or occupied by the Company (the
"Leased Property").
(b) The Leases are in full force and effect, and the Company holds a
valid and existing leasehold interest under each of the Leases for the term set
forth under such caption in the Disclosure Schedule. The Company has delivered
to Buyer complete and accurate copies of each of the Leases, and none of the
Leases has been modified in any respect, except to the extent that such
modifications are disclosed by the copies delivered to Buyer. The Company is not
in default, and no circumstances exist which, if unremedied, would, either with
or without notice or the passage of time or both, result in such default under
any of the Leases; nor, to the best knowledge of the Company, is any other party
to any of the Leases in default.
(c) The Company owns good and marketable title to, or a valid leasehold
interest in, each of the tangible properties and tangible assets reflected on
the Latest Balance Sheet or acquired since the date thereof, free and clear of
all liens and encumbrances, except for (i) liens for current taxes not yet due
and payable, (ii) the properties subject to the Leases, (iii) liens imposed by
law and incurred in the ordinary course of business for obligations not yet due
to carriers, warehousemen, laborers and materialmen, and (iv) liens disclosed in
SCHEDULE 2.11.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Company's business are in good operating
condition and repair, ordinary wear and tear excepted, and are usable in the
ordinary course of business. There are no defects in such assets or other
conditions relating thereto which, in the aggregate, materially adversely affect
the operation or value of such assets.
(e) To the Company's knowledge, the Company is not in violation of any
applicable zoning ordinance or other law, regulation or requirement relating to
the operation of any properties used in
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the operation of its business, and the Company has not received any notice of,
nor does it have any reason to believe (i) any such violation exists, or (ii)
any condemnation proceeding exists with respect to any of the Leased Property,
except, in each case, with respect to violations the potential consequences of
which do not or will not have a material adverse effect on the Company.
2.12 Accounts Receivable. The accounts receivable reflected on the
Latest Balance Sheet are valid receivables and are collectible in accordance
with their terms except to the extent of the bad debt reserve, if any, reflected
on the Latest Balance Sheet. To the Company's knowledge, no counterclaim or
set-off has been claimed or asserted with respect to any such accounts
receivable.
2.13 Inventory. The Company's inventory of work in process and finished
goods consists of items of a quality and quantity usable and, with respect to
finished goods only, salable at the Company's normal profit levels, in each
case, in the ordinary course of the Company's business.
2.14 Tax Matters. Except as otherwise described on SCHEDULE 2.14:
(a) The Company has timely filed, or has caused to be timely filed on
its behalf, all returns, declarations and reports and information returns and
statements required to be filed or sent by or relating to any of them prior to
the Closing relating to any Taxes (as defined below) with respect to any income,
properties or operations of the Company prior to the Effective Time
(collectively, the "Returns"), and all such Returns are true, complete and
accurate, except to the extent any failure to file or any inaccuracies in any
filed Returns would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. All Taxes shown to be due on such Returns, or
otherwise owed, have been timely paid. No deficiency with respect to any Taxes
has been proposed, asserted or assessed in writing against the Company, and no
written requests for waivers of the time to assess any such Taxes are pending,
except to the extent any such deficiency or request for waiver would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(b) The United States federal income tax returns of the Company have
been filed through the year ending December 31, 1999. All material assessments
for Taxes due with respect to such completed and settled examinations or any
concluded litigation have been fully paid. There are no material liens for Taxes
(other than for current Taxes not yet due and payable or liens for Taxes being
contested in good faith by appropriate proceedings for which reserves have been
established in accordance with GAAP) on the assets of the Company. The Company
is not bound by any material agreement with respect to Taxes.
(c) "Tax" (and with the corresponding meaning "Taxes" and "Taxable")
shall include (i) any net income, gross income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profit tax, custom
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest and any penalty, addition to tax or
additional amount imposed by any taxing authority (domestic or foreign) and (ii)
any liability for the payment of any amount of the type described in clause (i)
as a result of being a member of an affiliated or combined group.
2.15 Contracts and Commitments.
(a) SCHEDULE 2.15 lists each of the following written agreements to
which the Company is a party, which are currently in effect, and which relate to
the operation of the Company's business: (i) collective bargaining agreement or
contract with any labor union; (ii) bonus, pension, profit sharing, retirement
or other form of deferred compensation plan, other than as described on SCHEDULE
2.20 (or
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excluded by SECTION 2.20 from inclusion thereunder); (iii) hospitalization
insurance or other welfare benefit plan or practice, whether formal or informal,
other than as described on SCHEDULE 2.20 (or excluded by SECTION 2.20 from
inclusion thereunder); (iv) stock purchase or stock option plans; (v) contract
for the employment of any officer, individual employee or other person on a
full-time or consulting basis or relating to severance pay for any such person;
(vi) material confidentiality agreements; (vii) contract, agreement or
understanding relating to the voting of the Company's Common Shares or the
election of directors of the Company; (viii) agreement or indenture relating to
the borrowing of money or to mortgaging, pledging or otherwise placing a lien on
any of the assets of the Company; (ix) guaranty of any obligation for borrowed
money or otherwise; (x) lease or agreement under which it is lessee of, or holds
or operates any property, real or personal, owned by any other party; (xi) lease
or agreement under which it is lessor of, or permits any third party to hold or
operate, any property, real or personal; (xii) contract or group of related
contracts with the same party for the purchase of products or services under
which the undelivered balance of such products or services is in excess of
$15,000 as of the Latest Balance Sheet Date; (xiii) contract or group of related
contracts with the same party for the sale of products or services under which
the undelivered balance of such products or services has a sales price in excess
of $15,000 as of the Latest Balance Sheet Date; (xiv) contract or group of
related contracts with the same party (other than any contract or group of
related contracts for the purchase or sale of products or services) continuing
over a period of more than six months from the date or dates thereof, not
terminable by the Company on 30 days' or less notice without penalty; (xv)
contract which prohibits the Company from freely engaging in business anywhere
in the world; (xvi) contract for the distribution of the Company's products
(including any distributor, sales and original equipment manufacturer contract);
(xvii) franchise agreement; (xviii) license agreement or agreement providing for
the payment or receipt of royalties or other compensation by the Company in
connection with the intellectual property rights listed on SCHEDULE 2.16; (xix)
contract or commitment for capital expenditures in excess of $15,000; (xx)
agreement for the sale of any capital asset; (xxi) contract with any affiliate
which in any way relates to the Company (other than for employment on customary
terms); or (xxii) other agreement which is either material to the Company's
business or was not entered into in the ordinary course of business.
(b) The Company has performed all material obligations required to be
performed by it in connection with the contracts or commitments disclosed in
SCHEDULE 2.15 and is not in receipt of any claim of default under any contract
or commitment disclosed under such caption and the Company has no present
expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed under such
caption; and the Company has no knowledge of any breach or anticipated breach by
any other party to any contract or commitment under such caption.
(c) Prior to the date of this Agreement, Buyer has been supplied with a
true and correct copy of each written contract or commitment, and a written
description of each oral contract or commitment disclosed on SCHEDULE 2.15,
together with all amendments, waivers or other changes thereto.
2.16 Intellectual Property Rights.
(a) SCHEDULE 2.16 lists all Registered Intellectual Property Rights
owned by, filed in the name of, or applied for, by the Company (the "Company
Registered Intellectual Property Rights") and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property Rights or Company Intellectual
Property.
(b) Each item of the Company Registered Intellectual Property Rights is
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Company Registered Intellectual Property Rights have been
paid and all necessary documents and certificates in connection with
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such Company Registered Intellectual Property Rights have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property Rights. The Company has not claimed a
particular status, including "Small Business Status," in the application for any
Intellectual Property Rights, which claim of status was not at the time made, or
which has since become, inaccurate or false or that will no longer be true and
accurate as a result of the Closing.
(c) The Company has no knowledge of any facts or circumstances that
would render any Company Intellectual Property invalid or unenforceable.
(d) Each item of Company Intellectual Property is free and clear of any
Security Interests except for non-exclusive licenses granted to end-user
customers in the ordinary course of business, non-exclusive licenses received by
Company from third parties, and as otherwise disclosed on SCHEDULE 2.16. The
Company is the exclusive owner or exclusive licensee of all Company Intellectual
Property identified on SCHEDULE 2.16 as being owned by Company.
(e) Except as set forth on SCHEDULE 2.16, all Company Intellectual
Property currently licensed by the Company from third parties will be fully
transferable, alienable or licensable by Surviving Corporation without
restriction and without payment of any kind to any third party.
(f) To the extent that any Company Technology has been developed or
created by a third party for the Company, the Company either (i) has obtained
ownership of, and is the exclusive owner of, or (ii) has obtained a license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to all such third party's Intellectual Property Rights
in such Technology by operation of law or by valid assignment.
(g) The Company has taken all steps that are reasonably required to
protect its rights in confidential information and trade secrets of the Company
or provided by any other person to the Company.
(h) SCHEDULE 2.16 lists all material contracts, licenses and agreements
to which the Company is a party with respect to any Technology or Intellectual
Property Rights. The Company is not in breach of nor has it failed to perform
under, any of the foregoing contracts, licenses or agreements and, to the
Company's knowledge, no other party to any such contract, license or agreement
is in breach thereof or has failed to perform thereunder.
(i) To the Company's knowledge, the operation of the business of the
Company as it currently is conducted or is contemplated to be conducted by the
Company, including but not limited to the design, development, use, import,
branding, advertising, promotion, marketing, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company does not and will not when conducted
by the Company, Buyer and/or the Surviving Corporation in substantially the same
manner following the Closing, infringe or misappropriate any Intellectual
Property Right of any person, violate any right of any person (including any
right to privacy or publicity) or constitute unfair competition or trade
practices under the laws of any jurisdiction, and the Company has not received
notice from any person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of the Company infringes or misappropriates any Intellectual
Property of any person or constitutes unfair competition or trade practices
under the laws of any jurisdiction.
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(j) To the Company's knowledge, no person is infringing or
misappropriating any Intellectual Property owned by Company.
(k) Except as disclosed in SCHEDULE 2.16, neither this Agreement nor
the transactions contemplated by this Agreement, including the assignment to
Buyer or the Surviving Corporation, by operation of law or otherwise, of any
contracts or agreements to which the Company is a party, will result in (i)
either Buyer's or the Surviving Corporation's granting to any third party any
right to or with respect to any Technology or Intellectual Property Right owned
by, or licensed to, either of them, (ii) either Buyer's or the Surviving
Corporation's being bound by, or subject to, any non-compete or other
restriction on the operation or scope of their respective businesses, or (iii)
either Buyer or the Surviving Corporation being obligated to pay any royalties
or other amounts to any third party in excess of those payable by Buyer or
Surviving Corporation, respectively, prior to the Closing.
(l) Except as disclosed on SCHEDULE 2.16, there are no royalties, fees,
honoraria or other payments payable by the Company to any person or entity by
reason of the ownership, development, use, license, sale or disposition of
Company Intellectual Property, other than salaries and sales commissions paid to
employees and sales agents in the ordinary course of business.
(m) For purposes of this Agreement, the following definitions shall
apply:
(i) "Intellectual Property" shall mean any or all of the
following owned by the Company, and all rights in, arising out of, or
associated therewith: (A) all United States and foreign patents and
utility models and applications therefor and all reissues, divisions,
re-examinations, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights
anywhere in the world in inventions and discoveries including without
limitation invention disclosures ("Patents"); (B) all trade secrets and
other rights in know-how and confidential or proprietary information;
(C) all copyrights, copyrights registrations and applications therefor
and all other rights corresponding thereto throughout the world
("Copyrights"); (D) all maskworks, maskwork registrations and
applications therefor, and any equivalent or similar rights in
semiconductor masks, layouts, architectures or topology ("Maskworks");
(E) all industrial designs and any registrations and applications
therefor throughout the world; (F) all rights in World Wide Web
addresses and domain names and applications and registrations therefor;
(G) all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and
all goodwill associated therewith throughout the world ("Trademarks");
and (H) any similar, corresponding or equivalent rights to any of the
foregoing anywhere in the world. Intellectual Property excludes
standard off-the-shelf or pre-packaged software licenses, licenses
pertaining to general website access and usage, licenses for software
pre-installed on computer and telecommunications hardware, and
invention or patent rights owned by third parties and embodied in third
party commercial products that are owned or utilised by the Company.
(ii) "Registered Intellectual Property Rights" all United
States, international and foreign: (a) Patents, including applications
therefor; (b) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other
registrations or applications related to Trademarks; (c) Copyrights
registrations and applications to register Copyrights; (d) Maskwork
registrations and applications to register
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Maskworks; and (e) any other Technology that is the subject of an
application, certificate, filing, registration or other document issued
by, filed with, or recorded by, any state, government or other public
or private legal authority at any time.
(iii) "Technology" shall mean any or all of the following: (i)
works of authorship including, without limitation, computer programs,
source code and executable code, whether embodied in software, firmware
or otherwise, documentation, designs, files, net lists, records, data
and maskworks; (ii) inventions (whether or not patentable),
improvements, and technology; (iii) proprietary and confidential
information, including technical data and customer and supplier lists,
trade secrets and know how; (iv) databases, data compilations and
collections and technical data; (v) logos, trade names, trade dress,
trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, methods and processes; and (viii) all
instantiations of the foregoing in any form and embodied in any media.
2.17 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of the Company, threatened
against the Company, at law or in equity, or before or by any federal, state or
municipal court or other governmental department, commission, board, bureau,
agency or instrumentality.
2.18 Warranties. SCHEDULE 2.18 sets forth a summary of the Company's
product or service warranties and all claims outstanding, pending or, to the
best knowledge of the Company, threatened for breach of any warranty relating to
any products or services sold by the Company prior to the date hereof. The
reserves for warranty claims on the Latest Balance Sheet are consistent with the
Company's prior practices and are fully adequate to cover all warranty claims
made or to be made against any products or services of the Company sold prior to
the date thereof.
2.19 Employees. Except as set forth on SCHEDULE 2.19: (a) to the
Company's knowledge, no employee or group of employees of the Company has any
plans to terminate his, her or its employment; (b) the Company has no material
labor relations problem pending and its labor relations are satisfactory; (c) to
the Company's knowledge, no employee of the Company is subject to any secrecy or
noncompetition agreement or any other agreement or restriction of any kind that
would impede in any way the ability of such employee to carry out fully all
activities of such employee in furtherance of the business of the Company; and
(d) to the Company's knowledge, no employee or former employee of the Company
has any claim with respect to any Intellectual Property Rights of the Company.
2.20 Employee Benefit Plans.
(a) SCHEDULE 2.20 lists all employee welfare benefit plans and all
employee pension benefit plans within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), maintained or contributed to
by the Company (collectively, the "Plans"), and no trust funds are so maintained
in connection with any employee welfare benefit plan. The Company has delivered
or made available to Buyer a true, correct and complete copy of each of the
Plans identified on such list. As to each of such Plans that is funded, the
Company has delivered or made available to Buyer a true, correct and complete
copy of the most recent annual financial report with respect to such plan, and
any subsequent interim report. Each such financial report and interim report is
an accurate description of the financial status of the subject employee benefit
plan, and there have been no adverse changes in the financial status of any such
Plans since the date of the most recent report provided with respect thereto.
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(b) SCHEDULE 2.20 also specifically identifies each of the Plans that
is represented to be a qualified plan under Section 401(a) of the Code. With
respect to each of the Plans so identified, each has been administered in all
material respects in accordance with its terms and in compliance with the
applicable provisions of ERISA and the Code. There are no investigations by any
governmental agency, termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Plans), suits or proceedings
against or involving any Plan or asserting any rights to or claims for benefits
under, any Plan. The Company has no formal plan or commitment to create any
additional benefit plans or modify any existing Plan except as necessary to
comply with ERISA and the Code.
(c) The Company does not now maintain or contribute to, nor, except as
set forth on SCHEDULE 2.20, has the Company at any time maintained or
contributed to, any employee benefit plan which is subject to Title IV of ERISA.
Except as set forth on SCHEDULE 2.20, all contributions payable to any of the
Plans for any plan year ending prior to the date hereof have been paid in full
on a timely basis and no accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA) has been incurred.
(d) The Company has not engaged in, nor entered into any arrangement
pursuant to which any person or entity is contractually bound to enter into, any
transaction which could result in imposition upon either the Company or any
subsidiary or Buyer of any excise tax under Sections 4971 through 4980B,
inclusive, and Section 5000 of the Code or civil liability under Section 502(i)
or 502(l) of ERISA or otherwise incurred a liability for any excise tax, other
than excise taxes which have heretofore been paid or have been accrued on the
Latest Balance Sheet.
(e) The Company and each subsidiary (if any) has (i) filed or caused to
be filed on a timely basis each and every return, report, statement, notice,
declaration and other document required to be filed with any governmental
agency, federal, state and local (including, without limitation, the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation and SEC) with
respect to each of the Plans; and the Company delivered or made available to
Buyer all records with respect to the Plans as are required for their proper
administration and proper continued reporting and disclosure; (ii) timely
complied with all applicable participant disclosure requirements of ERISA; and
(iii) has maintained in full force and effect any bond required under ERISA in
connection with such Plans.
(f) The Company is not and has never been a member of a controlled
group of corporations, an unincorporated trade or business under common control,
or a member of an affiliated service group (as such terms are defined in
Sections 414(b), 414(c) and 414(m) of the Code), involving any other entity.
(g) There are no "leased employees" (as defined in Section 414(n) of
the Code) who performed services for the Company, nor are there any persons who
are anticipated to become leased employees with the passage of time.
(h) The Company does not maintain any employee benefit plan providing
benefits to former employees or directors, other than health coverage mandated
by applicable law.
(i) The Company has complied in all respect with the "COBRA"
requirements of Section 4980B of the Code.
(j) There are no actions, suits or claims pending or, to the best
knowledge of the Company, threatened with respect to any of the Plans other than
routine claims for benefits.
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(k) Neither the Company nor any of its directors, officers, employees
or other "fiduciaries," as that term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans that would subject the Company to any
liability under ERISA or any other applicable law.
(l) SCHEDULE 2.20 sets forth a description of the Company's employee
policy with respect to vacation, sick day or personal time off, including the
amount each employee of the Company has accrued as of the date hereof.
2.21 Insurance. SCHEDULE 2.21 lists and briefly describes (i) each
insurance policy maintained by the Company with respect to the Company's
properties, assets and operations, (ii) sets forth the date of expiration of
each such insurance policy and (iii) briefly summarizes all material claims
currently outstanding under each such policy. All of such insurance policies are
in full force and effect and provide adequate insurance coverage for the assets
and operations of the Company for risks normally insured against, in a manner
consistent with the Company's past practices. The Company is not in default with
respect to its obligations under any of such insurance policies. To the best
knowledge of the Company, there has been no threatened termination of, or
premium increase whether retrospective or prospective with respect to any of
such policies.
2.22 Affiliate Transactions. Other than pursuant to this Agreement, no
officer, director or employee of the Company or any member of the immediate
family of any such officer, director or employee, or any entity in which any of
such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "Insiders"), has any
agreement with the Company (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the business of the Company (other than ownership of capital
stock of the Company). None of the Insiders has any direct or indirect interest
in any competitor, supplier or customer of the Company or in any person, firm or
entity from whom or to whom the Company leases any property, or in any other
person, firm or entity with whom the Company transacts business of any nature.
For purposes of this SECTION 2.22, the members of the immediate family of an
officer, director or employee shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such officer, director or employee.
2.23 Customers and Suppliers. SCHEDULE 2.23 lists the 10 largest
customers and suppliers of the Company for the fiscal year ended December 31,
2000, and for the six-month period ended June 30, 2001, and sets forth opposite
the name of each such customer or supplier the approximate percentage of net
sales or purchases by the Company attributable to such customer or supplier for
each such period. Except as listed on SCHEDULE 2.23, since the Latest Balance
Sheet Date, no customer or supplier listed on SCHEDULE 2.23 has indicated that
it will stop or decrease the rate of business done with the Company except for
changes in the ordinary course of the Company's business.
2.24 Officers and Directors; Bank Accounts. SCHEDULE 2.24 lists all
officers and directors of the Company and all of the Company's bank accounts
(designating each authorized signer).
2.25 Compliance with Laws; Permits.
(a) The Company and its officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to,
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federal, state and local laws, ordinances, rules, regulations and other
requirements pertaining to product labeling, consumer products safety, equal
employment opportunity, employee retirement, affirmative action, immigration and
naturalization, and other hiring practices, occupational safety and health,
workers' compensation, unemployment and building and zoning codes, violation of
which could have a Material Adverse Effect and to which the Company may be
subject, and no claims have been filed against the Company alleging a violation
of any such laws, regulations or other requirements.
(b) The Company has, in full force and effect, all licenses, permits
and certificates, from federal, state and local authorities (including, without
limitation, federal and state agencies regulating occupational health and
safety) necessary to conduct its business and own and operate its properties
(other than Environmental Permits, as such term is defined in SECTION 2.26(C)
hereof) (collectively, the "Permits"). A true, correct and complete list of all
the Permits is set forth on SCHEDULE 2.25. The Company has conducted its
business in substantial compliance with all material terms and conditions of the
Permits.
2.26 Environmental Matters.
(a) As used in this SECTION 2.26, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or
substance as defined in or governed by any federal, state or local law,
statute, code, ordinance, regulation, rule or other requirement
relating to such substance or otherwise relating to the environment or
human health or safety, including without limitation any waste,
material, substance, pollutant or contaminant that might cause any
injury to human health or safety or to the environment or might subject
the Company to any imposition of costs or liability under any
Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state
and local laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution,
contamination or protection of the environment (including, without
limitation, all applicable federal, state and local laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits,
licenses and judgments relating to Hazardous Materials in effect as of
the date of this Agreement).
(b) To the Company's knowledge, no Leased Property nor any of the
operations conducted thereon, nor any other past or present actions or omissions
by the Company, violate any Environmental Laws, nor are there any conditions
existing on any such Leased Property or resulting from operations conducted
thereon that may give rise to any on-site or off-site remedial obligations under
any Environmental Law.
(c) To the Company's knowledge, no Leased Property nor the operations
currently or previously conducted thereon or by any prior owner of the Leased
Property or operation, are subject to any existing, pending or threatened,
action, suit, order, investigation, inquiry or proceeding relating to human
health or environmental quality or any Environmental Laws by or before any
court, agency, or other governmental authority.
(d) To the Company's knowledge, all notices and Authorizations, if any,
required to be obtained or filed in connection with the operation or use of any
and all Leased Property, including without limitation past or present treatment,
storage, disposal or release of a Hazardous Materials or solid waste into the
environment, have been duly obtained or filed, and the Company is in compliance
with the terms and conditions of all such notices and authorizations.
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(e) The Company has not nor has any other Person filed any notice under
any Environmental Laws indicating that the Company is responsible for the
release into the environment, or the improper storage, of any hazardous or toxic
waste, substance or constituent or that any such waste, substance or constituent
has been released, or is improperly stored, upon any Leased Property.
2.27 Disclosure. Neither this Agreement, and of the Exhibits hereto,
any of the documents delivered by or on behalf of the Company pursuant to
ARTICLE 6 hereof, the Disclosure Schedules nor any of the financial statements
referred to in SECTION 2.8 hereof (as to the periods relating to such financial
statements), contain any untrue statement of a material fact regarding the
Company or its business or any of the other matters dealt with in this Article 2
relating to the Company or the transactions contemplated by this Agreement or
omit to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they were made, not
misleading, and there is no fact which has not been disclosed to Buyer of which
the Company is aware which materially affects adversely or could reasonably be
anticipated to materially affect adversely the business (in the aggregate),
including operating results, assets, customer relations, employee relations and
business prospects, of the Company.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY
Buyer (including predecessors of Buyer) and Merger Subsidiary hereby
represent and warrant to the Company that:
3.1 Incorporation and Corporate Power. Each of Buyer and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota, with the requisite corporate
power and authority to enter into this Agreement and perform their respective
obligations hereunder. Each of Buyer and Merger Subsidiary is qualified to do
business as a foreign corporation in every jurisdiction in which the nature of
its business or its ownership of property requires it to be so qualified except
for those jurisdictions in which the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on it.
3.2 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by each of Merger Subsidiary and
Buyer and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate action, and no other
corporate proceedings are necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement has been, and each of the Related
Agreements to be executed by Buyer or Merger Subsidiary at Closing (including
the Buyer's Note) will be, duly executed and delivered by each of Merger
Subsidiary and Buyer and constitute the valid and binding obligation of each,
enforceable in accordance with their respective terms, except as the same may be
subject to general laws of equity or limited by bankruptcy, reorganization,
fraudulent conveyance or similar laws.
3.3 No Breach. The execution, delivery and performance of this
Agreement and each Related Agreement by each of Merger Subsidiary and Buyer and
the consummation by them of the transactions contemplated hereby do not conflict
with or result in any breach of any of the provisions of, constitute a default
under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of either, or require any authorization, consent,
approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the respective Articles of
Incorporation or Bylaws of Merger Subsidiary or Buyer or any indenture,
mortgage, lease, loan agreement or other agreement or instrument by which either
is bound or affected, or any law, statute, rule or regulation or order, judgment
or decree to which either is subject, except with respect to consents or waivers
otherwise obtained or to be obtained by Buyer or Merger Subsidiary prior to the
Effective Time.
3.4 Governmental Authorities; Consents. Other than with respect to any
Buyer or Merger Subsidiary securities law reporting obligation, neither Merger
Subsidiary nor Buyer is required to submit any notice, report or other filing
with any governmental authority in connection with their respective execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby, and no consent, approval or authorization of any governmental or
regulatory authority or any other party or person is required to be obtained by
either Merger Subsidiary or Buyer in connection with their respective execution,
delivery and performance of this Agreement or the transactions contemplated
hereby.
3.5 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Buyer or
Merger Subsidiary.
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3.6 Validity of Buyer's Common Shares. The Buyer's Common Shares to be
issued to the Company Shareholders pursuant to SECTION 1.3 have been duly
authorized, and upon issuance, delivery and payment therefor will be validly
issued, fully paid and nonassessable.
3.7 SEC Reports and Financial Statements. Since April 30, 2001, Buyer
has filed with the Securities and Exchange Commission (the "SEC") all reports
and other filings required to be filed by Buyer in accordance with the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder (the "Buyer SEC Reports"). As of their respective dates, the Buyer
SEC Reports complied in all material respects with the applicable requirements
of the Securities Act, the Exchange Act and the respective rules and regulations
promulgated thereunder applicable to such Buyer SEC Reports and, except to the
extent that information contained in any Buyer SEC Report has been revised or
superseded by a later Buyer SEC Report filed and publicly available prior to the
date of this Agreement (a "Buyer Filed SEC Document"), none of Buyer SEC Reports
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Buyer for the year ended December
31, 2000 (included in Buyer's Form 8-K filed May 14, 2001) and for the quarters
ended March 31, 2001 and June 30, 2001 were prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and presented fairly the consolidated financial position of
Buyer and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in Buyer SEC Reports, neither Buyer nor any of
Buyer's subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) other than liabilities or
obligations incurred in the ordinary course of business. None of Buyer's
subsidiaries is required to file any forms, reports or other documents with the
SEC pursuant to Sections 12 or 15 of the Exchange Act. The Buyer SEC Reports
accurately disclose (i) the terms and provisions of Buyer's 2000 Director Stock
Option Plan, (ii) transactions with affiliates (other than the agreement with
IntraNet Solutions, Inc., as described in Buyer's press release dated August 23,
2001), and (iii) all material contracts required to be disclosed pursuant to
Item 601(b)(10) of Regulation S-K promulgated under the Securities Act.
3.8 Capital Stock. The authorized capital stock of Buyer consists of
40,000,000 shares of capital stock, par value $.01 per share in the case of
common stock, 365,000 shares of which have been designated as Series B
Convertible Preferred Stock, par value $1.00 per share. As of the date hereof,
there are 10,086,261 shares of Buyer's common stock and 365,000 shares of Series
B Convertible Preferred Stock issued and outstanding (a description of which is
contained in the Buyer SEC Reports). All of Buyer's common stock and the Series
B Convertible Preferred Stock have been duly authorized and are validly issued,
fully paid and nonassessable. Except as set forth on SCHEDULE 3.8, (i) Buyer has
no other equity securities or securities containing any equity features
authorized, issued or outstanding; (ii) there are no agreements or other rights
or arrangements existing which provide for the sale or issuance of capital stock
by Buyer, and there are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or otherwise acquire
from Buyer any shares of capital stock or other securities of Buyer of any kind;
and (iii) there are no agreements or other obligations (contingent or otherwise)
which may require Buyer to repurchase or otherwise acquire any shares of its
capital stock.
3.9 Issuance of Buyer Capital Stock. Since April 30, 2001, all
outstanding shares of capital stock of Buyer have been issued in material
compliance with applicable federal and state securities laws.
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3.10 SEC Filings. Other than those filings with the SEC made by Buyer
via the EDGAR Filing System, Buyer has provided copies to the Company of all
filings and other correspondence it has made with the SEC and the Nasdaq Stock
Market.
3.11 Environmental Indemnification. In connection with that certain
Stock Purchase Agreement dated January 30, 2001 by and between Meteor
Industries, Inc. (Buyer's predecessor) and Capco Energy, Inc. ("Capco"), as
amended on April 27, 2001 (the "Capco Agreement"), a copy of which has been made
available to the Company, Buyer is the beneficiary of an agreement by Capco to
indemnify Buyer for any "Loss" (as defined therein) relating to, among other
things, the former business and operations of Meteor Industries, Inc. There has
been no amendment, rescission or other modification to the Capco Agreement as of
the date hereof.
3.12 Stock Option Plans. Except for Buyer's 2000 Director Stock Option
Plan contained in Buyer's SEC Reports, Buyer has provided the Company with true
and correct copies of its 1999 Stock Option Plan (as amended) and its 2001
Employee Stock Option Plan.
3.13 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of the Buyer, threatened
against the Buyer, at law or in equity, or before or by any federal, state or
municipal court or other governmental department, commission, board, bureau,
agency or instrumentality.
ARTICLE 4
COVENANTS OF THE COMPANY
4.1 Conduct of the Business. The Company covenants and agrees that from
the date hereof until the Effective Time, unless otherwise consented to by Buyer
in writing:
(a) The business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of its
business, on an arm's-length basis and in accordance in all material respects
with all applicable laws, rules and regulations and the Company's past custom
and practice;
(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue or sell any additional shares of, or any
options, warrants, conversion privileges or rights of any kind to acquire any
shares of, any of its capital stock, (ii) sell, pledge, dispose of or encumber
any of its assets, except in the ordinary course of business; (iii) amend or
propose to amend its Articles of Incorporation or Bylaws; (iv) split, combine or
reclassify any outstanding Company Common Shares, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or otherwise
with respect to Company Common Shares; (v) redeem, purchase or acquire or offer
to acquire any Company Common Shares or other securities of the Company; (vi)
acquire (by merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or other business
organization or division or material assets thereof; (vii) incur any
indebtedness for borrowed money or issue any debt securities except the
borrowing of working capital in the ordinary course of business and consistent
with past practice; (viii) permit any accounts payable owed to trade creditors
to remain outstanding more than 60 days (other than the account payable to
Capstone Planning & Control in the amount of $6,625); (ix) accelerate or defer,
beyond the normal collection cycle, collection of accounts receivable; or (x)
enter into or propose to enter into, or modify or propose to modify, any
agreement, arrangement or understanding with respect to any of the matters set
forth in this SECTION 4.1(B);
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(c) The Company shall not, directly or indirectly, (i) enter into or
modify any employment, severance or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination pay to, any
officers, or directors or consultants; or (ii) in the case of employees,
officers or consultants, take any action with respect to the grant of any
bonuses, salary increases, severance or termination pay or with respect to any
increase of benefits payable in effect on the date hereof;
(d) The Company shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director;
(e) The Company shall not cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect;
(f) The Company shall (i) use its best efforts to preserve intact its
business organization and goodwill, keep available the services of its officers
and employees as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with the
Company; (ii) confer on a regular and frequent basis with representatives of
Buyer to report operational matters and the general status of ongoing
operations; (iii) not intentionally take any action which would render, or which
reasonably may be expected to render, any representation or warranty made by it
in this Agreement untrue at the Closing; (iv) notify Buyer of any emergency or
other change in the normal course of the Company's business, or prospects, or in
the operation of the Company's properties and of any governmental or third party
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) if such emergency, change, complaint, investigation or
hearing would be material, individually or in the aggregate, to the business,
prospects, operations or financial condition of the Company or to the Company's
or Buyer's ability to consummate the transactions contemplated by this
Agreement; and (v) promptly notify Buyer in writing if the Company shall
discover that any representation or warranty made in this Agreement was when
made, or has subsequently become, untrue in any respect;
4.2 Conditions. The Company shall take all commercially reasonable
actions necessary or desirable to cause the conditions set forth in SECTION 6.1
to be satisfied and to consummate the transactions contemplated herein.
4.3 Shareholder Approval. The Company shall call a special meeting of
its shareholders for the purpose of voting on the transactions contemplated by
this Agreement to be held as soon as practicable following the date hereof in
accordance with the Company's bylaws and the CBCA. The Board of Directors of the
Company shall recommend approval of this Agreement and the Merger and shall use
all reasonable efforts (including, without limitation, soliciting proxies for
such approvals) to obtain approvals thereof from its shareholders; provided,
however, that the Company's Board of Directors may fail to make such
recommendation or seek to obtain shareholder approval, or withdraw, modify or
change any such recommendation if such Board of Directors determines, in good
faith, after consultation with counsel, that the making of such recommendation,
the seeking to obtain such shareholder approval or the failure to so withdraw,
modify or change such recommendation, may constitute a breach of the fiduciary
or legal obligations of the Board of Directors.
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ARTICLE 5
COVENANTS OF BUYER
Buyer covenants and agrees with the Company as follows:
5.1 Regulatory Filings. As promptly as practicable after the execution
of the Agreement, Buyer shall make or cause to be made all filings and
submissions under any laws or regulations applicable to Buyer for the
consummation of the transactions contemplated herein. Buyer will coordinate and
cooperate with the Company in exchanging such information, will not make any
such filing without providing the Company with a final copy thereof at least two
full business days in advance of the proposed filing and will provide such
reasonable assistance as the Company may request in connection with all of the
foregoing.
5.2 Conditions. Buyer shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in SECTION 6.2 to be
satisfied and to consummate the transactions contemplated herein.
5.3 Company's Employees. Other than the employees of the Company
identified on SCHEDULE 8.1 whose employment shall be subject to separate
employment agreements, Buyer will offer employment to all of the Company's
employees following the Effective Time; provided, however, that neither Buyer
nor the Surviving Corporation shall be under any obligation to retain any such
employee for any definite period of time.
5.4 Buyer's Note. Buyer covenants and agrees that the Buyer's Notes
will be pari passu or senior to all other debt of the Buyer, whether existing as
of the date hereof or subsequently incurred by Buyer, and Buyer covenants not to
enter into any indebtedness or other agreement that restricts Buyer's ability to
make payment in full of the Buyer's Notes in the amounts and time periods set
forth therein.
5.5 Company Employee Benefit Plans. Buyer covenants and agrees that,
following the Effective Date, Buyer will maintain the employee benefit plans
listed on SCHEDULE 2.20, and will assume the accrued vacation/sick time for the
Company's current employees to the extent described on SCHEDULE 2.20.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The aggregate Cash Consideration payable to the Company
Shareholders in accordance with ARTICLE 1 hereof shall not exceed One Million
Five Hundred Fifty Thousand Dollars ($1,550,000);
(b) The representations and warranties set forth in ARTICLE 2 hereof
shall be true and correct in all material respects at and as of the Effective
Time as though then made and as though the Effective Time had been substituted
for the date of this Agreement throughout such representations and warranties,
except that any such representation or warranty made as of a specified date
(other than the date hereof) shall only need to have been true on and as of such
date;
(c) The Company shall have performed in all material respects all of
the covenants and agreements required to be performed and complied with by it
under this Agreement prior to the Closing;
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(d) The Company shall have obtained, or caused to be obtained, each
consent and approval necessary in order that the transactions contemplated
herein not constitute a breach or violation of, or result in a right of
termination or acceleration of, or creation of any encumbrance on any of the
Company's assets pursuant to the provisions of, any agreement, arrangement or
undertaking of or affecting the Company or any license, franchise or permit of
or affecting the Company if the failure to obtain will have a Material Adverse
Effect;
(e) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby
will have been duly made and obtained;
(f) There shall not be threatened, instituted or pending any action or
proceeding before any court or governmental authority or agency, (i) challenging
or seeking to make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated hereby
or seeking to obtain material damages in connection with such transactions, (ii)
seeking to prohibit direct or indirect ownership or operation by Buyer of all or
a material portion of the business or assets of the Company, or to compel Buyer
or any of its subsidiaries or the Company to dispose of or to hold separately
all or a material portion of the business or assets of Buyer and its
subsidiaries or of the Company, as a result of the transactions contemplated
hereby; (iii) seeking to invalidate or render unenforceable any material
provision of this Agreement or any of the other agreements attached as exhibits
hereto or contemplated herein or hereby, including without limitation, the
Buyer's Note, the Employment Agreements, the Pledge Agreement, the letters of
investment intent contemplated by Section 8.3, the Registration Rights Agreement
and the Lock-Up Agreements (collectively, the "Related Agreements"), or (iv)
otherwise relating to and materially adversely affecting the transactions
contemplated hereby;
(g) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal or state court, government or governmental authority or agency,
which would reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in SECTION 6.1(E) hereof;
(h) There shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company, not covered by insurance,
which, in the aggregate, has, or would be reasonably likely to have, a material
adverse effect on the Company's business, operations, earnings, assets or
financial condition;
(i) Buyer shall have received from counsel for the Company a written
opinion, dated as of the Closing Date, addressed to Buyer and satisfactory to
Buyer's counsel, in form and substance mutually acceptable to the parties;
(j) The Company shall have filed with the Internal Revenue Service its
federal income tax return and with the State of Colorado its state tax return
for the year ending December 31, 2000;
(k) Holders of at least ninety percent (90%) of the Company Common
Shares who are to receive Stock Consideration shall execute and deliver to Buyer
at or prior to Closing an agreement relating to the sale or disposition of the
Stock Consideration in substantially the form of EXHIBIT E attached hereto.
(l) On the Closing Date, the Company shall have delivered to Buyer all
of the following:
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(i) A certificate of the chief executive officer of the
Company, dated the Closing Date, stating that the conditions precedent
set forth in subsections (a) and (b) above have been satisfied;
provided, however, to the extent that the Company must make additional
or different disclosures with respect to any representation or warranty
to make such representation or warranty true as of the Closing Date,
notwithstanding any other provision of this Agreement if such
additional representations and warranties have a Material Adverse
Effect on Buyer, Buyer shall have a right to immediately terminate this
Agreement and the contemplated merger without any liability to the
Company or the Company Shareholders.
(ii) copies of the third party and governmental consents and
approvals referred to in subsections (c) and (d) above;
(iii) the Company's minute books, stock transfer records,
corporate seal and other materials related to the Company's corporate
administration;
(iv) resignations (effective as of the Closing Date) from such
of the Company's officers and members of the Company's Board of
Directors as Buyer shall have requested prior to the Closing Date;
(v) a copy of the Articles of Incorporation of the Company,
certified by the Secretary of State of the State of Colorado, and a
Certificate of Good Standing from the Secretary of State of the State
of Colorado evidencing the good standing of the Company in such
jurisdiction;
(vi) a copy of the Bylaws of the Company; along with
certificates executed on behalf of the Company by its corporate
secretary certifying to Buyer that such copy is a true, correct and
complete copies of such bylaws and that such bylaws were duly adopted
and have not been amended or rescinded;
(vii) an executed copy of each of the Related Agreements,
including without limitation the Employment Agreements contemplated by
SECTION 8.1 and letters of investment intent contemplated by SECTION
8.3 for each of the Accredited Shareholders;
(viii) a copy of the text of the resolutions adopted by the
Board of Directors and shareholders of the Company authorizing the
execution, delivery and performance of this Agreement and the
consummation of all of the transactions contemplated by this Agreement,
along with certificates executed on behalf of the Company by its
corporate secretary certifying to Buyer that such copy is a true,
correct and complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded;
(ix) incumbency certificates executed on behalf of the Company
by its corporate secretary certifying the signature and office of each
officer executing this Agreement; and
(x) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions contemplated
hereby.
6.2 Conditions to the Company's Obligations. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions on or before the Closing
Date:
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(a) The representations and warranties set forth in ARTICLE 3 hereof
shall be true and correct at and as of the Effective Time as though then made
and as though the Effective Time had been substituted for the date of this
Agreement throughout such representations and warranties (without taking into
account any disclosures by Buyer or Merger Subsidiary of discoveries, events or
occurrences arising on or after the date hereof), except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed and complied with by it under
this Agreement prior to the Closing;
(c) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby
will have been duly made and obtained;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, (i)
challenging or seeking to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the transactions
contemplated hereby or seeking to obtain material damages in connection with
such transactions, (ii) seeking to invalidate or render unenforceable any
material provision of this Agreement or any of the Related Agreements, or (iii)
otherwise relating to and materially adversely affecting the transactions
contemplated hereby;
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal or state court, government or governmental authority or agency,
which would reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in SECTION 6.2(D) hereof; and
(f) The Company shall have received from counsel for Buyer and Merger
Subsidiary a written opinion, dated as of the Closing Date, addressed to the
Company and satisfactory to the Company's counsel, in a form and substance
mutually acceptable to the parties;
(g) On the Closing Date, Buyer will have delivered to the Company all
of the following:
(i) a certificate of appropriate officer(s) of Buyer, dated
the Closing Date, stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(ii) an executed copy of each of the Related Agreements,
including without limitation the Buyer Note;
(iii) a copy of the Articles of Incorporation of each of Buyer
and Merger Subsidiary, certified by the Secretary of State of the State
of Minnesota, and Certificates of Good Standing from the Secretaries of
State of the State of Minnesota evidencing the good standing of the
Company in such jurisdiction;
(iv) a copy of each of (x) the text of the resolutions adopted
by the board of directors of Buyer and Merger Subsidiary authorizing
the execution, delivery and performance of this Agreement and the
consummation of all of the transactions contemplated by this Agreement
and (y) the bylaws of Buyer and Merger Subsidiary, along with
certificates executed on behalf of Buyer and Merger Subsidiary by its
corporate secretary certifying to the Company that such copies are
true, correct and
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complete copies of such resolutions and bylaws, respectively, and that
such resolutions and bylaws were duly adopted and have not been amended
or rescinded; and
(v) incumbency certificates executed on behalf of Buyer and
Merger Subsidiary by their respective corporate secretaries certifying
the signature and office of each officer executing this Agreement or
any of the Related Agreements.
ARTICLE 7
TERMINATION AND REMEDIES
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of Buyer and the Company;
(b) by either Buyer or the Company if there has been a material
misrepresentation, breach of warranty or breach of covenant on the part of the
other in the representations, warranties and covenants set forth in this
Agreement;
(c) by Buyer or the Company if the transactions contemplated hereby
have not been consummated by September 30, 2001; provided that, neither party
will be entitled to terminate this Agreement pursuant to this SECTION 7.1(C) if
its breach of this Agreement has prevented the consummation of the transactions
contemplated hereby by such date;
7.2 Effect of Termination. In the event of termination of this
Agreement by either Buyer or the Company as provided in SECTION 7.1, this
Agreement shall become void and, except for a termination pursuant to SECTIONS
7.1(B), there shall be no liability on the part of either Buyer or the Company
or their respective shareholders, officers, or directors, except that SECTIONS
11.1 and 11.2 hereof shall survive indefinitely, and except with respect to
willful breaches of this Agreement prior to the time of such termination.
7.3 Notice of Termination; Remedies. Any party desiring to terminate
this Agreement shall give prior written notice of such termination and the
reasons therefor to the other party. The parties hereto acknowledge and agree
that their sole remedy in the event another party hereto materially breaches any
representation, warranty or covenant contained in this Agreement shall be to
terminate this Agreement as provided in SECTION 7.1.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Non-Competition and Employment Agreement. On the Closing Date, each
of the persons identified on SCHEDULE 8.1 will execute and deliver to Buyer an
Employment and Non-Competition Agreement substantially in the form attached
hereto as EXHIBIT B (the "Employment Agreements"). The Employment Agreements
will set forth the compensation and benefit package of each person identified on
SCHEDULE 8.1, which shall be mutually agreeable to both Buyer and such persons.
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8.2 Pledge of Shares. Immediately following the Closing, Buyer shall
pledge to the Company Shareholders its shares of capital stock held in the
Surviving Corporation solely to secure Buyer's obligation to deliver the first
three installments due under Buyer's Note, as described in SECTION 1.4(B)
hereof, pursuant to the terms and conditions of the pledge agreement attached
hereto as EXHIBIT C (the "Pledge Agreement"). Buyer further covenants and agrees
that until such time as it has satisfied its obligations to deliver the first
three installments it shall neither transfer or assign to any third parties its
interest in the Surviving Corporation nor issue any shares of capital stock of
the Surviving Corporation to any third parties.
8.3 Securities and Blue Sky Laws. Buyer shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of Buyer's Common Shares hereunder. Each
Company Shareholder shall execute and deliver to Buyer at or prior to the
Closing a letter of investment intent in substantially the form of EXHIBIT D
attached hereto; provided, however, that each Company Shareholder who does not
deliver a letter of investment intent shall be deemed to be a Minority
Shareholder and shall not receive any of the Stock Consideration.
8.4 Audit Fees. The Company shall cause its financial statements for
the years ended December 31, 1998, 1999 and 2000 to be audited by independent
certified public accountants, which audit shall be completed as soon as
practicable following the Closing. The Company and Buyer shall share equally the
cost of such audit, provided that the Company's share of such expenses shall not
exceed $10,000. The Company's share shall be paid by reducing the Closing
Payment.
8.5 Legal Fees. The Company shall cause the law firm of Davis, Graham &
Stubbs, LLP, its legal counsel, to deliver a final bill for its fees and
expenses incurred in connection with the transactions contemplated hereby within
seven (7) days of the Closing. To the extent such legal fees and expenses exceed
$20,000, such excess amount shall be deducted from the Closing Payment delivered
by Buyer.
8.6 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to SECTION 7.1 or the transactions contemplated hereby have
been consummated, neither the Company nor its officers, directors or agents
shall, directly or indirectly, encourage, solicit or initiate discussions or
negotiations with, or engage in negotiations or discussions with, or provide
non-public information to, any corporation, partnership, person or other entity
or groups concerning any merger, sale of capital stock, sale of substantial
assets or other business combination; provided that the Company may engage in
such discussion in response to an unsolicited proposal from an unrelated party
if the Board of Directors of the Company determines, in good faith, after
consultation with counsel, that the failure to engage in such discussions may
constitute a breach of the fiduciary or legal obligations of the Board of
Directors of the Company. The Company will promptly advise Buyer if it receives
a proposal or inquiry with respect to the matters described above.
8.7 Covenant to Register Stock Consideration. As soon as practicable
following the Closing, Buyer shall undertake to prepare and file a registration
statement with the SEC under the Securities Act, covering the resale of the
Stock Consideration issued to the Company Shareholders hereunder (the
"Registration Statement") in accordance with the terms and provisions of a
registration rights agreement in substantially the form of EXHIBIT E attached
hereto.
8.8 Lock-Up Agreements. Holders of at least ninety percent (90%) of the
Company Common Shares who are to receive Stock Consideration as part of their
Merger Consideration shall execute and deliver to Buyer at or prior to the
Closing an agreement relating to the sale or disposition of the Stock
Consideration in substantially the form of EXHIBIT F attached hereto.
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8.9 Nasdaq Listing. Buyer shall use its best efforts to have the Buyer
Common Shares approved for listing on the Nasdaq SmallCap Market.
ARTICLE 9
MISCELLANEOUS
9.1 Press Releases and Announcements. Prior to the Closing Date, no
party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of the Company
without prior written approval of either the Company or Buyer, as the case may
be, except as may be necessary, in the opinion of counsel to the party seeking
to make disclosure, to comply with the requirements of this Agreement or
applicable law. If any such press release or public announcement is so required,
the party making such disclosure shall consult with the other party prior to
making such disclosure, and the parties shall use all reasonable efforts, acting
in good faith, to agree upon a text for such disclosure which is satisfactory to
both parties.
9.2 Confidentiality. Unless (i) otherwise expressly provided in this
Agreement, (ii) required by applicable law or any listing agreement with, or the
rules and regulations of, any applicable securities exchange or the NASD, (iii)
necessary to secure any required consents as to which the other party has been
advised or (iv) consented to in writing by Buyer and the Company, any
information or documents furnished in connection herewith shall be kept strictly
confidential by the parties hereto and their respective officers, directors,
employees and agents. Prior to any disclosure pursuant to the preceding
sentence, the party intending to make such disclosure shall consult with the
other party regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply with
accounting, SEC and other disclosure obligations imposed by applicable law. In
the event the merger is not consummated, each party shall return to the other
any documents furnished by the other and all copies thereof any of them may have
made and will hold in absolute confidence any information obtained from the
other party except to the extent (i) such party is required to disclose such
information by law or such disclosure is necessary or desirable in connection
with the pursuit or defense of a claim, (ii) such information was known by such
party prior to such disclosure or was thereafter developed or obtained by such
party independent of such disclosure or (iii) such information becomes generally
available to the public other than by breach of this SECTION 9.2. Prior to any
disclosure of information pursuant to the exception in clause (i) of the
preceding sentence, the party intending to disclose the same shall so notify the
party which provided the same in order that such party may seek a protective
order or other appropriate remedy should it choose to do so.
9.3 Expenses. Except as otherwise expressly provided for herein, the
Company, Buyer and Merger Subsidiary will pay all of their own expenses
(including attorneys' and accountants' fees) in connection with the negotiation
of this Agreement, the performance of their respective obligations hereunder and
the consummation of the transactions contemplated by this Agreement (whether
consummated or not).
9.4 Further Assurances. The Company agrees that, on and after the
Closing Date, it shall take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof.
9.5 Amendment and Waiver. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to
27
30
modify or amend any part of this Agreement or any rights or obligations of any
person under or by reason of this Agreement.
9.6 Knowledge. Whenever a statement herein or in any schedule, exhibit,
certificate or other document delivered to any party pursuant to this Agreement
is made "to the Company's knowledge" or "to the Buyer's knowledge" or "to the
best of the Company's or Buyer's knowledge" or words of similar intent or effect
of any party or its representative, such statement shall be deemed to be made to
the best knowledge of the party or, if an entity, its senior management.
9.7 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
mailed by first class mail, return receipt requested, or when receipt is
acknowledged, if sent by facsimile, telecopy or other electronic transmission
device. Notices, demands and communications to Buyer and the Company will,
unless another address is specified in writing, be sent to the address indicated
below:
To Buyer or Merger Subsidiary: Active IQ Technologies, Inc.
601 Carlson Parkway, Suite 1550
Minnetonka, MN 55305
Facsimile: (952) 449-5001
Attention: Chief Executive Officer
With a copy to: Maslon Edelman Borman & Brand LLP
90 South 7th Street, Suite 3300
Minneapolis, MN 55402
Attention: William M. Mower, Esq.
Facsimile: (612) 672-8397
To the Company: Champion Business Systems, Inc.
6726 South Revere Parkway
Englewood, CO 80112
Facsimile: (303) 792-0255
Attention: Mr. James C. Long
with a copy to: Patricia Peterson, Esq.
Davis Graham & Stubbs LLP
1550 17th Street, Suite 500
Denver, CO 80202
Facsimile: (303) 892-7400
9.8 Assignment. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by either party
hereto without the prior written consent of the other party hereto, except that
Buyer may assign any and all rights it has under this Agreement or any Related
Agreement to a wholly owned subsidiary of Buyer without the consent of any other
party.
9.9 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held
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31
to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
9.10 Complete Agreement. This Agreement and the Related Agreements and
other exhibits hereto, the Disclosure Schedules and the other documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
9.11 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
9.12 Governing Law. The internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
ACTIVE IQ TECHNOLOGIES, INC.,
A MINNESOTA CORPORATION
By: /s/ Kenneth W. Brimmer
--------------------------------------
Kenneth W. Brimmer
Chairman and Chief Executive Officer
MERGER SUBSIDIARY:
CBS ACQUISITION, INC.,
A MINNESOTA CORPORATION
By: /s/ Kenneth W. Brimmer
--------------------------------------
Kenneth W. Brimmer
Chief Executive Officer
COMPANY:
CHAMPION BUSINESS SYSTEMS, INC.,
A COLORADO CORPORATION
By: /s/ James C. Long
--------------------------------------
James C. Long
President and Chief Executive Officer
30
33
EXHIBIT A
FORM OF BUYER'S NOTE
FILED AS EXHIBIT 10.2 TO THIS FORM 8-K DATED SEPTEMBER 18, 2001
34
Pursuant to Item 601(b)(2) of Regulation S-K, the following Exhibits have been
omitted from this Agreement. The Registrant will furnish a copy of any omitted
Schedule or Exhibit to the Commission upon request.
EXHIBIT B
FORM OF EMPLOYMENT AGREEMENT
EXHIBIT C
FORM OF PLEDGE AGREEMENT
EXHIBIT D
FORM OF LETTER OF INVESTMENT INTENT
EXHIBIT F
LOCK-UP AGREEMENT
35
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
FILED AS EXHIBIT 10.1 TO THIS FORM 8-K DATED SEPTEMBER 18, 2001
EX-10.1
4
c65103ex10-1.txt
REGISTRATION RIGHTS AGREEMENT
1
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of September 14, 2001, among Active IQ Technologies, Inc., a
Minnesota corporation (the "COMPANY"), and the shareholders listed on Exhibit A
hereto (the "HOLDERS").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Holders agree as
follows:
1. Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON STOCK" means the Company's Common Stock, $.01 par
value per share.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective Registration Statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" means any Common Stock issued to the
Holders pursuant to that certain Agreement and Plan of Merger dated
August 30, 2001 by and among the Company, CBS Acquisition, Inc. and
Champion Business Systems, Inc. (the "Merger Agreement"). As to any
particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to
the public through a broker, dealer or market maker in compliance with
Rule 144. For purposes of this Agreement, a person will be deemed to be
a holder of Registrable Securities whenever such person has the right
to acquire directly or indirectly such Registrable Securities (upon
conversion, exchange or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such
acquisition has actually been effected.
"REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees of the National Association of
Securities Dealers, Inc., fees of transfer agents and registrars and
fees and disbursements of counsel for the Company and all independent
certified public
2
accountants, underwriters (excluding discounts and commissions) and
other persons retained by the Company.
"REGISTRATION STATEMENT" means a registration statement filed
hereunder, including (in each case) the Prospectus, all amendments and
supplements to such registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"RULE 144" and "RULE 158" means Rule 144 and Rule 158
promulgated by the Commission pursuant to the Securities Act, as such
rules may be amended from time to time, or any similar rules or
regulations hereafter adopted by the Commission having substantially
the same effect as such rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) any day on which the Common Stock is
traded on its primary Trading Market, or (b) if the Common Stock is not
then listed or quoted on any national securities exchange, market or
trading or quotation facility, then a day on which trading occurs on
the New York Stock Exchange (or any successor thereto).
"TRADING MARKET" means the Nasdaq SmallCap Market or any other
national securities exchange, market or trading or quotation facility
on which the Common Stock is then listed or quoted.
2. Registration. As soon as practicable following the execution of this
Agreement, the Company shall prepare and file a Registration Statement with the
Commission, covering the resale of the Registrable Securities. The Company shall
undertake to maintain the effectiveness of such Registration Statement for at
least one year following the effective date of such Registration Statement. The
Holders understand that the Company has filed a registration statement, File No.
333-68088 with the Commission and that such registration statement has not been
declared effective. Unless to do so would materially adversely affect the timing
of the declaration of effectiveness of such registration statement, the Company
will include the Holders' shares in such registration statement.
3. Covenants of the Company. The Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with Section
2 hereof, and pursuant thereto the Company will as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities and cause such
Registration Statement to become effective (provided that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company will furnish to any participating Holder copies of all such
documents proposed to be filed);
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
a period of not less than six months
2
3
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition set forth in such
Registration Statement;
(c) furnish to the participating Holders such number of copies
of such Registration Statement, each amendment and supplement thereto, the
Prospectus included in such Registration Statement (including each preliminary
Prospectus) and such other documents as the Holders may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by them;
(d) register or qualify such Registrable Securities under such
securities or blue sky laws of such jurisdictions as the participating Holders
reasonably request and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Holders to consummate the
disposition in such jurisdiction of the Registrable Securities owned by it
(provided that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subsection, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process (i.e., service of
process which is not limited solely to securities law violations) in any such
jurisdiction);
(e) notify the Holders at any time when a Prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
the participating Holders, the Company will promptly prepare a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such Prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange or exchanges, automated quotation system or over-the-counter
market upon which securities of the Company of the same class are then listed;
(g) make available for inspection by the Holders, any
underwriter participating in any disposition pursuant to such Registration
Statement, any attorney for the Holders, and any accountant retained by the
Holders or the underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers and
employees to supply all information reasonably requested by the Holders and any
such underwriter, attorney, accountant or agent in connection with such
Registration Statement subject to standard confidentiality covenants;
(h) comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve months
beginning with the first day of the Company's first full calendar quarter after
the effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder; and
3
4
(i) cause such Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary to
enable the Holders to consummate the disposition of such Registrable Securities.
4. Registration Expenses.
All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation all Registration Expenses,
will be borne by the Company.
5. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted
by law, the Holders against all losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue or alleged untrue statement of
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, and shall reimburse such Holder
for any legal or other expenses reasonably incurred by such Holder in connection
with the investigation or defense of such loss, claim, damage, liability or
expense, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) It shall be a condition precedent to the obligation of the
Company to include in any Registration Statement any Registrable Securities held
by the Holders that in connection with any Registration Statement in which the
Holders are participating, the Holders shall have furnished to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any such Registration Statement or Prospectus and a
written undertaking to indemnify the Company, its directors and officers and
each person who controls the Company (within the meaning of the Securities Act)
against any losses, claims damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact contained in the
Registration Statement, Prospectus or preliminary Prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by the
Holders.
(c) Any person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties exists with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party. If such defense is assumed, the indemnifying party
will not be subject to any liability for any settlement made by the indemnified
party without its consent
4
5
(provided that such consent shall not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest exists between such indemnified party and any other indemnified party
with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
6. Rule 144 Reporting. With a view to making available to the Holders
the benefits of certain rules and regulations of the Commission which may permit
the sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep current public information available, within
the meaning of Rule 144 or any similar or analogous rule promulgated under the
Securities Act;
(b) file with the Commission, in a timely manner, all reports
and other documents required of the Company under the Securities Act and
Exchange Act; and
(c) so long as the Holders owns any Registrable Securities,
furnish to it upon request, a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144, the Securities Act
and the Exchange Act; a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as the Holders may reasonably
request in availing itself of any rule or regulation of the Commission allowing
it to sell any such securities without registration.
7. Restriction on Transfer. The Holders agree that, following the date
on which the Commission shall declare the Registration Statement effective, the
Holders will not, directly or indirectly, sell, offer to sell, transfer,
contract to sell, grant any option to purchase, or otherwise dispose of the
Registrable Securities, except (a) by operation of law, (b) pursuant to a bona
fide gift or private sale to any person or other entity which agrees in writing
to be bound by the provisions of this Agreement, or (c) by bona fide pledge;
provided, however, that every three (3) months following the date on which the
Commission shall declare the Registration Statement effective, 12.5 percent of
the shares of Common Stock issued under the Merger Agreement shall no longer be
subject to the foregoing restrictions on transfer. In addition, the Holders
agree that the Company may, and that each of the Holders will (i) with respect
to any Registrable Securities, cause the transfer agent for the Common Stock to
note stop transfer instructions with respect to such shares on the transfer
books and records of the Company.
8. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by
the Holders of any of their obligations under this Agreement, the Holders or the
Company, as the case may be,
5
6
in addition to being entitled to exercise all rights granted by law and under
this Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and the Holders
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders.
(c) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that would have the effect of impairing
the rights granted to the Holders in this Agreement or otherwise conflict with
the provisions hereof.
(d) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number provided pursuant to this Agreement prior to 6:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number provided pursuant to this Agreement on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) and
earlier than 11:59 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as may be designated in writing, in the manner set forth herein.
(e) Successors and Assigns. Subject to the provisions of
Section 7 hereof, the Holders may assign their rights and obligations hereunder
without the consent of any person. This Agreement shall inure to the benefit of
and be binding upon the Holders and each of their respective successors and
assigns and the Company. The Company may not assign its rights or obligations
hereunder without the prior written consent of the Holders, except any
assignment effected by operation of law.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(g) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and
6
7
enforced in accordance with the laws of the State of Minnesota, without regard
to the principles of conflicts of law thereof. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts in
Minnesota for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement, and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
(h) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
[SIGNATURE PAGE FOLLOWS.]
7
8
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
ACTIVE IQ TECHNOLOGIES, INC.
By: /s/ D. Bradly Olah
--------------------------------------
D. Bradly Olah
President and Chief Operating Officer
HOLDERS:
/s/ Charles R. Grant
-----------------------------------------
[Signature]
Print Name: Charles R. Grant, Director
BancBoston Capital Inc.
/s/ Robert Bauers
-----------------------------------------
[Signature]
Print Name: The Bauers Family Ltd
Partnership
/s/ Robert Bauers
-----------------------------------------
[Signature]
Print Name: Robert Bauers
AG Edward & Sons Inc.,
custodian for Robert Bauers
/s/ Norman Brownstein
-----------------------------------------
[Signature]
Print Name: Norman Brownstein
/s/ Steven W. Farber
-----------------------------------------
[Signature]
Print Name: Steven W. Farber
/s/ Mark A. Fuller, III
-----------------------------------------
[Signature]
Print Name: Mark A. Fuller, III
8
9
/s/ Daniel Holland
-----------------------------------------
[Signature]
Print Name: Daniel Holland
/s/ Jack Hyatt
-----------------------------------------
[Signature]
Print Name: Jack Hyatt
/s/ John O. Lohre
-----------------------------------------
[Signature]
Print Name: John O. Lohre
/s/ Philip N. Lohre
-----------------------------------------
[Signature]
Print Name: Philip N. Lohre
/s/ James C. Long
-----------------------------------------
[Signature]
Print Name: James C. Long
/s/ Kathryn Middleton
-----------------------------------------
[Signature]
Print Name: Kathryn Middleton
/s/ Philip A. Odeen
-----------------------------------------
[Signature]
Print Name: Philip A. Odeen
/s/ Richard L. Treat
-----------------------------------------
[Signature]
Print Name: Richard L. Treat
/s/ Kevin A. Wachter
-----------------------------------------
[Signature]
Print Name: Kevin A. Wachter
9
10
/s/ Daniel Brimberry
-----------------------------------------
[Signature]
Print Name: Daniel Brimberry
/s/ George Perkins
-----------------------------------------
[Signature]
Print Name: George Perkins
/s/ Cherrie Lucerne Martin
-----------------------------------------
[Signature]
Print Name: Cherrie Lucerne Martin
/s/ Joletta Suchey
-----------------------------------------
[Signature]
Print Name: Joletta Suchey
/s/ Ronald G. Rossi
-----------------------------------------
[Signature]
Print Name: Ronald G. Rossi
10
EX-10.2
5
c65103ex10-2.txt
FORM OF PROMISSORY NOTE
1
EXHIBIT 10.2
PROMISSORY NOTE
$______________ Minneapolis, Minnesota
September 14, 2001
FOR VALUE RECEIVED, Active IQ Technologies, Inc., a corporation
organized and existing under the laws of the State of Minnesota (the "Maker"),
hereby unconditionally promises to pay to ____________________, or his
successors and assigns (the "Payee"), at Minneapolis, Minnesota or at such other
place or places as may be designated by the Payee from time to time, the
principal sum of _______________________________________________________________
($____________) (the "Principal Sum").
The Principal Sum shall be due and payable in four (4) equal
installments of ___________________________________________ Dollars ($________)
on each of the 4, 8, 12 and 16-month anniversaries of the date hereof,
respectively. In the event any installment of the Principal Sum is not paid when
due, interest shall accrue on the outstanding Principal Sum at the rate of Ten
Percent (10%) per annum, calculated on a 365-day year.
All payments on account of this Note, when paid, shall be applied first
to the payment of all interest then due on the unpaid Principal Sum and the
balance, if any, shall be applied to reduction of the unpaid balance of the
Principal Sum. This Note may be prepaid in full or in part at any time without
premium.
Maker waives presentment, protest and demand, notice of protest, notice
of dishonor and non-payment of this Note.
This Note is the "Buyer's Note" within the meaning of that certain
Agreement and Plan of Merger dated August 30, 2001 (the "Merger Agreement"), by
and among Active IQ Technologies, Inc., CBS Acquisition, Inc. and Champion
Business Systems, Inc. The payment of this Note is secured under the terms of a
"Pledge Agreement" (as defined in the Merger Agreement) of even date herewith,
including any event of default specified therein. By accepting this Note, the
Payee hereby appoints James C. Long as its "Collateral Agent" pursuant to the
Pledge Agreement.
The terms, conditions and provisions of this Note shall be construed
and enforced according to the laws of the State of Minnesota.
IN WITNESS WHEREOF, the duly authorized officer of Maker has caused
this Note to be executed on the date first written above.
ACTIVE IQ TECHNOLOGIES, INC.,
a Minnesota corporation
By:
-----------------------------------
D. Bradly Olah
Its: President and Chief Operating Officer
EX-99.1
6
c65103ex99-1.txt
PRESS RELEASE
1
EXHIBIT 99.1
Tuesday September 18, 3:18 pm Eastern Time
Press Release
SOURCE: Active IQ Technologies, Inc.
ACTIVE IQ TECHNOLOGIES COMPLETES ACQUISITION OF CHAMPION BUSINESS
SYSTEMS
MINNEAPOLIS, Sept. 18 /PRNewswire/ --
Active IQ Technologies, Inc. (Nasdaq: AIQT - news), a leading provider of
eServices and accounting applications to small and mid-sized businesses, today
announced it has completed its planned purchase of Champion Business Systems.
Champion develops and markets small business desktop accounting software. The
purchase of Champion by Active IQ is the second accounting software provider
acquired by Active IQ this year following its earlier purchase of Red Wing
Business Systems. The Champion acquisition extends Active IQ's leading position
in the accounting market for small and growing businesses, increasing the number
of users of it various software products to over 18,000.
About Active IQ Technologies, Inc.
Active IQ Technologies, Inc. ( http://www.activeiq.com ) provides products and
services that meet the eBusiness needs of small and medium-sized organizations.
Through its Accounting Applications software division, it also provides
accounting solutions. The company's Epoxy Network is a service-based solution
that provides fully integrated eBusiness solutions to existing legacy
applications. Active IQ is headquartered in Minneapolis, Minn.
About Champion Business Systems
Champion develops, integrates and supports the accounting and business
management software needs of small and growing businesses internationally,
servicing an active database of over 8,000 customers. The company sells directly
and supports a distribution channel of over 250 VARs as well as a large network
of CPAs and recommenders. Champion is headquartered in Englewood, Colo. The
toll-free number for sales and business development inquiries is 1-800-243-2626.
The Company notes that statements in this press release, and elsewhere, that
look forward in time, which include everything other than historical
information, involve risks and uncertainties that may affect the Company's
actual results of operations. These forward-looking statements are made in
reliance upon safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Accordingly, actual results may differ materially from those
contemplated by the forward-looking statements.
SOURCE: Active IQ Technologies, Inc.