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METEOR INDUSTRIES, INC. SPECIAL MEETING
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X] [ ] Confidential, for
Use of the
Commission Only
(as permitted by
Filed by a Party other than the Registrant [ ] Rule 14a-6(e)(2))
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
METEOR INDUSTRIES, INC.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(a) $0.001 par value common stock and
(b) $1.00 par value Series B Convertible Preferred Stock.
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(2) Aggregate number of securities to which transaction applies:
4,077,903 shares of common stock, and 365,000 shares of Series B
Preferred Stock
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
Per unit price of common stock (average high/low 1/29/2001): $4.41
Per unit price of Series B Convertible Preferred Stock: $6.32
Underlying value of asset sale: $5,500,000
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(4) Proposed maximum aggregate value of transaction:
$25,790,352
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(5) Total fee paid:
$5,159.00
- - - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - - --------------------------------------------------------------------------------
(3) Filing Party:
- - - --------------------------------------------------------------------------------
(4) Date Filed:
- - - --------------------------------------------------------------------------------
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February 14, 2001
To Our Shareholders:
You are cordially invited to the Special Meeting of Shareholders (the
"Special Meeting") of Meteor Industries, Inc., a Colorado corporation (the
"Company") to be held at the Company's offices at 1401 Blake Street, Suite 200,
Denver, Colorado 80202 , on , , 2001 at a.m.
(Denver Time).
The formal Notice of the Meeting and Proxy Statement describing the matters
to be acted upon at the Meeting are contained in the following pages.
Shareholders also are entitled to vote on any other matters which properly come
before the Meeting.
Enclosed is a proxy which will enable you to vote your shares on the
matters to be considered at the Meeting even if you are unable to attend the
Meeting. Please mark the proxy to indicate your vote, date and sign the proxy
and return it in the enclosed envelope as soon as possible for receipt prior to
the Meeting.
WHETHER YOU OWN FEW OR MANY SHARES OF STOCK, PLEASE BE SURE YOU ARE
REPRESENTED AT THE MEETING EITHER BY ATTENDING IN PERSON OR BY RETURNING YOUR
PROXY AS SOON AS POSSIBLE.
Sincerely,
RICHARD E. KISSER,
Secretary
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METEOR INDUSTRIES, INC.
1401 BLAKE STREET, SUITE 200
DENVER, COLORADO 80202
(303) 572-1135
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2001
TO THE SHAREHOLDERS OF METEOR INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders (the
"Special Meeting") of Meteor Industries, Inc., a Colorado corporation (the
"Company") will be held at the Company's offices at 1401 Blake Street, Suite
200, Denver, Colorado on , , 2001 at a.m.
(Denver Time), or at any adjournment or postponement thereof, for the following
purposes:
1. To approve the sale of substantially all of the assets of the
Company pursuant to the terms of that certain Stock Purchase Agreement
dated January 30, 2001, by and between the Company and Capco Energy, Inc.
2. To approve and adopt a proposal to reincorporate the Company under
the laws of the State of Minnesota by merging the Company with and into AIQ
Acquisition, Inc., a newly formed and wholly owned subsidiary of the
Company organized under Minnesota law.
3. To approve and adopt that certain Agreement and Plan of Merger
dated January 11, 2001, by and among activeIQ Technologies, Inc., a
Minnesota corporation, the Company and MI Merger, Inc., a Minnesota
corporation and a wholly owned subsidiary of the Company.
Only the holders of issued and outstanding shares of the Company's common
stock and Series B Convertible Preferred Stock at the close of business on
February 13, 2001, are entitled to notice of, and to vote at, the Special
meeting and any adjournments or postponements thereof.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of the Company's common stock and Series B Convertible
Preferred Stock, voting together as one group, is necessary to approve Proposals
1 and 3. The affirmative vote of the holders of a majority of both the issued
and outstanding shares of the Company's common stock and Series B Convertible
Preferred Stock, voting separately as two classes, is necessary to approve
Proposal 2.
Each of the above proposals are corporate actions which give rise to
dissenters' rights under the Colorado Business Corporation Act. A summary and
discussion of dissenters' rights is set forth in the accompanying Proxy
Statement.
You are requested to complete and sign the enclosed proxy which is
solicited by the Board of Directors and to return it promptly in the enclosed
envelope. The proxy will not be used if you attend the Meeting and vote in
person.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE AS PROMPTLY
AS POSSIBLE. YOU MAY REVOKE A PROXY BY FILING WITH THE SECRETARY OF THE COMPANY
A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. IF YOU ARE
PRESENT IN PERSON AT THE SPECIAL MEETING YOU MAY REVOKE YOUR PROXY AND VOTE IN
PERSON ON EACH MATTER BROUGHT BEFORE THE MEETING. HOWEVER, IF YOUR SHARES ARE
NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM
YOUR RECORD HOLDER TO VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS,
RICHARD E. KISSER,
Secretary
Denver, Colorado
February 14, 2001
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TABLE OF CONTENTS
PAGE
NO.
----
QUESTIONS AND ANSWERS ABOUT THE SALE OF ASSETS, THE MERGER,
THE REINCORPORATION AND THE SPECIAL MEETING............... 1
SUMMARY..................................................... 7
COMPARATIVE UNAUDITED PER COMMON SHARE DATA................. 13
SELECTED CONSOLIDATED FINANCIAL DATA........................ 14
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING
INFORMATION............................................... 17
THE SPECIAL MEETING......................................... 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 20
PROPOSAL ONE: SALE OF ASSETS................................ 22
PROPOSAL TWO: REINCORPORATION............................... 24
PROPOSAL THREE: APPROVAL OF THE MERGER AGREEMENT............ 32
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE
MERGER
AND REINCORPORATION....................................... 45
CERTAIN INFORMATION CONCERNING THE COMPANY.................. 47
CERTAIN INFORMATION CONCERNING AIQ.......................... 48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS..................................... 54
RISK FACTORS................................................ 56
PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS....... 64
RIGHTS OF DISSENTING SHAREHOLDERS........................... 69
OTHER MATTERS............................................... 71
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 71
FINANCIAL STATEMENTS OF ACTIVEIQ TECHNOLOGIES, INC.......... 72
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QUESTIONS AND ANSWERS ABOUT THE SALE OF ASSETS, THE MERGER,
THE REINCORPORATION AND THE SPECIAL MEETING
Q: WHY IS METEOR INDUSTRIES, INC. HOLDING THE SPECIAL MEETING?
A: Meteor Industries, Inc. is holding a special meeting for the following
purposes:
(1) to ask you to vote on a proposal to approve and adopt the Stock
Purchase Agreement, dated as of January 30, 2001, by and between
Meteor and Capco Energy, Inc., and the transactions contemplated by
that agreement, including the sale of substantially all of the assets
of Meteor, referred to as the "Asset Sale;"
(2) to ask you to vote on a proposal to approve the reincorporation of
Meteor under Minnesota law, which would be effected by merging Meteor
with and into a newly formed and wholly owned subsidiary organized
under Minnesota law; and
(3) to ask you to vote on a proposal to approve and adopt an Agreement and
Plan of Merger, dated as of January 11, 2001, by and among, Meteor,
activeIQ Technologies, Inc. (referred to as "AIQ") and MI Merger,
Inc., a wholly owned subsidiary of Meteor, and the transactions
contemplated by that merger agreement, referred to as "the Merger."
Copies of the agreements relating to the Asset Sale and the Merger are
attached to this Proxy Statement and incorporated by reference as
Appendices A and B, respectively. You are urged to read these agreements
in their entirety.
Q: WHAT IS THE DETERMINATION AND RECOMMENDATION OF THE METEOR BOARD OF
DIRECTORS WITH RESPECT TO THE ASSET SALE, REINCORPORATION AND THE MERGER?
A: Meteor's Board of Directors has approved each of the proposals to be
considered at the Special Meeting, and has determined that each of the
transactions are fair to and in the best interests of Meteor and its
shareholders. Since three members of the Board of Directors are also
directors of Capco Energy, however, the proposed sale of the Company's
assets to Capco Energy constitutes an interested party transaction.
Accordingly, in accordance with the Colorado Business Corporations Act,
the Board makes no recommendation to shareholders concerning the approval
of the proposed transactions which are discussed in this Proxy Statement.
You must therefore consider the merits of the proposed transactions
independently of the recommendation of the Company's Board of Directors.
In making its determination and recommendation, the Board of Directors
considered discussions with potential purchasers and merger candidates
other than Capco, Meteor senior management, consultations with its legal
counsel, and the opinion of Business Valuation Services, financial advisor
to Meteor, dated as of , 2001, that as of the date of that
opinion, the consideration received by Meteor in exchange for
substantially all of its assets and the consideration paid in the Merger
was fair from a financial point of view to Meteor and its shareholders.
Q: WHY IS METEOR PROPOSING THE ASSET SALE?
A: Meteor is proposing the Asset Sale for two principal reasons: (1) it is a
condition to the consummation of the Merger; and (2) the amount of working
capital necessary to conduct Meteor's business has increased significantly
as the price of petroleum products has risen. In executing its business
plan, Meteor has grown its business through acquisitions and mergers.
Acquisitions are paid for with cash or stock. Meteor currently does not
have cash flow or borrowing power sufficient to pay cash for acquisitions.
Moreover, because of illiquidity and significant fluctuation in its stock
price, Meteor's stock has not been sufficiently attractive to serve as
currency to fund acquisitions. As a "small cap" company, Meteor has had
difficulty raising capital through equity offerings because its has very
little institutional interest in its stock. Having determined that Meteor
no longer has a ready means by which to fund future acquisitions central
to its business plan, Meteor's Board of Directors has determined that it
is in Meteor's best interests to dispose of all or substantially all of
its petroleum related businesses.
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Q: WHY ARE METEOR AND AIQ PROPOSING THE MERGER?
A: In the early spring of 2000 our Board met to evaluate the financial
condition of the Company and the prospects for our future as a small
independent regional refined petroleum product distribution company. Our
Board of Directors determined that the outlook for the Company under its
business plan was not good and that the interests of our shareholders
might be better served by restructuring the Company or its business plan.
In April of 2000, we hired a consultant, Henry Fong of the Fong Group, to
assist and advise us on our strategic plan, evaluate restructuring
alternatives and advise us with respect to prospective merger candidates.
Independently and through Mr. Fong we evaluated many opportunities. In
October 2000, Mr. Fong introduced us to AIQ, and after conducting our due
diligence and discussing the fairness of the transaction with Business
Valuation Services, on January 11, 2001 we executed the Agreement and Plan
of Merger with AIQ. We decided to propose the merger because we believe
that the assets of AIQ and the prospects of AIQ's business will give our
shareholders a greater chance of realizing shareholder value than if we
continue with our current petroleum business. AIQ is a development stage
company attempting to allow small-to-medium size enterprises easy and
efficient access to the "business to business" internet marketplace. The
Board believes that if we can monetize our existing assets and invest them
in AIQ, our shareholders have a better chance of maximizing value.
AIQ is proposing the Merger in order to provide its shareholders with
greater liquidity and to provide AIQ with greater access to capital
markets for the continued development of its products and services.
Q: WHY IS METEOR PROPOSING TO REINCORPORATE IN MINNESOTA?
A: We are reincorporating as a Minnesota corporation because it is a
condition to the consummation of the Merger with AIQ. Upon the completion
of the Asset Sale and the Merger, we will no longer maintain any offices,
employees or assets in Colorado and will no longer conduct our operations
from Colorado. Also, following the Merger, the surviving company will
maintain its headquarters in Minnesota and will be run by AIQ management,
who is more familiar with Minnesota law.
Q: WHAT IS THE CURRENT BUSINESS OF AIQ?
A: AIQ, a development stage company based in Minneapolis, Minnesota, provides
Internet infrastructure software and services for small to medium-sized
companies through an affordable, service-based solution that quickly and
seamlessly enables a wide variety of e-business applications. AIQ's
Epoxy(sm) platform connects directly with a customers back end system and
serves up its suite of e-business solutions. Epoxy(sm) currently offers
integrated e-Commerce, CRM, and Account Tracking in its solutions suite.
More services are constantly being created through in-house development
and partnerships. One such partnership being a strategic relationship with
Intranet Solutions, Inc. to offer Web content management solutions to
small- and medium-sized businesses worldwide through the Epoxy(sm)
platform
As a result of its recent acquisition of Las Vegas-based Edge Technologies
Incorporated, now an AIQ subsidiary, AIQ's business also includes Edge
Technologies' web-enabled services known as Account Wizard, which is fully
integrated with a business user's accounting system. Through automated
daily updates, an Account Wizard enabled website is self-maintaining:
after the initial build, there is no need to enter transactions twice,
since Account Wizard accesses the accounting system directly.
Q: WHAT WILL HAPPEN IN THE PROPOSED MERGER?
As a condition of and prior to the Merger, the Company must reincorporate
as a Minnesota corporation (which we will refer to as "New Meteor"). If
the Merger is consummated, a wholly owned subsidiary of the New Meteor
will merge with and into AIQ, the separate existence of the wholly owned
subsidiary will cease, and AIQ will continue as the surviving corporation.
Following the Merger, AIQ will be a wholly owned subsidiary of New Meteor.
In connection with the reincorporation of the Company under Minnesota law
to form New Meteor, your shares of Company stock will automatically
convert into an equal number and class of shares of New Meteor.
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Q: WHAT WILL AIQ SHAREHOLDERS RECEIVE IN THE MERGER?
A: If the Merger is consummated, in exchange for their shares of AIQ common
stock, each AIQ shareholder will receive:
- one share of New Meteor's common stock, and
- a warrant to purchase 2 shares of New Meteor's common stock at a price
of $5.50 per share for every 3 shares of AIQ common stock held by such
shareholder (see "Proposal Three: Approval of the Merger
Agreement -- The Merger Agreement -- The Merger Warrant").
Provided that the Company raises at least $1,700,000 in the "MI Private
Placement" (as defined in the Agreement and Plan of Merger attached as
Appendix B), then the shares of New Meteor common stock issued to AIQ's
shareholders may be adjusted depending on the amount of cash we have
available at the time of the closing of the Merger. If we have less than
$4,850,000 of cash available, then AIQ's shareholder will receive in the
aggregate one additional share for each dollar of cash below $4,850,000.
On the other hand, if we have more than $5,150,000 of cash available, then
AIQ's shareholders will receive in the aggregate, one less share for every
dollar of cash in excess of $5,150,000.
Q: ARE THERE ANY CONDITIONS TO CONSUMMATION OF THE MERGER?
A: Yes, the consummation of the Merger is subject to the satisfaction or
waiver of several conditions, including the approval by our shareholders
of (1) the Merger, (2) the Asset Sale and (3) the reincorporation of the
Company in Minnesota, as well as the approval of the Merger by the
shareholders of AIQ. A discussion of these conditions is set forth at
pages 39-40 of this Proxy Statement. If our shareholders do not approve
all three of the proposals described in this Proxy Statement, the Company
will not follow through with the Merger, the Asset Sale, or the
reincorporation of the Company in Minnesota. While our Board will not
consummate the Merger, the Asset Sale, or the reincorporation unless the
shareholders of the Company approve all three proposals, certain other
conditions of the Merger may be waived by our Board or the board of
directors of AIQ. Similarly, certain conditions to the Asset Sale may also
be waived by our Board of Directors or the board of directors of Capco.
Q: WHAT ARE THE IMPLICATIONS OF THE PROPOSALS FOR METEOR'S CURRENT
BUSINESSES?
A: If the Asset Sale, the reincorporation under Minnesota law and the Merger
are approved by our shareholders, Meteor will sell all or substantially
all of its assets and no longer own or operate its current business of
distributing and marketing refined petroleum products. Instead, after the
Merger, Meteor will carry on AIQ's business, under the leadership of AIQ's
current management and the petroleum products business will continue to be
operated by current employees under the ownership of Capco Energy.
Q: WHAT ARE THE RISKS TO THE PROPOSALS?
A: Meteor's Board of Directors has determined that we should sell of all of
our petroleum related operating assets. Capco, the purchaser, is also our
largest shareholder. Three of our Board members are also members of the
board of Capco. Capco is buying our assets. Capco is not withdrawing from
the independent petroleum product distribution business. We are taking the
consideration from Capco and investing it, by way of the proposed merger,
in a development stage company that is attempting to provide
small-to-medium size enterprises with easy and efficient access to the
"business to business," or "B2B," internet marketplace. Our decision to
withdrawal from our petroleum related business may be premature. Economic
factors change quickly. AIQ's business plan may never be realized. It is
possible that we will sell our existing assets to a related party at the
bottom of the economic cycle for independent petroleum distributors and
purchase a "B2B" internet company at the top of the market. Only time will
tell whether the timing of our decision to sell our petroleum businesses
to Capco and
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invest in AIQ was correct. If we sell our petroleum businesses and invest
in AIQ, your return may be less than if we continued our current petroleum
business.
Q: WILL METEOR'S COMMON STOCK CONTINUED TO BE LISTED ON THE NASDAQ MARKET
SYSTEM?
A: Currently, our common stock is listed on the Nasdaq SmallCap Market
System. One of the conditions to the consummation of the Merger is that
the parties receive assurances from Nasdaq that Meteor's common stock
maintains its listing, or if Nasdaq requires a new listing application to
be submitted, then Nasdaq shall have approved the application prior to
consummation of the Merger. However, this condition may be waived by the
parties' respective boards of directors. If our common stock is delisted
from the Nasdaq SmallCap Market or if Nasdaq notifies us that upon
completion of the Merger our common stock will be delisted, then the
Merger will not be completed unless both parties agree to waive this
condition. If both parties do waive this condition and Meteor's common
stock is delisted from the Nasdaq SmallCap Market, then the common stock
will likely be traded on the so-called "pink sheets" or the Electronic
Bulletin Board. You are urged to review the section entitled "Risk
Factors" for a discussion of the risks associated with de-listed stock.
Q: WHEN WILL THE ASSET SALE AND MERGERS OCCUR?
A: We plan to complete the Asset Sale, the reincorporation and the Merger as
soon as possible after the Special Meeting, subject to the satisfaction or
waiver of the conditions to the stock purchase agreement with Capco
Energy, Inc. and the merger agreement with AIQ. Although we cannot predict
exactly when all conditions will be satisfied or waived, we hope to
complete the transactions in the second quarter of 2001. The merger
agreement provides for termination if the Merger is not consummated by
April 16, 2001, unless the both parties agree to a later date.
Q: ARE DISSENTERS' RIGHTS AVAILABLE AND HOW DO I EXERCISE THEM?
A: Yes, Colorado law provides that you may dissent from any of the three
proposals to be considered at the Special Meeting. In order to perfect
your dissenter's rights, you must first notify the Company prior to the
Special Meeting in writing that you intend to vote against one or more of
the proposals and, in fact, you must actually vote against a proposal. If
the proposal from which you dissent is approved by our shareholders and
that transaction is consummated, the Company will then notify you that you
are entitled to demand payment for your shares and instruct you of the
necessary steps in order to obtain such payment. If you do not comply with
the procedures governing dissenters' rights set forth in Colorado law and
explained elsewhere in this Proxy Statement, you may not be entitled to
payment for your shares. You are urged to review the section of this Proxy
Statement entitled "Rights of Dissenting Shareholders" for a more complete
discussion of dissenters' rights.
Q: WHAT DO I NEED TO DO NOW?
A: This Proxy Statement contains important information regarding the Asset
Sale, the proposed reincorporation and the Merger, as well as information
about us and AIQ. It also contains important information about what the
management and board of directors, and the management and board of
directors of AIQ, considered in evaluating the Merger. We urge you to read
this Proxy Statement carefully, including the appendices, and to consider
how the Asset Sale, the reincorporation and the Merger affects you as a
shareholder.
Q: HOW DO I VOTE?
A: Just indicate on your proxy card how you want to vote your shares of
Meteor stock and sign and mail the proxy card in the enclosed return
envelope as soon as possible so that your shares will be represented at
the Special Meeting. You may also have the ability to vote electronically
via the Internet or by telephone, as indicated on your proxy materials.
Q: WILL METEOR ISSUE FRACTIONAL SHARES OF COMMON STOCK AS MERGER
CONSIDERATION?
A: We will not issue fractional shares in the Merger. As a result, the total
number of shares of our common stock that each AIQ shareholder will
receive in the Merger will be rounded down to the nearest whole number and
each AIQ shareholder will receive a cash payment for the value of any
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remaining fraction of a share of Meteor common stock that he or she would
otherwise receive, if any, based on the closing sale price of our common
stock on the effective date of the Merger.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE ASSET SALE, THE REINCORPORATION
MERGER AND THE MERGER BY METEOR'S SHAREHOLDERS?
A: Each of the proposals to be considered at the Special Meeting must be
approved by our shareholders in the following manner:
- With respect to the Asset Sale, the affirmative vote of a majority of
the issued and outstanding shares of our common stock and Series B
Preferred Stock, voting together as a single class, is required to
approve the transaction. Because of the potential conflict of interest
presented by selling our assets to Capco, which is also one of our
significant shareholders, and because three of the Company's directors
are also directors of Capco, Capco has agreed to abstain from voting its
shares in connection with the approval of the Asset Sale. However,
shareholders of Capco who are also shareholders of Meteor should vote
their shares in connection with approval of the Asset Sale as they see
fit, even though Capco has agreed to abstain from voting its shares.
- The reincorporation proposal must be affirmatively approved by both a
majority of the issued and outstanding shares of our common stock and a
majority of the issued and outstanding shares of our Series B
Convertible Preferred Stock. With respect to this proposal only, our
common shareholders and Series B Convertible Preferred shareholders will
vote as two separate classes.
- Like the Asset Sale, the Merger must be approved by the affirmative vote
of at least a majority of the issued and outstanding shares of our
common stock and Series B Preferred Stock voting together as a single
class.
If you return a signed and dated proxy card but do not indicate how the
shares are to be voted, those shares represented by your proxy card will
be voted "FOR" each of the proposals. An "ABSTAIN" vote will not be voted
at the Special Meeting, but will be counted as present for purposes of
both establishing a quorum and as shares entitled to vote on a matter.
Since each of the proposals to be considered must be approved by a
majority of all shares entitled to vote on the matter, an abstention will
have the same effect as a vote against a proposal.
Q: WHAT IF SOME, BUT NOT ALL, OF THE PROPOSALS PRESENTED ARE NOT APPROVED?
A: All proposals must be approved for any of the transactions described in
these proxy materials to be consummated. If any one of the proposals is
not approved, none of the proposed transactions will be consummated.
Q: WHEN AND WHERE IS THE SPECIAL MEETING?
A: The Special Meeting will be held on , 2001 at m.
(Denver Time), at , Denver, Colorado.
Q: WHO CAN VOTE AT THE SPECIAL MEETING?
A: Holders of Meteor's common stock and Series B Convertible Preferred Stock
who hold their shares of record as of the close of business on February
13, 2001, are entitled to notice of and to vote at the special meeting. On
the record date, there were approximately 620 shareholders of record of
Meteor common stock (approximately 565 of which are held in "street name")
and approximately 4,077,903 shares of Meteor common stock were issued and
outstanding. On the record date there were 365,000 shares of Meteor's
Series B Convertible Preferred Stock outstanding, all of which were held
by 5 shareholders.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER OR NOMINEE, WILL MY
BROKER OR NOMINEE VOTE MY SHARES FOR ME?
A: Your broker or nominee will vote your shares only if you provide
instructions on how you want your shares to be voted. You should follow
the directions provided by your broker or nominee.
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Q: CAN I CHANGE MY VOTE AFTER I HAVE VOTED BY TELEPHONE OR THE INTERNET OR
MAILED MY PROXY CARD?
A: Yes. You may change your vote by revoking your proxy at any time before
the polls close at the Special Meeting. You can do this in one of three
ways:
- timely delivery of a valid, later-dated proxy, including a proxy cast by
telephone or the Internet;
- written notice addressed to Corporate Secretary, Meteor Industries,
Inc., 1401 Blake Street, Suite 200, Denver, Colorado 80202, before the
Special Meeting that you have revoked your proxy; or
- attendance at the special meeting in person and completing a ballot.
You may not revoke your proxy by simply attending the Special Meeting
unless you complete a ballot. If you have instructed a broker or nominee
to vote your shares, you must follow directions from your broker or
nominee to change those instructions.
Q: WHAT DO I NEED TO DO NOW?
A: Please vote your shares as soon as possible, so that your shares are
represented at the Special Meeting.
TO VOTE YOUR SHARES BY TELEPHONE OR THE INTERNET FOLLOW THE INSTRUCTIONS
APPEARING IN YOUR PROXY MATERIALS. IF YOU DO NOT WISH TO VOTE BY TELEPHONE
OR THE INTERNET, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD
AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
If you attend the Special Meeting, you may vote in person if you wish by
completing a ballot at the Special Meeting, whether or not you have
already signed, dated and returned your proxy card or voted by telephone
or the Internet.
Please review this Proxy Statement for more complete information regarding
the matters proposed for your consideration at the Special Meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you would like additional copies of this Proxy Statement or if you have
questions about how to complete and return your proxy card and/or vote by
telephone or the Internet, you should call at
. If you have questions about other matters discussed in this
Proxy Statement, please telephone Edward J. Names, Meteor's President and
Chief Executive Officer, at (303) 572-1135.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. The following summary is not intended to be complete and
is qualified in its entirety by reference to the more detailed information
contained in this Proxy Statement and in the Appendices attached hereto. You are
urged to review the entire Proxy Statement carefully. References in this Summary
and throughout the Proxy Statement to "we," "us," "Meteor," or the "Company"
refer to Meteor Industries, Inc. References to "AIQ" refer to activeIQ
Technologies, Inc. The Company has supplied all information contained in this
Proxy Statement relating to Meteor Industries, Inc. and its subsidiaries, and
AIQ has supplied all information in this Proxy Statement relating to activeIQ
Technologies, Inc. and its subsidiaries. Neither the Company nor AIQ makes any
representation as to information contained herein supplied by the other company.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting will be held on , 2001 at .m.
(Denver Time) at , Denver, Colorado.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE
Only holders of issued and outstanding shares of the Company's common stock
and Series B Convertible Preferred Stock on February 13, 2001 (the "Record
Date") are entitled to notice of and to vote at the Special Meeting or at any
adjournment or postponement thereof. As of the Record Date, there were
approximately 4,077,903 shares of Company common stock outstanding, held of
record by approximately 620 shareholders. All of the 365,000 shares of Series B
Convertible Preferred Stock outstanding as of that date, were held of record by
5 shareholders. The presence, in person or by proxy, at the Special Meeting of
the holders of a majority of the outstanding shares of the Company's common
stock and Series B Convertible Preferred Stock is necessary to constitute a
quorum at the Special Meeting.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, you will be asked to:
- Approve the sale of substantially all of the Company's assets (the "Asset
Sale") pursuant to the Stock Purchase Agreement with Capco Energy, Inc.
dated January 30, 2001;
- Approve the reincorporation of the Company under Minnesota law by merging
the Company with and into a wholly owned subsidiary of the Company
organized under Minnesota law; and
- Approve the Agreement and Plan of Merger dated as of January 11, 2001
(the "Merger Agreement"), with AIQ and MI Merger, Inc., a Minnesota
corporation and newly-formed wholly owned subsidiary of the Company
("Merger Sub").
SHAREHOLDER APPROVAL OF THE ASSET SALE AND THE MERGER
Approval of the Asset Sale and the Merger requires the affirmative vote of
at least a majority of all issued and outstanding shares of Company stock, both
common stock and Series B Preferred Stock counted together and voting as a
single class. It is expected that all 2,578,032 shares of common stock owned by
the Company's officers and directors, which is 50.5 percent of the total number
of outstanding shares of the Company's common stock, will be vote in favor of
the Asset Sale and the Merger at the Special Meeting. Capco, the entity to whom
all or substantially all of the assets of the Company are being sold, is also
the beneficial owner of approximately 28 percent of the outstanding common stock
of the Company. Capco has agreed to abstain from voting in connection with the
approval of the Asset Sale, however, so as to avoid any apparent or actual
conflict of interest.
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SHAREHOLDER APPROVAL OF REINCORPORATION MERGER
With respect to the reincorporation proposal, Colorado law provides that
the holders of Company common stock and holders of the Series B Convertible
Preferred Stock must vote as two separate classes. Approval of the
reincorporation, which will be effected by the merging the Company with and into
a wholly-owned Minnesota subsidiary, requires both (i) the affirmative vote of
at least a majority of the issued and outstanding shares of our common stock
entitled to vote at the Special Meeting, and (ii) the affirmative vote of a
majority of the issued and outstanding shares of the Series B Preferred Stock
entitled to vote at the Special Meeting. If either class does not approve the
proposed reincorporation by the affirmative vote of a majority of the issued and
outstanding shares of that class, the proposal will fail. It is expected that
all 2,578,032 shares of common stock owned by the Company's officers and
directors, which is 50.5 percent of the total number of outstanding shares of
the Company's common stock, will be voted in favor of the reincorporation
proposal at the Special Meeting.
THE COMPANY
The Company's is currently in the business of distributing refined
petroleum products, primarily in the Western United States. In April 2000, the
Company announced it would review strategic alternatives away from its
historical business with the goal of enhancing shareholder value. As part of the
proposed merger transaction with AIQ, the Company will divest itself of its
historical businesses.
SUMMARY OF THE ASSET SALE
Meteor is a holding company that owns Meteor Enterprises, Inc. ("MEI"). MEI
owns the shares of the Company's other indirect subsidiaries or investees. MEI
directly or indirectly owns and operates all of the Company's refined petroleum
product distribution businesses. The Stock Purchase Agreement governing the
terms and conditions of the Asset Sale provides for the sale of all of the
issued and outstanding stock of MEI and, indirectly, the Subsidiaries to Capco
Energy, Inc., 2922 Chapman Avenue, Suite 202, Orange, California 92869, a
Colorado corporation, for a total purchase price of $5,500,000. Pursuant to the
terms of the Stock Purchase Agreement, Capco has agreed to indemnify the
Company, including its successors and assigns, assume all of the Company's
liabilities or "Losses" (as defined in the Stock Purchase Agreement).
Additionally, Capco, MEI and certain subsidiaries of MEI will release the
Company of any and all claims any of them now have against the Company, or over
will have. Capco is also the beneficial owner of a substantial amount of the
Company's common stock.
SUMMARY OF REINCORPORATION
As a condition to the Merger (summarized below), the Company is required to
reincorporate under the laws of the State of Minnesota. The reincorporation will
be effected through a merger of the Company with and into its newly-formed and
wholly owned subsidiary, AIQ Acquisition, Inc., a Minnesota corporation
(referred to in this Proxy Statement as "New Meteor"). Each outstanding share of
capital stock of the Company will be automatically converted into a share of
capital stock of New Meteor upon the effective time of the reincorporation
merger. New Meteor will also assume all outstanding options and warrants to
purchase Company common stock. See "Proposal Two: Reincorporation."
SUMMARY OF THE MERGER
ACTIVEIQ TECHNOLOGIES, INC.
AIQ is a privately-held, development stage company that will provide
Internet infrastructure software and services for small to medium sized
companies through a service-based product line that will quickly and seamlessly
connect sellers and buyers with minimal supplier-IT effort. Epoxy(sm), AIQ's
core service, will connect directly with a customer's back-end system to
streamline the buy/sell process. Epoxy(sm) currently offers fully integrated
e-Commerce, customer relationship management (CRM), and account tracking and
8
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through its recent acquisition of Edge Technologies Incorporated, AIQ also
offers small to medium-sized businesses the ability to build and maintain
e-commerce enabled websites in an efficient manner.
As of January 31, 2001, all of AIQ's 3,854,295 issued and outstanding
shares of common stock and were held by an aggregate of 140 shareholders. AIQ
also has approximately 1,500,000 shares reserved for issuance upon the exercise
outstanding options and warrants. No public market exists for AIQ's common
stock.
AIQ is headquartered in suburban Minneapolis, Minnesota. Its address is 601
Carlson Parkway, Suite 1500, Minnetonka, Minnesota 55305 and its telephone
number is (952) 449-5000. AIQ also maintains offices in Bedford, Massachusetts
and Las Vegas, Nevada.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS; REASONS FOR THE MERGER
On 2000, the Company's Board of Directors determined that the
Merger Agreement and the transactions contemplated by the Merger Agreement,
including the Merger and the reincorporation of the Company under Minnesota law,
were advisable, fair to and in the best interests of the Company and its
shareholders. In reaching its conclusion, the Board considered several factors,
including:
- The rising cost of credit and petroleum products has adversely affected
the Company's ability to grow in what appears to the Company's management
as a difficult financial climate for small independent distributors; and
- The Company believes that AIQ's technology and business prospects offer
its shareholders a greater chance of maximizing shareholder value than if
the Company continued with its current operations.
Although the Board of Directors has approved the Merger Agreement, pursuant
to the Colorado Business Corporations Act ("CBCA"), it makes no recommendation
to shareholders concerning approval of the Merger Agreement, the reincorporation
or the Asset Sale. The Board makes no recommendation concerning the Merger
Agreement because the Asset Sale to Capco Energy, a significant shareholder of
the Company, constitutes an interested party transaction since three members of
the Company's Board of Directors are also directors of Capco. Accordingly, a
recommendation of the Board of Directors to approve either the Asset Sale or the
Merger Agreement could result in a conflict of interest. Instead, shareholders
must consider the merits of the Merger, the reincorporation, and the Stock Sale
independent of any recommendation of the Board of Directors.
AIQ'S REASONS FOR THE MERGER
On December 6, 2000, the board of directors of AIQ unanimously approved the
Merger Agreement and the transactions contemplated in the Merger Agreement,
determining they were advisable and in the best interests of AIQ and its
shareholders. In reaching its conclusion, AIQ's board of directors considered
the liquidity provided to its shareholders that the Merger affords, as well as
the increased ability that AIQ will have to raise additional capital if and when
that becomes necessary.
TERMS OF THE MERGER
General. Pursuant to the terms of the Merger Agreement, Merger Sub will
merge with and into AIQ, with AIQ as the surviving corporation, which, following
the effectiveness of the proposed reincorporation, will then be a wholly-owned
subsidiary of New Meteor (the "Merger").
Upon the consummation of the transactions contemplated by the Merger
Agreement, in exchange for their shares of AIQ common stock, the AIQ
shareholders will receive:
- one share of New Meteor's common stock for each share of AIQ stock owned
or held, and
- a warrant to purchase 2 shares of New Meteor's common stock at a price of
$5.50 per share for every 3 shares of AIQ common stock held (see
"Approval of the Merger Agreement -- The Merger Agreement -- The Merger
Warrant").
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14
New Meteor will also assume all outstanding options and warrants to purchase
shares of AIQ common stock. See "Approval of the Merger Agreement -- The
Merger -- Effects of the Merger" for a more detailed discussion. The aggregate
number of shares of New Meteor common stock to be received by the AIQ
shareholders is subject to adjustment, depending upon the amount of cash
available in New Meteor at the effective time of the Merger. See "Approval of
the Merger Agreement -- The Merger Agreement -- Certain Conditions to
Consummation of the Merger."
The Merger will become effective upon the filing of articles of merger with
the Minnesota Secretary of State. Assuming all conditions to the Merger are
satisfied or waived, it is anticipated that the Merger will be completed within
one week of the Special Meeting. At the effective time of the Merger, New Meteor
will be renamed "Active IQ Technologies, Inc." and AIQ will be renamed "AIQ,
Inc."
Adjustment to Exchange Ratio
As a condition to AIQ's obligation to complete the Merger, the Company is
required to have a minimum $4,500,000 of cash available at the time of the
Merger. Provided that the Company raises at least $1,700,000 in the "MI Private
Placement" (as defined in the Merger Agreement), then the number of shares of
New Meteor that each AIQ shareholder will receive as a result of the merger will
increase or decrease as follows depending on the amount of cash the Company has
available at the effective time of the Merger: for each dollar of available cash
less than $4,850,000, the aggregate number of shares issued to AIQ shareholders
will be increased by one share; and for each dollar of available cash in excess
of $5,150,000, the aggregate number of shares issued to the AIQ shareholders
shall be decreased by one share.
Conditions to Closing. In addition to other conditions to consummation of
the Merger customary to agreements of this type, the Merger Agreement provides
that the obligation of the parties to effect the Merger are subject to the
satisfaction, among others, of the following conditions, any of which may be
waived by the parties:
- the approval of each party's shareholders;
- neither the Company nor AIQ having more than 3 percent of its
shareholders dissent from the resolutions approving the Merger, or in the
case of the Company, the resolutions approving the Asset Sale and the
reincorporation;
- the receipt of a favorable tax opinion indicating that the Merger will
qualify as a tax-free exchange;
- that Nasdaq shall not have provided any notice to the Company that the
proposed Merger may jeopardize the continued listing of the Company's
common stock on the Small Cap Market;
- AIQ shall not have outstanding more than 4,555,000 shares of its common
stock and not more than 1,500,000 shares of common stock reserved for
issuance upon the exercise of outstanding options and warrants;
- the Company shall not have more than 10,200,000 shares outstanding on a
fully-diluted basis immediately prior to the effective time of the
Merger;
- the Company shall be reincorporated as a Minnesota corporation; and
- the Company shall have completed the Stock Sale or otherwise disposed of
all of its assets and liabilities, except the Company must have a minimum
of at least $4,500,000 of cash available.
Termination of the Merger Agreement. The Merger Agreement may be
terminated by either party if:
- the shareholders of either company do not approve the requisite
transactions contemplated by the Merger Agreement;
- the number of shares of either AIQ or the Company dissenting from the
Merger, in the case of AIQ, or the Stock Sale or reincorporation, in the
case of the Company exceeds 3 percent;
- the Merger has not been consummated by April 16, 2001, or a later date
mutually agreed upon;
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- there has been a material misrepresentation, breach of warranty or breach
of a covenant by the other party; or
- there has been a material adverse change in the financial condition of
the other party.
MANAGEMENT OF THE COMPANY AND THE SURVIVING COMPANY AFTER THE MERGER
The Company has agreed that, as of the effective time of the Merger, the
directors and all officers of the Company will resign, except for Edward J.
Names, who will remain a director. Mr. Names, as the sole remaining director of
the Company, will appoint Kenneth W. Brimmer, Ronald E. Eibensteiner, D. Bradly
Olah, Vernon J. Hanzlik, Steven R. Levine and Steven Weiss, each of whom is
currently a director of AIQ, as well as Ken Kaufman, the son of a current
director of the Company, to serve as members of the Board of Directors until the
next annual meeting of the shareholders. Immediately thereafter, Mr. Names will
resign and the newly-comprised Board of Directors will elect those individuals
serving as officers of AIQ immediately preceding the effective time of the
Merger as officers of New Meteor. Biographical information concerning the new
directors is set forth in "Approval of the Merger Agreement -- The Management of
the Company and the Surviving Company After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain individuals who will serve as directors and executive officers of
the Company following the effective time of the Merger currently have, and will
have following the Merger, beneficial ownership of the Company's common stock.
Assuming there is no adjustment in the exchange ratio, such directors and
executive officers will be deemed to have such beneficial ownership of common
Stock (as a percentage of outstanding shares) as follows:
COMMON STOCK
BENEFICIALLY OWNED
COMMON STOCK AS IF MERGER
BENEFICIALLY OWNED AS CONSUMMATED ON
OF JANUARY 31, 2001 JANUARY 31, 2001
--------------------- ---------------------
Kenneth W. Brimmer............................... 0 616,666
Ronald E. Eibensteiner........................... 0 358,333
D. Bradly Olah................................... 0 919,999
Steven A. Weiss.................................. 0 61,667
Steven R. Levine................................. 0 13,467
Vernon J. Hanzlik................................ 0 93,333
Ken Kaufman...................................... 0 0
Pete Rockers..................................... 0 300,000
Philip C. Rickard................................ 0 136,063
FAIRNESS OPINION
Business Valuation Services ("BVS") provided its opinion to the Company's
Board of Directors that, as of the date of its opinion, the consideration to be
paid by the Company is fair from a financial perspective to the Company's
shareholders. The full text of BVS' opinion is attached to this Proxy Statement
as Appendix . In reaching its conclusion, BVS reviewed various corporate and
public documents and performed other financial studies and analyses. See
"Approval of the Merger Agreement -- The Merger Agreement -- Fairness Opinion."
LOCK-UP AGREEMENTS
The Merger Agreement provides that at the closing, the directors and
officers of the Company and AIQ will agree to lock-up certain shares of AIQ or
Meteor common stock for a period of one year. AIQ's directors and officers will
be restricted from transferring the shares underlying the options and warrants
to purchase shares of AIQ common stock that such persons hold, subject to an
exception for transferring up to 10 percent of the shares underlying the options
and warrants held by such person during each month of the lockup period.
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The Company's directors and officers are subject to a similar lockup agreement
with respect to the shares underlying their options and warrants to purchase
Company common stock. The Company's president, Edward Names, and Capco Energy
have also agreed not to transfer their shares of Company common stock, subject
to an exception allowing transfer of an amount equal to 1 percent of the total
number of shares of Company common stock outstanding immediately following the
effective time of the Merger during each three month period following the
Merger.
ACCOUNTING TREATMENT
Since, at the effective time of the Merger, the Company will have only
monetary assets and no operations, the Merger will be accounted for as the
issuance of stock by AIQ in exchange for the monetary assets of the Company.
Accordingly, there will be no change in the recorded amount of AIQ's assets and
liabilities. The monetary assets of the Company that are acquired as a result of
the Merger will be recorded at their fair market value and no goodwill will be
recorded.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). It is not expected that the Merger will result in any
federal income tax consequences to shareholders of the Company other than any
shareholders exercising dissenter's rights under the CBCA. See "Approval of the
Merger Agreement -- Certain Federal Income Tax Effects."
REGULATORY APPROVAL
The Company and AIQ each believe that no regulatory approvals are or will
be required in connection with the Merger.
MARKET FOR COMMON STOCK
The Company's common stock is currently traded on the NASDAQ SmallCap
Market System under the symbol "METR." No established trading market exists for
AIQ's common stock.
The closing sale price per share of the Company's common stock, as reported
on the NASDAQ SmallCap Market System on January 10, 2001, the last full trading
day before the execution of the Merger Agreement by the Company, was $3.9375.
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COMPARATIVE UNAUDITED PER COMMON SHARE DATA
The following table presents selected comparative unaudited per common
share date for the Company and AIQ on a historical and pro forma basis given
effect to the merger pursuant to the terms of the agreement. The information
presented below is derived from the combined historical financial statements of
the Company and AIQ, including the related notes thereto, incorporated by
reference and included elsewhere herein and the unaudited pro form condensed
consolidated balance sheet and statements of operations, included elsewhere
herein. This information should be read in conjunction with such historical and
pro forma financial statements and the related notes thereto. See "Incorporation
of Certain Documents by Reference" and "Unaudited Pro Forma Condensed
Consolidated Financial Statements".
The per share data set forth below is not necessarily indicative of the
results of the future operations of the combined entity or the actual results
that would have been achieved had the Merger been consummated prior to the
periods indicated.
METEOR
AIQ COMMON STOCK
COMMON STOCK -----------------------
HISTORICAL HISTORICAL PRO FORMA
---------- ---------- ---------
EARNINGS (LOSS) PER COMMON SHARE -- assuming dilution
Nine months ended September 30, 2000...................... $(1.77) $(0.16) $(0.32)
Nine months ended September 30, 1999...................... $(0.50) $ 0.23
Year ended December 31, 1999.............................. $(1.92) $ 0.07 $(0.16)
Year ended December 31, 1998.............................. $(0.79) $ 0.31
Year ended December 31, 1997.............................. $ 0.04 $ 0.16
DIVIDENDS (2)............................................... -- -- --
BOOK VALUE -- SEPTEMBER 30, 2000............................ $ 0.48 $ 2.65 $ 1.35
NOTES TO COMPARATIVE UNAUDITED PER COMMON SHARE DATA
(1) The unaudited pro forma consolidated information per common share
combines financial information of the Company and AIQ for the years ended
December 31, 1999, 1998, 1997 and the nine months ended September 30, 2000.
(2) Neither the Company nor AIQ have declared or paid dividends since their
inception.
(3) Historical book value per common share is computed by dividing total
stockholders' equity by the number of common shares outstanding at the end of
the period presented. Pro forma consolidated book value per common share is
computed by dividing pro forma stockholders' equity by the pro forma number of
common shares outstanding for the period ended September 30, 2000 for the
Company and AIQ.
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SELECTED CONSOLIDATED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA OF ACTIVEIQ TECHNOLOGIES, INC.
The following table summarizes certain selected historical consolidated
financial data of AIQ, which should be read in conjunction with the financial
statements of AIQ, the related notes thereto and AIQ's "Management's Discussion
and Analysis of Financial Condition," set forth elsewhere in this Proxy
Statement. The statement of operations data set forth below for each of the
years ended December 31, 1997, 1998 and 1999, and the nine months ended
September 30, 2000, and the balance sheet data for the years ended December 31,
1998 and 1999, and the nine months ended September 30, 2000, are derived from
the financial statements of AIQ attached to this Proxy Statement. The statement
of operations data for the period from April 11, 1996 (inception) through
December 31, 1996, and for the nine months ended September 30, 2000 and the
balance sheet data for the years ending December 31, 1996 and 1997 and the nine
months ended September 30, 2000, are unaudited. However, AIQ believes that such
data reflects all adjustments (consisting of normal recurring entries) necessary
for a fair presentation of such data. Historical results are not necessarily
indicative of the results to be expected in the future.
NINE MONTHS YEARS ENDED DECEMBER 31 PERIOD FROM
ENDED -------------------------------- APRIL 11, 1996
SEPTEMBER 30, 2000 1999 1998 1997 TO DECEMBER 31, 1996
------------------ --------- --------- -------- --------------------
STATEMENT OF OPERATIONS DATA:
Revenues..................... $ -- $ -- $ -- $ -- $ --
Operating expenses........... $ 1,985,482 $ 413,982 $ 12,305 $ 7,677 $ 17,956
----------- --------- --------- -------- --------
Loss from operations......... $(1,985,482) $(413,982) $ (12,305) $ (7,677) $(17,956)
----------- --------- --------- -------- --------
Other income (expense)....... $ (35,472) $ (47,999) $$(132,187) $ 15,844 $(18,750)
----------- --------- --------- -------- --------
Net income (loss)............ $(2,020,954) $(461,981) $(144,492) $ 8,167 $(36,706)
----------- --------- --------- -------- --------
Basic and diluted net income
(loss) per common share.... $ (1.77) $ (1.92) $ (0.79) $ 0.04 $ (0.16)
=========== ========= ========= ======== ========
Basic and diluted weighted
average common shares
outstanding................ 1,140,790 240,394 183,667 228,000 228,000
=========== ========= ========= ======== ========
BALANCE SHEET DATA:
Total assets................. $ 2,278,052 $ 473,664 $ 72,014 $421,816 $262,272
Total liabilities............ $ 656,015 $ 289,305 $ 241,827 $475,491 $295,979
Shareholders' equity
(deficit).................. $ 1,622,037 $ 184,359 $(169,813) $(53,674) $(33,706)
Common shares outstanding.... 3,405,206 373,626 152,000 228,000 228,000
AIQ has paid no cash dividends on its common stock.
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SELECTED HISTORICAL FINANCIAL DATA OF METEOR INDUSTRIES, INC.
The following table summarizes certain selected historical consolidated
financial data of the Company, which should be read in conjunction with the
financial statements of the Company, the related notes thereto and its
"Management's Discussion and Analysis of Financial Condition," incorporated by
reference in this Proxy Statement. Effective November 2, 1995, the Company
acquired 100% of the issued and outstanding common stock of Capco Resources Inc.
("CRI") in exchange for 1,745,000 shares of Company common stock. The
acquisition was treated as a reverse acquisition of the Company by CRI.
Accordingly, the results of operations of CRI are included in the following
financial information since inception of CRI. The results of operations of the
Company are included in the following financial information since November 2,
1995, the effective date of the acquisition.
FOR NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Sales.......................... $ 144,108 $ 108,774 $ 155,211 $ 118,362 $ 88,440 $ 59,984 $ 9,828
Cost of sales.................. 127,438 90,520 130,417 97,558 75,439 49,644 7,373
Operating expenses............. 15,309 16,120 23,232 17,905 11,814 9,119 2,395
Other income (expense)......... (1,697) (276) (602) (348) 397 (79) (71)
Income (loss) from continuing
operations................... (551) 806 259 1,168 601 462 (74)
Income from discontinued
operations................... -- -- -- -- -- -- 1,871
Net income..................... $ (551) $ 806 $ 259 $ 1,168 $ 601 $ 462 $ 1,796
Earnings (loss) per share:
Basic
Continuing operations........ $ (.16) $ .24 $ .07 $ .31 $ .16 $ .15 $ (.15)
Discontinued operations...... -- -- B B B B- 3.82
Net income................... $ (.16) $ .24 .07 .31 .16 .15 3.67
Diluted:
Continuing operations........ $ (.16) $ .23 $ .07 $ .31 $ .16 $ .14 $ (.15)
Discontinued operations...... -- B B B B B- 3.80
Net income................... $ (.16) $ .23 $ .07 $ .31 $ .16 $ .14 3.65
Weighted average number of
common shares and common
share equivalents:
Basic........................ 3,527,509 3,430,805 3,454,146 3,792,197 3,821,061 3,184,397 489,035
Diluted...................... 3,527,509 3,477,738 3,459,798 3,796,864 3,862,826 3,227,496 492,535
FOR NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------- ------------------------------------------------------------
2000 1999 1998 1997 1996 1995
--------------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
BALANCE SHEET DATA:
Current Assets............. $ 26,761 $ 22,310 $ 16,096 $ 15,826 $ 8,488 $ 6,708
Property and Equipment..... 16,783 17,905 19,235 13,940 8,277 8,568
Other Assets............... 4,406 4,780 4,059 2,175 3,669 3,273
Total Assets............... 47,950 44,995 39,390 31,941 20,434 18,549
Current Liabilities........ 27,354 22,655 16,506 12,935 8,943 6,921
Long-term Debt............. 8,350 5,865 6,390 2,912 446 2,195
Deferred Tax Liability..... 2,606 2,606 3,686 2,288 1,773 1,894
Minority Interest.......... 250 5,412 4,952 4,515 4,152 3,615
Stockholders' Equity....... 9,390 8,457 7,856 9,291 5,120 3,924
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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma financial data is derived from
the Pro Forma Unaudited Consolidated Statements of Operations of Meteor
Industries, Inc. for the year ended December 31, 1999, and for the nine months
ended September 30, 2000, and a Pro Forma Unaudited Consolidated Balance Sheet
of Meteor Industries, Inc. as of September 30, 2000, which are included
elsewhere in this Proxy Statement. The Pro Forma Unaudited Consolidated Balance
Sheets give effect to the acquisitions as if they occurred on September 30,
2000.
The selected unaudited pro forma combined financial data is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger had been
consummated at the beginning of the periods indicated, not is such information
indicative of the future operating results or financial position of the Company
after the Merger.
NINE MONTHS YEAR ENDED
ENDED DECEMBER 31,
SEPT. 30, 2000 1999
-------------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 58 $ 60
Operating expenses.......................................... $ 2,683 $ 1,328
Other income (expense)...................................... $ (40) $ (56)
Net income (loss)........................................... $ (2,665) $ (1,324)
---------- ----------
Basic and diluted net income (loss) per common share........ $ (.30) $ (0.16)
Basic and diluted weighted average common shares
outstanding............................................... 8,863,182 8,197,152
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 8,690
Total assets................................................ $ 11,863
Total liabilities........................................... $ 718
Shareholders' equity (deficit).............................. $ 11,145
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CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING INFORMATION
Certain information contained in this Proxy Statement which does not relate
to historical financial information may be deemed to constitute forward looking
statements. The words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," "believe" or similar
expressions identify "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (as amended). This Proxy
Statement contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of each of the Company, Merger Sub and AIQ, and the
effect of the Merger. Because such statements are subject to risks and
uncertainties, actual results may differ materially from historical results and
those presently anticipated or projected. The Company's shareholders are
cautioned not to place undue reliance on such statements, which speak only as of
the date hereof. Among the factors that could cause actual results in the future
to differ materially from any opinions or statements expressed with respect to
future periods are those described in the section of this Proxy Statement
entitled "Risk Factors." Neither the Company nor AIQ undertakes any obligation
to release publicly any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to shareholders of the Company in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Special Meeting to be held on , 2001 at
.m. (Denver time) at , and at any adjournment
or postponement thereof.
MATTERS TO BE CONSIDERED
At the Special Meeting, the holders of record of the Company's common stock
and Series B Convertible Preferred Stock as of the Record Date, will: (1)
consider and vote upon a proposal to approve the Asset Sale; (2) consider and
vote upon a proposal to reincorporate the Company under Minnesota law; and (3)
consider and vote upon a proposal to approve the Merger Agreement.
RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; VOTING; QUORUM
The Company has fixed February 13, 2001, as the record date for the
determination of the holders of the Company's common stock and Series B
Convertible Preferred Stock entitled to notice of and to vote at the Special
Meeting. Only holders of the Company's common stock and the Series B Convertible
Preferred Stock on the Record Date will be entitled to notice of and to vote at
the Special Meeting and at any adjournment or postponement thereof. As of the
Record Date, there were approximately 4,077,903 shares of the Company's common
stock outstanding, held by approximately 620 shareholders of record
(approximately 565 of which are held in "street name") and there were 365,000
shares of Series B Convertible Preferred Stock held by approximately 5
shareholders of record. Each holder of record of common stock and Series B
Convertible Preferred Stock of the Company is entitled to cast one vote per
share of stock on all matters properly submitted for the vote of the Company's
shareholders, exercisable in person or by properly executed proxy, at the
Special Meeting.
The presence, in person or by proxy, of holders of a majority of the shares
of the Company common stock and Series B Convertible Preferred Stock outstanding
as of the Record Date constitutes a quorum for the transaction of business at
the Meeting. In the event there are not sufficient votes for a quorum or to
approve any proposals at the time of the Special Meeting, the Special Meeting
may be adjourned in order to permit further solicitation of proxies. Abstentions
will count towards quorum requirements.
The proposal to reincorporate the Company under Minnesota law (Proposal
Two) must be approved by both (i) the affirmative vote of at least a majority of
the issued and outstanding shares of our common stock entitled to vote at the
Special Meeting, and (ii) the affirmative vote of a majority of the issued and
outstanding shares of our Series B Preferred Stock entitled to vote at the
Special Meeting. As to the reincorporation proposal, a shareholder may: (i) vote
"FOR" the proposal, (ii) vote "AGAINST" the proposal, or (iii) "ABSTAIN" with
respect to the proposal. Pursuant to Colorado law, because the proposals must be
approved by an affirmative vote of a majority of the shares of each class
outstanding and entitled to vote, a vote of "Abstain" has the same effect as a
vote against the proposed reincorporation.
The Asset Sale (Proposal One) and the Merger (Proposal Three) must be
approved by the affirmative vote of at least a majority of all of the issued and
outstanding shares of Meteor stock, both common stock and Series B Convertible
Preferred Stock, counted together and voting as a single class. As to the Stock
Sale and the Merger, a shareholder may: (i) vote "FOR" the proposal, (ii) vote
"AGAINST" the proposal, or (iii) "ABSTAIN" with respect to each proposal. Since
the proposals must be approved by an affirmative vote of a majority of all of
the outstanding shares of Meteor, both common stock and Series B Preferred Stock
counted together and voting as a single class, a vote of "Abstain" has the same
effect as a vote against the proposals.
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SOLICITATION
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. Pursuant to the Merger
Agreement, the expense of soliciting Proxies, including the cost of preparing,
assembling and mailing the Proxy Materials to shareholders, will be divided
equally by the Company and AIQ. It is anticipated that solicitations of Proxies
for the Meeting will be made only by use of the mails; however, the Company may
use the services of its public relations firm or a proxy solicitation firm.
Directors, officers and employees may also be used to solicit Proxies personally
or by telephone, without additional salary or compensation to them. Brokerage
houses, custodians, nominees and fiduciaries will be requested to forward the
Proxy Materials to the beneficial owners of the Company's shares held of record
by such persons, and the Company will reimburse such persons for their
reasonable out-of-pocket expenses incurred by them in that connection.
All shares represented by valid Proxies will be voted in accordance
therewith at the Meeting.
VOTING AND REVOCABILITY OF PROXIES
Shares of Company common stock and Series B Convertible Preferred Stock
represented by all properly executed proxies received at the Company's transfer
agent prior to the date of the Special Meeting, will be voted as specified in
the proxy. Unless contrary instructions are indicated on the proxy, the shares
of common stock and Series B Convertible Preferred Stock represented by such
proxy will be voted "FOR" approval of the Stock Purchase Agreement, "FOR"
approval of the reincorporation under Minnesota law, and "FOR" approval of the
Merger Agreement.
The giving of the enclosed proxy does not preclude the right to vote in
person should the shareholder giving the proxy so desire. A proxy may be revoked
at any time prior to its exercise by (i) providing notice in writing to the
Company's corporate secretary that the proxy is revoked; (ii) presenting to the
Company a later-dated proxy; or (iii) by attending the Special Meeting and
voting in person.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth the number and percentage of shares of the
Company's common stock owned beneficially, as of the Record Date, by any person,
who is known to the Company to be the beneficial owner of 5 percent or more of
the Company's common stock, and, in addition, by each director and each
executive officer of the Company, and by all directors and executive officers as
a group. Information as to beneficial ownership is based upon statements
furnished to the Company by such persons.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON STOCK
- - - ------------------- ----------------------- ------------
Capco Energy, Inc. ......................................... 1,139,000 28%
2922 E. Chapman Ave. #202
Orange, CA 92869
Ilyas Chaudhary............................................. 1,319,000(1) 31%
2922 E. Chapman Ave. #202
Orange, CA 92869
Edward J. Names............................................. 562,619(2) 13%
1401 Blake Street, Suite 200
Denver, CO 80202
Darrell O. Owen............................................. 54,719(3) 1%
1401 Blake Street, Suite 200
Denver, CO 80202
Richard Kisser.............................................. 21,334(4) *
1401 Blake Street, Suite 200
Denver, CO 80202
Dennis R. Staal............................................. 253,460(5) 6%
2922 E. Chapman Ave. #202
Orange, CA 92869
Irwin Kaufman............................................... 149,100(6) 4%
8224 Paseo Vista Drive
Las Vegas, NV 89128
Richard Dana................................................ 218,000(7) 5%
128 Ash Street
Denver, CO 80220
Henry Fong.................................................. 383,400(8) 9%
2401 PGA Boulevard #190
Palm Beach Gardens, FL 33040
Wayne Mills................................................. 924,000(9) 21%
5020 Blake Road
Edina, MN 55436
All Executive Officers and Directors as a Group (7
persons).................................................. 2,578,032 50.5%
- - - ---------------
* less than 1 percent
(1) Includes 1,139,000 shares of the Company held by a subsidiary of Capco
Energy, Inc. Mr. Chaudhary is Chairman of the Board, Chief Executive Officer
and beneficially owns over 50% of its outstanding stock of Capco Energy,
Inc. Mr. Chaudhary also beneficially owns 180,000 shares underlying stock
options exercisable within 60 days by Mr. Chaudhary.
(2) Represents 40,240 shares held directly by Mr. Names, 265,000 shares held by
NFF, Ltd., a limited partnership of which he served as general partner;
2,400 shares held by his wife of which he disclaims
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beneficial ownership, and 254,979 shares underlying stock options
exercisable within 60 days by Mr. Names.
(3) Includes 1,201 shares held directly and 53,518 shares underlying stock
options exercisable within 60 days held by Darrell O. Owen, who is President
and Chief Executive Officer of certain of the Company's subsidiaries.
(4) Includes 21,334 shares underlying stock options exercisable within 60 days
held by Richard Kisser, the Company's Chief Financial Officer.
(5) Includes 5,400 shares held directly by Mr. Staal; 71,500 shares held by
PAMDEN, Ltd., a limited partnership of which Mr. Staal is general partner;
8,432 shares held by Mystique Resources Company which is wholly owned by
PAMDEN, Ltd.; 600 shares held by an IRA and 167,528 shares underlying stock
options exercisable within 60 days by Mr. Staal.
(6) Consists of 135,500 shares underlying stock options and warrants exercisable
within 60 days by Mr. Kaufman and 13,600 shares owned by Mr. Kaufman
directly.
(7) Consists of 218,000 shares underlying stock options exercisable within 60
days by Mr. Dana.
(8) Includes (i) 150,000 common shares and 90,000 warrants exercisable within 60
days held by Gulfstream Financial Partners LLC, an entity owned 100% by Mr.
Fong, (ii) 123,400 common shares held directly by Mr. Fong, and (iii) 20,000
publicly traded warrants held directly by Mr. Fong. Does not include 120,000
shares of Series B Preferred Stock held of record by an irrevocable trust
for the benefit of Mr. Fong's children that is convertible into 120,000
common shares and 120,000 warrants. The preferred stock can be converted
immediately and the warrants are exercisable immediately upon conversion.
Mr. Fong disclaims beneficial ownership of the shares because he has no
beneficial interest in nor any voting power over the trust's assets.
(9) Includes (i) 50,000 shares held of record by his wife of which he disclaims
beneficial ownership, (ii) 90,000 issuable upon exercise of warrants within
60 days, (iii) 584,000 common shares held directly, and (iv) 100,000 shares
of Series B Convertible Preferred Stock that is convertible into 100,000
common shares and warrants to purchase 100,000 additional common shares. The
Series B Convertible Preferred Stock can be converted immediately and the
warrants are exercisable immediately upon conversion.
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PROPOSAL ONE:
SALE OF ASSETS
GENERAL
Meteor is a holding company that owns 100 percent of the outstanding stock
of Meteor Enterprises, Inc. ("MEI"), which in turn owns several subsidiary
entities (the "Subsidiaries"). The Subsidiaries own, operate and acquire
independent refined petroleum product distribution companies. The Stock Purchase
Agreement (attached as Appendix A to the Proxy Materials) provides for the sale
of all of the issued and outstanding stock of MEI to Capco Energy, Inc., 2922
Chapman Avenue, Suite 202, Orange, California 92869, a Colorado corporation
("Capco"), for a total purchase price of $5,500,000. Pursuant to the terms of
the Stock Purchase Agreement, Capco has agreed to indemnify the Company,
including its successors and assigns, assume all of the Company's liabilities or
"Losses" (as defined in the Stock Purchase Agreement). Additionally, Capco, MEI
and certain subsidiaries of MEI will release the Company of any and all claims
any of them now have against the Company, or over will have. Capco is also the
beneficial owner of a substantial amount of the Company's common stock.
BACKGROUND AND REASONS FOR ASSET SALE
The Company is proposing the Asset Sale for two principal reasons: (1) the
disposition of all of the Company's assets is a condition to the consummation of
the Merger, as described in this Proxy Statement. (2) The amount of working
capital necessary to conduct the Company's business has increased significantly
as the price of petroleum products has risen. In executing its business plan,
the Company has grown its business through acquisitions and mergers.
Acquisitions are paid for with cash or stock. Currently, the Company does not
have cash flow sufficient to pay for acquisitions. Moreover, because of
illiquidity and significant fluctuation in its stock price, the Company's stock
has not been sufficiently attractive to serve as currency to fund acquisitions.
As a Nasdaq SmallCap company, Meteor has had difficulty raising capital through
equity offerings because it has very little institutional interest in its stock.
Having determined that it no longer has a ready means by which to fund future
acquisitions central to its business plan, the Board of Directors has determined
that it is in the Company's best interests to dispose of all or substantially
all of the Company's petroleum related businesses.
STOCK PURCHASE AGREEMENT
You are urged to review the Stock Purchase Agreement, a copy of which is
incorporated in and attached to this Proxy Statement as Appendix A, for a
complete statement of the terms of the proposed sale of assets. The following
summary is qualified in its entirety by the Stock Purchase Agreement, which
provides a complete statement of the terms of the proposed Asset Sale.
EFFECTIVE DATE AND CONSEQUENCES OF THE SALE OF ASSETS
The effective time of the Asset Sale will immediately precede the closing
of the Merger, on the earliest practicable date following the day on which all
of the obligations and conditions precedent set forth in the Stock Purchase
Agreement are satisfied or waived but in no event later than the date the Merger
is completed. It is anticipated that the closing of the Asset Sale will occur
within one week of the date of the Special Meeting. Upon the consummation of the
Asset Sale, the Company will no longer be obligated for any liabilities related
to the Subsidiaries, or any of the operations or assets of the Subsidiaries.
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Stock Purchase Agreement contains representations and warranties as to
the organization, authority, and business of the Company and such
representations and warranties will terminate at the Closing. The Stock Purchase
Agreement contains representations and warranties as to the organization,
authority and business of Capco and such representations and warranties will
terminate at the closing. The Stock Purchase Agreement also contains certain
covenants of Capco relating to the Subsidiaries and the Assets. Such covenants
shall
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survive for a period of eight years. Further, the Stock Purchase Agreement
contains covenants of Capco to indemnify the Company, which shall survive the
closing.
RIGHTS OF THE COMPANY'S DISSENTING SHAREHOLDERS
The proposed Asset Sale is a corporate action which gives rise to
dissenters' rights under the CBCA. A summary and discussion of dissenters'
rights available to Meteor shareholders is set forth in this Proxy Statement
under the heading "Rights of Dissenting Shareholders."
FAIRNESS OPINION
The Board of Directors of the Company has obtained a fairness opinion as to
the fair market value of the Assets proposed to be sold upon consummation of the
Asset Sale. The fairness opinion is attached to this Proxy Statement as Appendix
" ".
The Board of Directors engaged Business Valuation Services ("BVS") to
perform the fairness evaluation. BVS, in the course of its corporate finance
advisory operations, is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, public and private
financing, and valuations for estate, corporate and other purposes.
There are three generally accepted valuation approaches used in determining
the fair market value of a business: (i) the income, (ii) the cost, and (iii)
the market approach. Depending on the facts and circumstances surrounding a
particular business, applying the different approaches independently can yield
substantially different valuations. Professionals valuing businesses typically
apply a simultaneous application of at least two of the three valuation
approaches so as to arrive at mutually supporting conclusions indicating a
reasonable range of values for any business analyzed.
BVS elected to apply the income approach and the market approach in its
fairness review, after determining that the value of the Company's petroleum
business on a going concern basis is more directly related to its ability to
generate a fair rate of return on invested capital, a factor that is more
appropriately considered in the income and market approaches.
In connection with its analysis, BVS reviewed various corporate and public
documents, including but not limited to, the Stock Purchase Agreement, the
Company's financial statements, historical stock trading prices, and industry
and petroleum pricing data, and performed such other financial studies,
analyses, inquiries, and investigations as BVS deemed appropriate.
As a result of their analysis, BVS is of the opinion, subject to
assumptions and limitations set forth in Appendix , that the consideration
to be received by the Company as a result of the Asset Sale is fair, from a
financial point of view, to the Company and its shareholders.
The amount of consideration to be received by the Company as a result of
the Asset Sale was determined as a result of negotiations between Meteor and
Capco.
INTERESTS OF CERTAIN ENTITIES
In considering the Asset Sale, you should be aware that Capco, through a
majority owned subsidiary, currently owns 28 percent of the Company's
outstanding common stock. Therefore, Capco, as a shareholder of Meteor, has
interests in the Asset Sale in addition to, and different from, the interests of
the Company's shareholders generally. Prior to the effective date of the Asset
Sale, the Company shall have received a written opinion acceptable to the
Company in its sole discretion, stating that the consideration to be received by
the Company pursuant to the Stock Purchase Agreement is fair to the Company and
its shareholders from a financial point of view.
VOTE REQUIRED
Approval of the Asset Sale requires the affirmative vote of at least a
majority of all of the issued and outstanding shares of Meteor stock, both its
common stock and Series B Convertible Preferred Stock counted together and
voting as a single class. Because the Asset Sale must be approved by an
affirmative vote of a
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majority of all of the outstanding shares of Meteor, both common stock and
Series B Convertible Preferred Stock counted together and voting as a single
class, a vote of "Abstain" has the same effect as a vote against the Asset Sale.
As indicated above, Capco is also the beneficial owner of approximately 28
percent of Meteor's outstanding common stock. Accordingly, Capco has agreed to
abstain from voting in connection with the approval of the Asset Sale so as to
avoid any apparent or actual conflict of interest. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE VOTED FOR THE ASSET SALE PROPOSAL UNLESS A VOTE
AGAINST THE PROPOSAL OR ABSTENTION IS SPECIFICALLY INDICATED.
IN THE EVENT THAT THE MERGER AGREEMENT IS NOT APPROVED BY THE SHAREHOLDERS
AT THE SPECIAL MEETING OR THE MERGER IS OTHERWISE ABANDONED PRIOR TO THE
CONSUMMATION OF THE ASSET SALE, THE ASSET SALE WILL ALSO BE ABANDONED.
SIMILARLY, THE MERGER AGREEMENT WILL BE TERMINATED IF THE ASSET SALE IS NOT
APPROVED BY THE REQUISITE SHAREHOLDER VOTE AT THE SPECIAL MEETING.
PROPOSAL TWO:
REINCORPORATION
The following discussion summarizes certain aspects of the proposal to
change the state of incorporation of the Company from Colorado to Minnesota. The
change of the state of incorporation will be accomplished through the merger of
the Company with and into its newly-formed wholly owned subsidiary, AIQ
Acquisition, Inc., a Minnesota corporation (referred to as "New Meteor").
The following discussion does not purport to be a complete statement of the
terms of the reincorporation or of the provisions affecting, and differences
between, your rights as a shareholder of the Company and your rights as a
shareholder of New Meteor. This discussion is qualified in its entirety by the
form of agreement and plan of merger between the Company and New Meteor (a copy
of which is attached as Appendix D to this Proxy Statement), the articles of
incorporation of New Meteor (attached to this Proxy Statement as Appendix E),
the articles of incorporation and bylaws of the Company and by Colorado and
Minnesota law. You are urged to review these materials.
GENERAL
The Merger Agreement between the Company, Merger Sub and AIQ requires, as a
condition to AIQ's obligations to consummate the Merger, that the Company
reincorporate under Minnesota law. Accordingly, in connection with its adoption
and approval of the Merger Agreement, the Board of Directors has approved the
proposal to reincorporate the Company as a Minnesota corporation. In preparation
of the submission of this proposal to the shareholders, the Company formed New
Meteor by filing articles of incorporation with the Minnesota Secretary of State
on January 31, 2001.
If the shareholders approve the reincorporation proposal, as well as the
Merger Agreement described in more detail under "Proposal Three," the Company
will be merged with and into New Meteor and will cease to exist as a Colorado
corporation. In the reincorporation merger, each outstanding share of common
stock of the Company will be converted into one share of common stock of New
Meteor and each outstanding share of the Company's Series B Convertible
Preferred Stock will be converted into a share of New Meteor Series B
Convertible Preferred Stock. Each outstanding certificate representing shares of
the Company's capital stock will continue to represent the same number of shares
of New Meteor stock. Thus, it will not be necessary for you to exchange your
existing stock certificates for new stock certificates of New Meteor.
Pursuant to the terms of the Merger Agreement, the post-Merger Board of
Directors of New Meteor will be composed of Ken Kaufman, the son of a current
Meteor director, and six other persons, all of whom are currently directors of
AIQ. The Merger Agreement also provides that the persons who serve as officers
of AIQ at the effective time of the Merger will serve as the officers of New
Meteor after the Merger.
The Company's 1993 Incentive Stock Option Plan and 1998 Incentive Equity
Plan will be continued by New Meteor and any outstanding option or right issued
pursuant to either plan will automatically be converted into an option or right
to the same number of shares of common stock of New Meteor at the same price per
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share and upon the same terms and subject to the same conditions as set forth in
Meteor's plans. New Meteor will also assume all currently outstanding options
and warrants to purchase shares of Meteor common stock.
AT THE EFFECTIVE TIME OF THE REINCORPORATION, THE RIGHTS OF THE
SHAREHOLDERS OF NEW METEOR WILL BE GOVERNED BY MINNESOTA LAW AND BY NEW METEOR'S
ARTICLES OF INCORPORATION AND BYLAWS, EACH OF WHICH WILL RESULT IN CHANGES IN
YOUR RIGHTS AS SHAREHOLDERS. For additional information and details relating to
the changes in the rights of shareholders, you are referred to and urged to read
the Company's articles of incorporation and bylaws, the articles of
incorporation and bylaws of New Meteor, and the discussion in this Proxy
Statement under the headings "-- Comparative Rights of Holders of Meteor Capital
Stock and New Meteor Capital Stock."
It is anticipated that the reincorporation will become effective as soon as
practicable following the date of the Special Meeting. In any event, since the
Company's reincorporation is a condition to AIQ's obligations to consummate to
Merger, the reincorporation will be complete at or prior to the effective time
of the Merger. IN THE EVENT THE PROPOSED MERGER WITH AIQ IS ABANDONED PRIOR TO
REINCORPORATION, THE PROPOSAL TO REINCORPORATE WILL ALSO BE ABANDONED AND YOUR
RIGHTS AS A SHAREHOLDER WILL CONTINUE TO BE GOVERNED BY COLORADO LAW AND THE
COMPANY'S EXISTING ARTICLES OF INCORPORATION AND BYLAWS. SIMILARLY, IF THE
REINCORPORATION PROPOSAL FAILS, AIQ WILL HAVE THE RIGHT TO TERMINATE THE MERGER
AGREEMENT.
APPROVAL OF SHAREHOLDERS; BOARD RECOMMENDATION
The reincorporation proposal must be approved by both (i) the affirmative
vote of at least a majority of the issued and outstanding shares of Company
common stock entitled to vote at the Special Meeting, and (ii) the affirmative
vote of a majority of the issued and outstanding shares of the Company's Series
B Preferred Stock entitled to vote at the Special Meeting. Because the proposals
must be approved by an affirmative vote of a majority of all of the outstanding
shares of Meteor, both common stock and Series B Preferred Stock counted
separately and voting as separate classes, a vote of "Abstain" will have the
same effect as a vote against the reincorporation. A vote to approve the
reincorporation proposal will constitute specific approval to take all other
actions necessary to implement the reincorporation. You have the right to
dissent from the reincorporation proposal. See "Rights of Dissenting
Shareholders."
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE REINCORPORATION MERGER.
Pursuant to the CBCA (CRS 7-111-103(2)(a)), because the proposed reincorporation
could constitute a conflict of interest transaction, the Company's Board of
Directors makes no recommendation to shareholders concerning the approval of the
reincorporation. The proposed reincorporation could constitute a conflict of
interest transaction because the Asset Sale, upon which the reincorporation is
conditioned, is an interested party transaction whereby all or substantially all
of our assets will be sold to one of the Company's shareholders, Capco and
because three of the Company's directors are also directors of Capco. Therefore,
shareholders must consider the merits of the proposal to reincorporate under
Minnesota law, independent of the recommendation of the Board of Directors.
Shareholders should note, however, that all of the directors of the Company
intend to vote all shares of common stock under their control in favor of such
proposal and have determined that the terms and conditions of the plan of merger
between the Company and New Meteor are fair from an financial point of view to
the shareholders and in the Company's best interests. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS WILL BE VOTED FOR THE REINCORPORATION PROPOSAL UNLESS A VOTE
AGAINST THE PROPOSAL OR ABSTENTION IS SPECIFICALLY INDICATED.
REASONS FOR REINCORPORATION
The reincorporation of the Company under Minnesota law is a condition to
AIQ's obligations to consummate the Merger. The management of AIQ, which will
manage the Company following the Merger, seeks to reincorporate because,
following consummation of the Merger, the Company will no longer conduct any
operations within the State of Colorado. The Company will have disposed of
substantially all of its assets and will no longer maintain an office or
employees in Colorado. Additionally, the post-Merger officers and directors of
the Company are mostly all Minnesota residents and the Company will be
headquartered in Minnesota. For a discussion of certain differences in
shareholders' rights and the powers of management under
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the CBCA and the Minnesota Business Corporation Act ("MBCA"), see
"-- Comparative Rights of Holders of Meteor Capital Stock and New Meteor Capital
Stock" below.
COMPARATIVE RIGHTS OF HOLDERS OF METEOR CAPITAL STOCK AND NEW METEOR CAPITAL
STOCK
Assuming the reincorporation is approved by the requisite shareholder vote
at the Special Meeting, the holders of the Company's capital stock, whose rights
are currently governed by the CBCA and the Company's articles of incorporation
and bylaws, will become shareholders of New Meteor, which is a Minnesota
corporation. Accordingly, their rights will be governed in accordance with
Minnesota law and New Meteor's articles of incorporation and bylaws. Certain
differences in the rights of shareholders arise from distinctions between the
CBCA and the MBCA, as well as from the Company's articles of incorporation and
bylaws as compared to New Meteor's articles of incorporation and bylaws. The
following is a brief description of those differences. This discussion is not
intended to be a complete statement of the differences, but rather a summary of
the more significant differences affecting the rights of such shareholders and
certain important similarities. The identification of certain provisions or
differences is not meant to indicate that other equally or more significant
differences do not exist. The following summary discussion is qualified in its
entirety by reference to the CBCA, MBCA, the articles of incorporation and
bylaws of the Company and the articles of incorporation and bylaws of New
Meteor, to which shareholders are referred.
Authorized Capital Stock
The Company. The Company's articles of incorporation, as amended,
authorize the issuance of up to 11,000,000 shares of capital stock, $.001 par
value per share in the case of common stock and a par value as determined by the
Board of Directors in the case of preferred stock. As of the Record Date, there
were 4,077,903 shares of the Company's common stock and 365,000 shares of the
Company's Series B Convertible Preferred Stock issued and outstanding. Each
share of Series B Convertible Preferred Stock is convertible into one share of
the Company's common stock and a warrant, exercisable until May 15, 2005, to
purchase one share of common stock at a price of $2.50 per share. The Company's
common stock and Series B Convertible Preferred Stock are the only classes or
series of capital stock issued and outstanding.
New Meteor. New Meteor's articles of incorporation authorize the issuance
of up to 40,000,000 shares of undesignated capital stock, of which 365,000
shares have been designated as "Series B Convertible Preferred Stock." The terms
and conditions of New Meteor's Series B Convertible Preferred Stock are
substantially identical to the Company's Series B Convertible Preferred Stock.
Shares of New Meteor common stock have a par value of $.01 per share and New
Meteor's Series B Convertible Preferred Stock has a par value of $1.00 per
share. The board of directors of New Meteor shall determine the rights,
preferences, limitations and other conditions, to the extent permitted by
Minnesota law, of any class or series of New Meteor capital stock before the
issuance of such shares. The issuance of such shares does not require the
approval of the holders of New Meteor common stock.
Size of Board of Directors; Classes of Directors
The Company. The CBCA requires a corporation to have at least one director
and requires that the number of persons constituting a corporation's board of
directors, whether a specific number or a range of size, be fixed by or in
accordance with the bylaws. Colorado law permits either the board of directors
or the shareholders to amend the provision in the bylaws that establishes the
number of directors. The CBCA permits staggered terms for directors divided into
two or three groups if the articles so provide. The Company's bylaws provide for
a board of three to nine directors. The Company's bylaws also provide that the
Board of Directors may decrease the number of directors to fewer than three only
if there are less than three shareholders of record. Neither the Company's
articles of incorporation nor bylaws provide for staggered terms for directors.
New Meteor. The MBCA requires that a corporation must have at least one
director and that the number of directors must be fixed in the manner provided
in the articles or bylaws, and permits the board of directors to be divided into
classes as provided in the articles or bylaws. The proposed bylaws of New Meteor
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provide that the board of directors shall initially consist of seven directors,
which number may be increased or decreased by shareholder resolution, or
increased by a majority vote of the board of directors. Neither the articles of
incorporation nor the proposed bylaws of New Meteor divide the board of
directors into more than one class.
Cumulative Voting for Directors; Preemptive Rights
The Company. The CBCA requires cumulative voting in the election of
directors unless the corporation's articles provide otherwise. Shareholders do
not have preemptive rights unless the corporation's articles so provide or, in
some circumstances, unless the corporation was in existence in June 1994 and its
articles do not deny preemptive rights. The Company's articles deny both
cumulative voting and preemptive rights.
New Meteor. Under the MBCA, a shareholder has cumulative voting rights and
preemptive rights unless the articles provide otherwise. The articles of
incorporation of New Meteor deny cumulative voting and preemptive rights.
Removal of Directors
The Company. Under the CBCA, shareholders may remove a director with or
without cause if the corporation's articles do not provide otherwise and if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal. If, however, a director was elected by a "voting group" of
shareholders, only the shareholders of that voting group may vote to remove the
director. A "voting group" is all the shares of one or more classes or series
entitled to vote together pursuant to the CBCA or a corporation's articles. The
Company's articles of incorporation do not limit a shareholder's right to vote
to remove a director without cause.
New Meteor. Under the MBCA, unless a corporation's articles or bylaws
provide otherwise, any director may be removed by the board at any time, with or
without cause, if the director was named by the board to fill a vacancy, the
shareholders have not elected directors in the interval between the time of the
appointment to fill a vacancy and the time of the removal of such director, and
a majority of the remaining directors affirmatively vote for the removal of such
director. Shareholders may remove directors at any time, with or without cause,
by an affirmative vote of the majority of the voting power of all shares
entitled to vote at an election of directors; provided that, if a director has
been elected solely by the holders of a class or series of shares, then that
director may be removed only by the affirmative vote of the holders of a
majority of the voting power of all shares of that class or series. New Meteor's
articles and proposed bylaws do not alter these statutory provisions.
Filling Vacancies on the Board of Directors
The Company. Under the CBCA, unless the articles provide otherwise, any
vacancy on the board of directors, including a vacancy resulting from an
increase in the number of directors, may be filled by the shareholders or the
board of directors. If the number of directors remaining in office constitute
fewer than a quorum of the board, the remaining board members may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office. If the vacant office was held by a director elected by a voting group,
and if any remaining directors were elected by such voting group, only such
directors may vote to fill the vacancy, or, if it is filled by the shareholders,
only such voting group may vote to fill the vacancy. The Company's articles do
not alter these procedures.
New Meteor. Under the MBCA, unless a corporation's articles or bylaws
provide otherwise, (i) a vacancy on a corporation's board of directors may be
filled by the vote of a majority of directors then in office, although less than
a quorum, (ii) a newly created directorship resulting from an increase in the
number of directors may be filled by the board, and (iii) any director elected
pursuant to clause (i) or (ii) above can hold office only until a qualified
successor is elected at the next regular or special meeting of shareholders. The
articles of incorporation and proposed bylaws of New Meteor are consistent with
these procedures for filling vacancies on the board of directors.
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Shareholder Power to Call Special Meeting of Shareholders
The Company. Under the CBCA and according to the Company's bylaws, a
special meeting of shareholders may be called by the board of directors or
persons authorized by the board, the President, the corporation's legal counsel,
or holders of at least 10% of all shares entitled to cast votes at such a
meeting.
New Meteor. The MBCA and New Meteor's proposed bylaws allow a special
meeting of shareholders to be called by the President, a Vice-President in the
absence of the President, the Treasurer, the board of directors or two or more
directors, or a shareholder or shareholders holding 10% or more of the voting
power (or, in the case of a meeting to approve a business combination, 25% or
more of the voting power) of all shares entitled to vote. Any business conducted
at a special meeting of shareholders must be confined to the purposes stated in
the notice of meeting.
Right to Inspect Corporate Records
The Company. Under the CBCA, a shareholder is entitled to inspect, upon
five days notice:
(a)
the articles of incorporation;
(b)
the bylaws;
(c)
all minutes of shareholders' meeting for the past three years;
(d)
all written communications within the past three years to
shareholders;
(e)
the names and business addresses of current directors and officers;
(f)
the most recent corporate report; and
(g)
the annual and published financial statements for the past three
years.
In addition to the above, in some circumstances a shareholder is entitled
to inspect excerpts from board, shareholder and committee minutes, accounting
records and the corporation's share register. A shareholder may only inspect
these additional corporate records if he or she has been a shareholder for at
least three months preceding his or her demand or holds at least 5% of all the
outstanding shares of any class of shares, and if such demand is made in good
faith and for a proper purpose. The requested corporate records must be
described with reasonable particularity and relate to the stated purpose.
New Meteor. The MBCA provides that a shareholder of a privately held
corporation has an absolute right to inspect, at any reasonable time, the share
register and certain corporate records, similar to those records available to a
shareholder of a Colorado corporation, within ten days of the corporation's
receipt of a written demand. A shareholder of a privately held corporation has
the right to inspect additional corporate records only upon demonstration of a
proper purpose.
A shareholder of a publicly held corporation has the right, upon written
demand, to inspect the corporation's share register and other corporate records
only if the shareholder demonstrates a proper purpose. The requested corporate
records must be reasonably related to the stated purpose and described with
reasonable particularity.
Dissenter/Appraisal Rights
The Company. Under the CBCA, shareholders have the right, under certain
circumstances, to dissent from certain corporate transactions, principally
mergers and consolidations, by demanding payment in cash for their shares equal
to the fair value of such shares. The CBCA provides that a shareholder is
entitled to dissenters' rights in the event of (1) a merger, if shareholder
approval is required by the CBCA or the articles of incorporation, or if the
corporation is a subsidiary merging with its parent corporation; (2) a plan of
share exchange if the corporation's shares will be acquired; (3) a sale or other
disposition of all or substantially all of the corporation's property, or the
property of a subsidiary of the corporation, if a shareholder vote is required
by the CBCA; and (4) in some circumstances, a reverse stock split. However, a
shareholder is generally not entitled to exercise dissenters' rights with
respect to any shares which were listed on a national securities
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exchange or on the Nasdaq National Market System, or which were held of record
by more than 2000 shareholders, as of the record date. See "The Special
Meeting -- Rights of Dissenting Shareholders."
New Meteor. Under Minnesota law, dissenters' rights are available in the
event of (1) certain amendments of the articles that materially and adversely
affect the rights or preferences of the dissenting shareholder's shares; (2)
certain dispositions of all or substantially all of the assets of the
corporation; (3) a plan of merger; (4) a plan of share exchange if the
corporation's shares will be acquired; or (5) any other corporate action taken
by shareholder vote where the articles, bylaws or a board resolution provide for
dissenters' rights. However, unless the articles of incorporation, bylaws, or a
board resolution provide otherwise, dissenters' rights are not available in a
merger, to a shareholder of the surviving corporation whose shares are not
entitled to be voted on the merger and are not canceled or exchanged in the
merger, or in a plan of exchange, to a shareholder of the corporation whose
shares will be acquired with respect to shares that are not entitled to be voted
on the exchange or exchanged pursuant to the exchange. Unlike the CBCA, the MBCA
does not limit the exercise of dissenters' rights by shareholders of publicly
held corporations.
Limitations on Director Liability
The Company. The CBCA allows a corporation to include in its articles of
incorporation a provision that eliminates or limits the personal liability of a
director to the corporation or its shareholders for monetary damages for a
breach of a fiduciary duty as a director, except for:
- any breach of the director's duty of loyalty;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- distributions that are illegal under applicable law;
- any transaction from which the director derived an improper personal
benefit; or
- any act or omission occurring prior to the date when the provision in the
charter eliminating or limiting liability became effective.
The Company's articles of incorporation eliminate personal liability for a
breach of a fiduciary duty.
New Meteor. The corresponding provisions of the MBCA are substantially
similar. New Meteor's articles of incorporation also contain a provision
eliminating the personal liability of a director to the maximum extent allowed
by law.
Indemnification
The Company. The CBCA provides that, unless the articles of incorporation
provide otherwise, a corporation must indemnify a director or officer who was
wholly successful, on the merits or otherwise, in a legal proceeding to which
such director or officer was a party due to his or her position or former
position with the corporation. A corporation may also indemnify a person made a
party to a legal proceeding due to his or her current or former position as a
director of the corporation if such director acted in good faith, had no
reasonable cause to believe his or her conduct was unlawful, and if acting in an
official capacity, acted in the corporation's best interests, or if acting in an
unofficial capacity, acted in a manner not opposed to the corporation's best
interests. A corporation may not indemnify a director in connection with a
proceeding by or in the right of the corporation in which the director was
adjudged liable to the corporation, or in any other proceeding in which the
director was adjudged liable on the basis of deriving an improper personal
benefit. The CBCA permits corporations to indemnify officers, employees,
fiduciaries and agents to the same extent as directors. The Company's articles
of incorporation provide that the corporation may indemnify directors, officers,
employees, fiduciaries and agents to the full extent permitted by the CBCA.
New Meteor. The MBCA contains broader indemnification requirements than
the CBCA. Unless the corporation's articles or bylaws provide otherwise,
Minnesota law requires indemnification of any person made or threatened to be
made a party to a legal proceeding relating to his or her position or former
position as a director, officer or employee of the corporation, or service as a
director, officer, employee or agent of another
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organization at the request of the corporation, if such person meets certain
additional requirements. To be indemnified pursuant to this section, the
director, officer or employee must have acted in good faith; received no
improper personal benefit; and reasonably believed his or her conduct was in the
best interests of the corporation, or, as to acts or omissions relating to
service for another organization, reasonably believed such conduct was not
opposed to the best interests of the corporation. Additionally, in the case of a
criminal proceeding, such director, officer or employee must have had no
reasonable cause to believe the conduct was unlawful, and in the case of any
proceeding involving a director, such director must have complied with the MBCA
section regarding director conflicts of interest. New Meteor's bylaws provide
for the indemnification of officers, directors, employees and agents to the
fullest extent permitted by the MBCA.
Amendment of Articles and Bylaws
The Company. The CBCA provides that the board of directors may amend the
articles prior to the issuance of shares, and thereafter the board of directors
may make certain amendments to the articles without shareholder approval,
including deleting the names of the initial directors and initial registered
agent. Other amendments must be proposed by a majority vote of the board of
directors or by the holders of at least 10% of the shares entitled to vote on
such amendments, and unless the articles or bylaws adopted by the shareholders
provide otherwise, approved by the shareholders by a majority vote of all shares
entitled to vote. Shareholders are entitled to vote as a voting group on certain
amendments that would affect the rights of such voting group. The board of
directors may amend the bylaws, unless the CBCA or a corporation's articles or
bylaws provide otherwise, and the shareholders may also amend a corporation's
bylaws at a meeting of the shareholders by a majority vote of all shares
entitled to vote. The Company's charter documents are consistent with these
statutory provisions.
New Meteor. The MBCA provides that if a corporation has not issued shares,
the incorporators or the board of directors may amend the articles. Further, if
shares of a particular class or series have not been issued, the board may amend
a statement establishing the rights and preferences of that class or series.
After the issuance of shares, amendments to the articles must be proposed by a
majority vote of the board of directors or by shareholders holding at least 3%
of the voting power of the shares entitled to vote, and approved by the
shareholders by a majority vote of all shares entitled to vote, unless the
articles of incorporation require a larger proportion. Voting by a class or
series of shareholders is required in certain circumstances where an amendment
to the articles would affect the rights of holders of that class or series. The
board of directors has the power to adopt, amend, or repeal the bylaws. However,
if shareholders holding 3% of the voting power of the shares entitled to vote
propose to adopt, amend, or repeal bylaws, the shareholders may approve such
action by a majority vote of all shares entitled to vote, unless the articles
require a larger proportion. New Meteor's bylaws provide that the board of
directors may not adopt, amend, or repeal certain bylaws, including those
relating to the removal of directors, vacancies on the board of directors, and
the number of directors, other than to increase such number.
Actions By Shareholders Without a Meeting
The Company. The CBCA provides that, unless the articles of incorporation
require certain actions to be voted upon at a meeting of shareholders, an action
required or permitted to be taken at a meeting may be taken by written action
only if signed by all of the shareholders entitled to vote on that action. The
Company's articles of incorporation do not alter the foregoing rule.
New Meteor. Under the MBCA, an action required or permitted to be taken at
a meeting of the shareholders may be taken without a meeting by written action
only if signed by all of the shareholders entitled to vote on that action.
Actions By Directors Without a Meeting
The Company. The CBCA provides that, unless the bylaws require certain
actions to be voted upon at a meeting of the board of directors, an action
required or permitted to be taken at a meeting by written action only if signed
by all of the directors. The Company's bylaws do not alter the foregoing rule.
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New Meteor. Unlike the CBCA, the MBCA provides that if the corporation's
articles of incorporation so provide, an action required or permitted to be
taken at a meeting of the board of directors may be taken by written action
signed by the same number of directors that would be required to take the same
action at a meeting of the board at which all directors were present. New
Meteor's bylaws provide that the acts of a majority of the directors present at
a meeting constitute the acts of the board and New Meteor's articles of
incorporation provide that the board of directors may take any action required
or permitted to be taken at a meeting of the directors by the written consent of
the same number of directors required if such action was to be taken at a
meeting at which all directors were present.
Mergers, Share Exchanges and Sales of Assets
The Company. Under the CBCA, a plan of merger, a share exchange or a sale
of all, or substantially all, of a corporation's assets must be approved by each
voting group entitled to vote separately on the plan by a majority of all votes
entitled to be cast on the plan by that voting group. Under the CBCA,
shareholder approval is not required for a merger or consolidation if the
articles of incorporation will not be amended in the transaction, if each
shareholder before the transaction will continue to hold the same number of
shares with identical rights after the transaction, and if the number of voting
shares issuable as a result of the merger and the number of participating shares
(i.e., shares that entitle the holder to participate without limitation in
distributions) immediately after the transaction, plus those issuable upon
conversion or exercise of other securities or obligations issued in the
transaction, will not exceed by more than 20 percent the number of shares with
voting power and the numbers of participating shares, as the case may be,
immediately before the transaction. The Company's articles of incorporation and
bylaws do not contain any provision altering these voting requirement.
New Meteor. The MBCA, like the CBCA, generally requires the affirmative
vote of the holders of a majority of the voting power of all shares entitled to
vote for approval of mergers and consolidations or the sale or exchange of all,
or substantially all, of a corporation's assets. Under the MBCA, as with the
CBCA, shareholder approval is not required for a merger or consolidation if the
articles of incorporation will not be amended in the transaction, if each
shareholder before the transaction will continue to hold the same number of
shares with identical rights after the transaction, and if the number of shares
issuable with voting power and the number of participating shares (i.e., shares
that entitle the holder to participate without limitation in distributions)
immediately after the transaction, plus those issuable upon conversion or
exercise of other securities or obligations issued in the transaction, will not
exceed by more than 20 percent the number of shares with voting power and the
numbers of participating shares, as the case may be, immediately before the
transaction. Neither the articles of incorporation of New Meteor nor its bylaws
alter these voting provisions.
Takeover Statutes
The Company. The CBCA does not contain provisions designed to deter
takeovers of public corporations, such as those provisions of the MBCA discussed
herein.
New Meteor. Minnesota's control share acquisition statute requires
disinterested shareholder approval for any acquisition of shares of an "issuing
public corporation" which results in the "acquiring person" owning more than a
designated percentage of the outstanding shares of such corporation. Shares
beneficially owned by the acquiring person that exceed certain share ownership
thresholds lose their voting power unless and until the acquiring person
discloses certain information to the corporation and voting rights are granted
by the shareholders at a special or annual meeting of the shareholders or the
shares are transferred to an unaffiliated third party. These shares may also be
subject to redemption rights in various circumstances. The Minnesota control
share acquisition statute applies unless the "issuing public corporation" opts
out of the statute in its articles of incorporation or bylaws approved by its
shareholders. New Meteor has opted out of such provisions in its articles of
incorporation.
The MBCA also prohibits a Minnesota public corporation from engaging in a
"business combination" with an "interested shareholder" for a period of 4 years
after the date of a transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
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"Business combination" includes mergers, asset sales, certain issuances of stock
and other transactions resulting in a financial benefit to the interested
shareholder. An "interested shareholder" is a person or an entity who is the
beneficial owner of 10% or more of the voting power of the outstanding shares
entitled to vote of the issuing public corporation, or who is an affiliate or
associate of the corporation and at any time within the four years prior to the
date in question was the beneficial owner of 10% or more of the voting power of
the outstanding shares entitled to vote of the issuing public corporation. Like
the provisions in the MBCA relating to control share acquisition, the provisions
of the MBCA relating to business combinations with interested shareholders apply
unless the articles of incorporation contain a provision expressly electing to
not be subject to such provisions. New Meteor's articles of incorporation
expressly elect not to be subject to these provisions of the MBCA.
Anti-Greenmail Provisions
The Company. The CBCA does not contain an anti-greenmail provision similar
to Minnesota's statute discussed herein.
New Meteor. The MBCA contains a provision which limits the ability of a
corporation to pay greenmail. Pursuant to the statute, a publicly held
corporation is prohibited from purchasing or agreeing to purchase any shares
from a person (or two or more persons who act as a partnership, limited
partnership, syndicate or other group pursuant to any written or oral agreement,
arrangement, relationship, understanding, or otherwise for the purpose of
acquiring, owning or voting shares of the publicly held corporation) who
beneficially owns more than 5% of the voting power of the corporation if the
shares have been beneficially owned by that person for less than two years, and
if the purchase price would exceed the market value of those shares. However,
such a purchase would not violate the statute if the purchase is approved at a
meeting of the shareholders by the majority of all shares entitled to vote or if
the corporation makes an offer of at least of equal value per share to all
holders of the class or series and holders of any class or series into which the
securities may be converted.
PROPOSAL THREE:
APPROVAL OF THE MERGER AGREEMENT
The following information describes the material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the appendices attached hereto, including the Merger
Agreement, which is attached to this Proxy Statement as Appendix B and is
incorporated herein by reference. You are urged to read Appendix B in its
entirety.
BACKGROUND OF THE MERGER
On October 26, 2000, the Company entered into a non-binding letter of
intent to merge with AIQ. Negotiations subsequent to the letter of intent led to
definitive agreements concerning the Merger. Prior to negotiating the letter of
intent, neither the Company nor any of its subsidiaries or affiliates were
involved in any negotiations, transactions, mergers, acquisitions, or
consolidations with AIQ or any of its affiliates.
As contemplated by the letter of intent, on January 11, 2001, the date of
the Merger Agreement, the Company purchased 400,000 shares of AIQ common stock
for $1.1 million in cash. To finance this purchase and obtain additional working
capital, the Company sold to private investors, some of which are current
shareholders of the Company, 120,000 units of its securities at a price of $15
per unit, each unit consisting of 5 shares of Company common stock and a warrant
to purchase 3 shares of common stock at a price of $5.50 per share.
THE COMPANY'S REASONS FOR THE MERGER
In the early spring of 2000, the Company's Board of Directors met to
consider and evaluate the economic conditions for small independent regional
refined petroleum product distribution companies. While the Company has grown
through acquisitions, the rising cost of credit and petroleum products has
adversely affected its ability to grow in what its management saw as a difficult
financial climate for small independent
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distributors. In April 2000, the Company hired a consultant, Henry Fong of the
Fong Group, to assist and advise it on its strategic plan, evaluate
restructuring alternatives and advise us with respect to prospective merger
candidates. Independently and through Mr. Fong, the Board of Directors evaluated
several opportunities. In October 2000, Mr. Fong introduced the Company to AIQ.
Shortly after this introduction, the parties entered into a non-binding letter
of intent to merger the companies, and on January 11, 2001, the parties executed
the Merger Agreement. The Company proposed the Merger because it believes that
the technology and business prospects of AIQ will afford the Company's
shareholders a better opportunity to increase shareholder value than if the
Company continued in the petroleum distribution business. The Board of Directors
believes that if the Company sells its existing assets and invests the net
proceeds in AIQ, the Company's shareholders are more likely to realize increased
value.
APPROVAL OF SHAREHOLDERS; BOARD RECOMMENDATION
The Merger must be approved by the affirmative vote of at least a majority
of all of the issued and outstanding shares of our stock, both common stock and
Series B Preferred Stock counted together and voting as a single class. Because
the Merger must be approved by an affirmative vote of a majority of all of the
outstanding shares of Meteor, both common stock and Series B Convertible
Preferred Stock counted together and voting as a single class, a vote of
"Abstain" has the same effect as a vote against the Merger. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE VOTED FOR THE MERGER UNLESS A VOTE AGAINST THE
MERGER OR ABSTENTION IS SPECIFICALLY INDICATED.
The Board of Directors of the Company has determined that the terms and
conditions of the Merger are fair from a financial point of view to the
Company's shareholders. THE BOARD OF DIRECTORS HAS APPROVED THE MERGER
AGREEMENT. Pursuant to the CBCA (C.R.S. sec. 7-111-103(2)(a)), because the
Merger could constitute a conflict of interest transaction, the Board of
Directors makes no recommendation to shareholders concerning the approval of the
Merger. The Merger could constitute a conflict of interest transaction because
the Asset Sale is a condition of the Merger, and the Asset Sale, whereby all or
substantially all of our assets will be sold to one of our shareholders, Capco,
is an interested party transaction. The Asset Sale is an interested party
transaction because three of the Company's directors are also directors of Capco
Energy, Inc.; therefore, shareholders must consider the merits of the Merger,
independent of the recommendation of the Board of Directors. Shareholders should
note, however, that all of the Company's directors intend to vote all shares of
Company common stock under their control in favor of such proposal and have
determined that the terms and conditions of the Merger are fair from an
financial point of view to the shareholders and in the best interests of the
Company.
IN THE EVENT THAT THE MERGER AGREEMENT IS NOT APPROVED BY THE SHAREHOLDERS
AT THE SPECIAL MEETING, THE ASSET SALE AND THE PROPOSED REINCORPORATION UNDER
MINNESOTA LAW WILL ALSO BE ABANDONED. SIMILARLY, THE MERGER AGREEMENT MAY BE
TERMINATED IF THE ASSET SALE OR THE PROPOSED REINCORPORATION IS NOT APPROVED AT
THE SPECIAL MEETING.
AIQ'S REASONS FOR THE MERGER
The decision by AIQ's board of directors to enter into the Merger Agreement
is based upon its conclusion that the Merger affords AIQ greater access to
capital markets for the continued development of its products and services and
greater liquidity for AIQ shareholders.
THE MERGER AGREEMENT
General Terms
The Merger Agreement provides that, upon the satisfaction or waiver of
certain conditions, Merger Sub will be merged with and into AIQ, AIQ will
continue as the surviving corporation, and the separate existence of Merger Sub
will cease. Following the Merger, AIQ will be a wholly-owned subsidiary of the
Company, which will have been reincorporated under Minnesota law. The Merger
will become effective upon the filing of articles of merger with the Minnesota
Secretary of State. It is anticipated that if all conditions of the Merger have
been satisfied or waived, the Merger will be completed within one week of the
Special Meeting. The
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delay in fulfilling any condition of the Merger could delay the completion of
the Merger or result in the termination of the Merger Agreement.
Effects of the Merger
Upon consummation of the Merger, Merger Sub will be merged with and into
AIQ, AIQ will continue as the surviving corporation, and the separate existence
of Merger Sub will cease. At the effective time of the Merger,
- all shares of Merger Sub outstanding immediately prior to the effective
time of the Merger held by the Company will be automatically converted
into one share of AIQ common stock;
- each share of the Company's common stock outstanding immediately prior to
the Merger will (after giving effect to the reincorporation of the
Company) be automatically converted into one share of common stock of New
Meteor (See "Proposal 2: Reincorporation");
- each share of the Company's Series B Convertible Preferred Stock will
(after giving effect to the reincorporation of the Company) be converted
into one share of Series B Convertible Preferred Stock of New Meteor,
which shall have substantially identical terms and conditions as the
Company's Series B Convertible Preferred Stock;
- each outstanding share of AIQ common stock will automatically be
converted into the right to receive one share of New Meteor common stock
(subject to adjustment in certain events) and a warrant to purchase two
shares of New Meteor common stock at a price of $5.50 per share for every
three shares of AIQ common stock owned by each AIQ shareholder prior to
the Merger (See "-- The Merger Warrant");
- each share of AIQ common stock owned by the Company immediately prior to
the Effective Time will be canceled and extinguished without any
conversion thereof;
- each outstanding option and warrant to purchase shares of AIQ common
stock shall be converted into the right to purchase an equal number of
shares of New Meteor common stock at the same price and terms; and
- all shares of AIQ common stock converted into shares of New Meteor common
stock in the Merger will no longer be outstanding and will be
automatically canceled and retired and will cease to exist at the
effective time of the Merger.
Following the Merger and assuming the Company's reincorporation in Minnesota,
AIQ will be a wholly-owned subsidiary of New Meteor.
As of the Record Date, there were 3,854,295 shares of AIQ common stock
outstanding. Assuming each share of AIQ common stock is exchanged for one share
of New Meteor common stock, based on the number of shares of AIQ common stock
outstanding as of the Record Date and assuming no change prior to the effective
time of the Merger, the aggregate number of shares of New Meteor common stock
issuable to the shareholders of AIQ would be 3,854,295, or approximately 49
percent of the New Meteor common stock outstanding immediately after the
effective time of the Merger. On a fully-diluted basis, assuming exercise of all
currently outstanding options and warrants to purchase shares of AIQ common
stock, all warrants to purchase shares of the Company's common stock issued in
the Merger (but assuming no exercise of any of the Company's currently
outstanding options and warrants), the aggregate number of shares issuable to
the AIQ shareholders would be approximately 7,923,825, or about 66 percent. As a
result, the shareholders of AIQ will have significant control over the Company.
Fractional Shares
No fractional shares of New Meteor common stock shall be issued in exchange
for shares of AIQ common stock. In lieu thereof, the Company shall pay to the
owner thereof cash equal to the pro rata market
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price of a share of the Company's common stock based on the closing sales price
of the common stock on the effective date of the Merger as reported on the
NASDAQ Small Cap Market.
Effective Time
If the Merger Agreement is adopted by the requisite vote of the
shareholders of the Company and all of the other conditions described under
"-- The Merger Agreement -- Certain Conditions to Consummation" are satisfied or
waived by one or both of the parties, as appropriate (and to the extent
permitted by the Merger Agreement), then, unless the Merger Agreement is
previously terminated, the Merger will be consummated and become effective at
the time articles of merger are filed with the Minnesota Secretary of State.
The Merger Agreement provides that the Company and AIQ will cause the
effective time to occur as promptly as practicable after the adoption by the
shareholders of the Company and of AIQ and the satisfaction or waiver of the
other conditions described under "-- The Merger Agreement -- Certain Conditions
to Consummation," but in no event later than ten (10) business days after all
such conditions have been satisfied or waived, or on such other date as may be
mutually agreed upon by the parties. There can be no assurance that all
conditions to the Merger will be satisfied. The Merger Agreement may be
terminated prior to the effective date of the Merger by either the Company or
AIQ in certain circumstances, whether before or after adoption of the Merger
Agreement by the shareholders of the Company. See "-- The Merger
Agreement -- Termination."
Adjustment to Exchange Ratio
Provided that the Company raises at least $1,700,000 in the "MI Private
Placement" (as defined in the Merger Agreement), then the number of shares of
New Meteor that each AIQ shareholder will receive as a result of the merger will
increase or decrease as follows depending on the amount of cash the Company has
available at the effective time of the Merger: for each dollar of available cash
less than $4,850,000, the aggregate number of shares issued to AIQ shareholders
will be increased by one share; and for each dollar of available cash in excess
of $5,150,000, the aggregate number of shares issued to the AIQ shareholders
shall be decreased by one share.
The Merger Warrant
For every 3 shares of AIQ common stock held by an AIQ shareholder, such
shareholder shall receive as part of the merger consideration a 5-year warrant
to purchase 2 shares of New Meteor's common stock at a price of $5.50 per share.
The warrant shall be redeemable at a price of $.01 per warrant share at the
option of New Meteor at any time after one year from the effective time of the
Merger following a period of 14 consecutive days where the average closing bid
price of the common stock exceeds $7.50. The warrant provides incidental
registration rights, meaning that if at any time New Meteor proposes to file
with the Securities and Exchange Commission ("SEC") a registration statement
(other than on Forms S-4 and S-8 or other inappropriate forms), the holder of
the warrant will be provided notice and an opportunity to have the warrant
shares included in such registration statement. The warrant also contains other
customary provisions, including, without limitation, appropriate adjustments
upon the occurrence of certain corporate events.
Conduct of AIQ's Business Prior to the Merger
The Merger Agreement provides that from the period of January 11, 2001 (the
date of the Merger Agreement), to the effective time of the Merger, AIQ will
generally not conduct its business other than in the ordinary course and in
accordance with past practices. In particular, without the Company's consent,
AIQ may not:
(1) amend its articles of incorporation or bylaws;
(2) split, combine or reclassify any shares of its outstanding capital
stock;
(3) declare or pay a dividend or other cash distribution relating to
its capital stock;
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(4) default in its obligations under any material debt, contract or
other commitment, which would result in the acceleration of the obligations
due thereunder; and
(5) issue or sell any additional shares of its capital stock, or any
options, warrants or other rights to acquire any shares of its capital
stock.
Conduct of Company's Business Prior to Merger
From the date of the Merger Agreement until the effective time of the
Merger, the Company is also generally required to conduct its business in the
ordinary course and in a manner consistent with its past practices. In
particular, unless otherwise contemplated or permitted by the Merger Agreement
or unless AIQ has given its consent, the Company may not:
(1) amend its articles of incorporation or bylaws;
(2) issue or sell any additional shares of its capital stock or any
options, warrants or other rights to acquire any shares of its capital
stock;
(3) declare any stock dividends, splits, reverse splits, or otherwise
reclassify, subdivide or change its capital stock;
(4) acquire any other business organization;
(5) default in its obligations under any material debt, contract or
other commitment, which would result in the acceleration of the obligations
due thereunder.
Representations and Warranties
Subject to certain specified exceptions, the Merger Agreement contains
various representations and warranties of both the Company and AIQ relating to,
among other things:
(1) the due organization, power and standing of the Company and AIQ,
and similar corporation matters;
(2) the authorization, execution, delivery and performance by, and
enforceability of the Merger Agreement against, the Company and AIQ;
(3) the absence of any provision of each party's articles or bylaws or
any agreements, governmental authorizations, laws, regulations or orders in
conflict with such party's authorization, execution, delivery or
performance of the Merger Agreement;
(4) the absence of any public body, court or authority's
authorization, consent or approval required for the consummation of the
Merger by the Company, Merger Sub and AIQ;
(5) the capital structure and the authorization and validity of the
outstanding shares of capital stock of the Company, Merger Sub and AIQ;
(6) the absence of certain changes or events with respect to the
Company and AIQ;
(7) the absence of certain undisclosed liabilities of the Company and
AIQ;
(8) the absence of pending or threatened actions against such party
with respect to the Merger;
(9) the absence of claims for brokerage commissions, finders' fees,
investment advisory fees or similar compensation based upon arrangements
made by or on behalf of the Company or AIQ with respect to the Merger;
(10) real property used or occupied by the Company and AIQ;
(11) title (including leasehold title) of the Company and AIQ to, and
the absence of liens against, certain properties and assets;
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(12) the filing of tax returns, the absence of tax audits, the payment
of taxes and related tax matters by the Company and AIQ;
(13) certain material contracts to which the Company or AIQ is a party
and the absence of defaults and breaches with respect thereto;
(14) the rights in certain intellectual property of the Company and
AIQ;
(15) employee relations and certain other matters related to employees
of the Company and AIQ;
(16) certain employee benefit plans and matters arising under the
Employee Retirement Income Security Act of 1974, as amended;
(17) insurance policies of the Company and AIQ and certain matters
related thereto;
(18) certain transactions with affiliates of the Company and AIQ;
(19) compliance with applicable laws and possession of necessary
permits by the Company and AIQ; and
(20) material disclosure by the Company and AIQ.
In addition, the Company has also made certain additional representations
and warranties to AIQ relating to, among other things, the following matters
(which representations and warranties are subject, in certain cases, to
specified exceptions):
- the filing of reports and other documents with the SEC, the material
compliance of such documents with SEC rules and regulations and the
accuracy of the information contained therein;
- the material compliance of this Proxy Statement with certain laws and the
accuracy of the information contained therein; and
- the authorization and validity of the shares of Common Stock to be issued
pursuant to the Merger Agreement.
Certain Covenants
The Merger Agreement also contains various other covenants, including the
following:
(1) The parties shall use all reasonable efforts to make all
legally-required filings and take all other actions necessary, proper or
advisable to consummate the Merger;
(2) Between the date of the Merger Agreement and the date this Proxy
Statement was filed with the SEC, the parties were required to afford each
other reasonable access to certain books, records and papers;
(3) Prior to the closing of the Merger and in the event the Merger is
never consummated, the parties are prohibiting from disclosing or using any
confidential information received from the other party;
(4) The parties are each required to hold a special meeting of its
shareholders to seek approval of the transactions contemplated by the
Merger Agreement and to cooperate in the preparation of this Proxy
Statement;
(5) Neither the Company nor AIQ shall knowingly take any action which
would disqualify the Merger as a tax-free reorganization under the Internal
Revenue Code;
(6) The parties shall cooperate regarding the substance of press
releases and public announcements relating to the Merger Agreement;
(7) The parties shall use reasonable efforts to obtain approval for
listing New Meteor's common stock on the Nasdaq Small Cap Market System, or
to maintain listing on the Nasdaq Small Cap Market System;
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(8) Subject to the fiduciary duties and legal obligations of the
respective boards of directors of the Company and AIQ, the parties shall
each recommend approval of the Merger Agreement, the Merger and, in the
case of the Company, the sale of substantially all of its assets and the
reincorporation under Minnesota law, and use all reasonable efforts to
obtain approvals thereof from their respective shareholders;
(9) The parties shall give prompt notice to each other with respect to
certain events and determinations and discovery of certain information;
(10) At the effective time of the Merger, the Company shall deliver
the voluntary resignations of its directors and executive officers, except
that the Company shall appoint Ken Kaufman to the Board of Directors;
(11) Following the effective time of the Merger, New Meteor shall not
file a registration statement covering any shares of its common stock
without the permission of both Capco Energy, Inc. and Edward J. Names,
except a registration statement covering the shares issuable upon the
exercise of outstanding options and warrants; and
(12) The parties agreed that, following the effective time of the
Merger, they will not alter the rights of any current or former director of
the Company who has a right to indemnification from the Company pursuant to
its articles of incorporation or bylaws.
Lock-Up Agreements
The Merger Agreement contemplates the execution of three types of lock-up
agreements by different groups of AIQ and Meteor shareholders:
(1) AIQ's directors and officers will be required to execute a lock-up
agreement limiting the transfer or disposition of the shares of AIQ common
stock underlying the options and warrants held by such persons for a one
year period. The lock-up agreement does allow, however, the sale or other
transfer of up to 10 percent of such shares in each calendar month during
the period of the lock-up agreement.
(2) Like AIQ's directors and officers, the current officers and
directors of the Company are required to execute a lock-up agreement
limiting the transfer or disposition of the shares of Meteor common stock
underlying options and warrants held by such persons for a one year period,
provided, that such persons are allowed to sell or otherwise transfer up to
ten percent of such shares in each calendar month of the lock-up agreement.
(3) Edward J. Names and Capco Resources Ltd. are required to execute a
lock-up agreement limiting the sale or other transfer of their shares of
Meteor common stock or convertible preferred stock for a 1-year period.
Notwithstanding such limitation, the lock-up agreement will allow both Mr.
Names and Capco Resources to sell or transfer up to 1 percent of the total
number of outstanding shares of Meteor common stock at the effective time
of the Merger in each three month period of the agreement.
Limitations on Solicitation of Transactions
Pursuant to the Merger Agreement, the Company and AIQ have each agreed that
neither such party nor such party's 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, except, in the case of AIQ, any such
transaction pursuant to which (a) AIQ is the surviving corporation in such
transaction, and (b) the shareholders of AIQ immediately preceding such
transaction will own at least 51% of the outstanding shares after giving effect
to such transaction; provided that either party may engage in such discussion in
response to an unsolicited proposal from an unrelated party if such party's
Board of Directors 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
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obligations of such Board of Directors. The Company and AIQ have each agreed to
promptly advise the other party if it receives a proposal or inquiry with
respect to the matters described above.
Certain Conditions to Consummation of the Merger
The effective time of the Merger shall occur only upon the satisfaction of
numerous conditions by either Meteor, AIQ or both. The Merger Agreement provides
that neither party is obligated to consummate the Merger unless the following
conditions are satisfied or mutually waived:
(1) NASDAQ shall not have provided any notice to the Company that the
listing of its common stock may be in jeopardy following the completion of
the Merger;
(2) Neither Meteor nor AIQ may have more than three (3) percent of its
shares of common stock dissent from the resolution approving the Merger
and, in the case of Meteor, from the resolutions approving the sale of all
of substantially all of its assets or the reincorporation in Minnesota;
(3) There shall be no injunction or other order of any court and there
shall not have been any law enacted prohibiting the transactions
contemplated by the Merger Agreement;
(4) AIQ shall have received a tax opinion stating that, among other
things, the Merger qualifies as a tax-free reorganization;
(5) Each party shall have obtained all necessary third party consents
and approvals;
(6) No action or proceeding shall be pending or threatened which would
seek to prohibit the transactions contemplated by the Merger Agreement;
(7) Each of AIQ shareholders shall have completed and delivered to the
Company a subscription agreement and letter of investment representation in
the form attached to the Merger Agreement;
(8) There shall not have been any general suspension of trading on the
New York Stock Exchange or the NASDAQ markets, a suspension of trading of
Meteor Common Stock or any other banking crisis or other national
emergency; and
(9) The offering of shares of Meteor common stock to the AIQ
shareholders shall be exempt under the Securities Act.
Conditions to Meteor's Obligations. In addition to the conditions set
forth above, the obligation of Meteor to effect the Merger is subject to the
satisfaction of certain conditions at or prior to the effective time of the
Merger (unless waived by Meteor), including without limitation:
(1) The shareholders of AIQ shall have approved the Merger.
(2) The representations and warranties of AIQ contained in the Merger
Agreement shall be true and correct on the closing date.
(3) AIQ shall have performed and complied with all the covenants and
agreements contained in all material respects and satisfied in all material
respects all the conditions required by the Merger Agreement to be
performed or complied with by AIQ at or prior to the Effective Time.
(4) AIQ shall not have more that 4,555,000 shares of its common stock
outstanding and there shall be no more than 1,500,000 shares of its common
stock reserved for issuance upon the exercise of outstanding options and
warrants.
(5) The directors and officers of AIQ shall have entered into a lockup
agreement under which such persons are prohibiting from transferring of
their shares of AIQ common stock issuable upon the exercise of outstanding
options and warrants, except in limited amounts or under limited
circumstances.
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Conditions to AIQ's Obligations. The obligation of AIQ to effect the
Merger is subject to the satisfaction of certain conditions at or prior to the
effective time of the Merger (unless waived by AIQ), including without
limitation:
(1) The shareholders of Meteor shall have approved the Merger, as well
as the Asset Sale and the reincorporation as a Minnesota corporation, by
the requisite votes.
(2) The representations and warranties of Meteor contained in the
Merger Agreement shall be true and correct on the closing date.
(3) Meteor shall have performed and complied with all the covenants
and agreements contained in all material respects and satisfied in all
material respects all the conditions required by the Merger Agreement to be
performed or complied with by Meteor at or prior to the effective time of
the Merger.
(4) Meteor shall have disposed of all or substantially all of its
assets and liabilities.
(5) Meteor shall have a minimum of $4,500,000 of cash available to New
Meteor upon consummation of the Merger.
(6) Meteor shall not have more than 10,200,000 shares of its common
stock outstanding on a fully-diluted basis.
(7) Edward Names, Meteor's President and Chief Executive Officer, and
Capco Energy, Inc. shall both have entered into lockup agreements
preventing them from disposing, on a quarterly basis, the number of shares
of Meteor Common Stock held by them equal to one percent of the number of
shares of the surviving corporation immediately after the effective time of
the Merger. See "-- Lockup Agreements."
(8) The directors and officers of Meteor shall have entered into a
lockup agreement under which such persons are prohibiting from transferring
of their shares of Meteor common stock issuable upon the exercise of
outstanding options and warrants, except in limited amounts or under
limited circumstances. See "-- Lockup Agreements."
Termination of Merger Agreement
The Merger Agreement may be terminated at any time prior to the effective
time of the Merger:
(1) by mutual consent of Meteor or AIQ;
(2) by either Meteor or AIQ if:
(a) the shareholders of either company do not give the requisite
approvals to the transactions contemplated by the Merger Agreement;
(b) the number of shares of either AIQ or Meteor dissenting from
the Merger, or in the case of Meteor, the Asset Sale or the
reincorporation proposal, exceeds three percent of the respective
company's outstanding shares;
(c) the Merger has not been consummated on or before April 16,
2001, or such later date as the parties may mutually agree;
(d) there has been a material misrepresentation, breach of warrant
or breach of covenant by the other party; and
(e) there shall have been a material adverse change in the
financial condition of the other party, or if an event shall have
occurred which, as far as reasonably can be foreseen, would result in
any such change.
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Amendment of the Merger Agreement
The Merger Agreement may not be amended except by a written instrument
signed on behalf of each of the parties.
Expenses
Whether or not the Merger is consummated, all costs and expenses, including
legal, accounting and investment banking fees and expenses, incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses. However, AIQ shall be solely
responsible for all expenses relating to obtaining the federal income tax
opinion indicating that the merger will qualify as a tax-free reorganization and
both Meteor and AIQ shall share in the costs and expenses relating to the
printing and mailing of this Proxy Statement.
MANAGEMENT OF THE COMPANY AFTER THE MERGER
Pursuant to the Merger Agreement, the officers and all directors of the
Company, except Edward J. Names, will, as of the effective time of the Merger,
resign. Mr. Names, as the remaining director of the Company, will appoint to the
board of directors Ken Kaufman, the son of one of the Company's current
directors, Kenneth W. Brimmer, D. Bradly Olah, Vernon J. Hanzlik, Steven A.
Weiss, Steven R. Levine and Ronald E. Eibensteiner, each of whom is currently a
director of AIQ and who will serve as a director of the Company until the next
annual meeting of the Company's shareholders. Biographical information
concerning the new directors is set forth below:
Ken Kaufman currently serves, and has served since 1999, as the Vice
President of Sales and Marketing of A Life Medical, a leading provider of
natural language processing and artificial intelligence in healthcare
applications. From 1997 until to 1999, Mr. Kaufman was the CEO of Dietsite.com,
a leading provider of nutritional and healthcare content and services on the
Internet. Dietsite.com was acquired in 1999. Between 1998 and 2001, Mr. Kaufman
served as the Vice President of Sales for ChannelHealth.com, an IDX Company, a
subsidiary of IDX Systems Corporation, a leading supplier of health care
software. Between the years of 1997 and 1998, Mr. Kaufman also served as the
Director of Strategic Accounts for IDX Systems Corporation. Between 1995 and
1997, Mr. Kaufman served as Director of Product Marketing and Development for
IDX Systems Corporation.
Kenneth W. Brimmer currently serves as the Chairman, Chief Executive
Officer and Chief Financial Officer of AIQ. He became a director of AIQ in 1999.
Mr. Brimmer was president of Rainforest Cafe, Inc. from April 1997 until April
2000 and was Treasurer from its inception in 1995. While at Rainforest, Mr.
Brimmer was responsible for, among other things, raising over $200 million in
equity capital during the early growth of the business. Mr. Brimmer was employed
by Grand Casinos, Inc. as Special Assistant to the Chairman and Chief Executive
Officer from October 1990 through December 1997. Mr. Brimmer is also Chairman of
the Board of Directors of both Hypertension Diagnostics, Inc., and Oxboro
Medical, Inc, both of which are NASDAQ listed companies.
D. Bradly Olah co-founded AIQ, currently serves as its Executive Vice
President and formerly served as Chief Executive Officer from April 1996 to
November 1999. Mr. Olah has been a member of the AIQ's board of directors since
April 1996 and will be actively involved in the company's business development.
He was a director of Natural Resources Geophysical Corporation from 1996 until
1998, when it was sold to Eagle Geophysical of Houston, Texas. He was also the
founder/Chairman and Chief Executive Officer and a director of Innovative Gaming
Corporation of America from 1991 through February 1996 and also served as the
Chief Financial Officer of that company from 1991 to 1993.
Vernon J. Hanzlik has been a director of AIQ since 1999. He served as the
Vice President of Strategic Development for IntraNet Solutions, Inc. from April
1999 until 2000, and currently serves as that company's President and Chief
Operating Officer. He has worked for IntraNet Solutions and its predecessor
company since 1991 and served as Vice President, Product Marketing from June
1996 to April 1999. Prior to that time,
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Mr. Hanzlik held marketing and application consulting positions with Lee Data
Corporation, a computer hardware manufacturer.
Steven A. Weiss has been a director of AIQ since 1999. Mr. Weiss
co-founded, and from June 1990 to August 1994 and from November 1994 to present
has been the Chairman of the Board of Casino Data Systems, a leading designer,
manufacturer, and distributor of innovative, technology-driven products for the
gaming industry.
Stephen R. Levine became a director of AIQ in October 1999. Dr. Levine is a
computer science professional with over 30 years' software and hardware
experience. Dr. Levine has received an award as a pioneer in the field of
computer graphics and was one of the original founders of ACM SigGraph. He is
currently Chief Technology Officer for the Temporal Bone Foundation, a nonprofit
foundation dedicated to understanding the morphology of the middle ear and
uncovering reasons for its dysfunction, particularly in newborns and infants.
Dr. Levine is responsible for all aspects of technology at the Temporal Bone
Foundation.
Ronald E. Eibensteiner was appointed to AIQ's Board of Directors in
September 2000. Mr. Eibensteiner is the president of Wyncrest Capital, Inc. and
has been a seed investor in several early stage technology companies. Since May
1996, Mr. Eibensteiner has been chairman of the board of directors of OneLink,
Inc., a provider of Internet-delivered business intelligence services to the
telecommunications industry. He is also a director of IntraNet Solutions, Inc.,
a provider of Web-based document management solutions for corporate intranets.
Mr. Eibensteiner co-founded of Diametrics Medical, Inc., a manufacturer of blood
gas diagnostic systems, and was chairman of Prodea Software Corporation, a data
warehousing software company, until its sale to Platinum technology, inc., in
January 1996. In 1983, Mr. Eibensteiner co-founded Arden Medical Systems and
served as its chief financial officer until its sale to Johnson & Johnson in
1987.
AIQ will be the surviving corporation in the Merger and will become a
wholly-owned subsidiary of New Meteor upon consummation of the Merger. As of the
effective time of the Merger, the directors and officers of the surviving
corporation will be the persons who were the directors and officers of AIQ
immediately prior to the effective time of the Merger. AIQ currently expects
that, following the Merger, it will retain all of the executive officers of AIQ,
who will then serve as executive officers of New Meteor with duties
substantially similar to those that such executive officers are currently
performing.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date, and as adjusted
to give effect to the Merger as if such transaction had occurred on such date,
by those individuals who will serve as directors and by the directors and
executive management of the Company (as a group) following the Merger. See
"-- Management of the Company After the Merger." The number of shares reflected
under shares to be issued include the shares issuable upon exercise of the
warrants issued in the Merger. Shares of common stock subject to options and
warrants currently exercisable or exercisable within 60 days from the date
hereof are deemed outstanding for computing the percentage of the person holding
such options or warrants (including the warrants issued in the Merger), but are
not deemed outstanding for computing the percentage ownership of any other
person:
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED FOLLOWING
MERGER MERGER
------------------- SHARES TO -------------------
PERSON NUMBER PERCENT BE ISSUED NUMBER PERCENT
- - - ------ -------- -------- --------- --------- -------
Ken Kaufman(1)............................... 0 * 0 0 *
Kenneth W. Brimmer(2)........................ 0 * 516,666 616,666 7.5
D. Bradly Olah(3)............................ 0 * 866,666 919,999 11.0
Vernon J. Hanzlik(4)......................... 0 * 83,333 93,333 1.2
Steven A. Weiss(5)........................... 0 * 20,000 61,667 *
Steven R. Levine(6).......................... 0 * 0 13,467 *
Ronald E. Eibensteiner(7).................... 0 * 333,333 358,333 4.4
Pete Rockers(8).............................. 0 * 250,000 300,000 3.7
Philip C. Rickard(9)......................... 0 * 54,638 136,063 1.7
All persons who will serve as directors and
executive officers following the Merger as
a group (nine persons)..................... 0 * 1,836,664 2,499,528 27.1
- - - ---------------
* Less than 1 percent
(1) Mr. Kaufman holds no Company stock.
(2) Represents 310,000 shares of AIQ held jointly with Mr. Brimmer's spouse, and
100,000 shares issuable upon the exercise (at a price of $1.00 per share) of
an option.
(3) Includes (i) 165,000 shares of AIQ held by Mr. Olah's spouse, (ii) 15,000
shares of AIQ held by the D. Bradly Olah Irrevocable Trust, (iii) 50,000
shares of AIQ issuable upon the exercise (at a price of $1.00 per share) of
an option, and (iv) 3,333 shares of AIQ issuable upon the exercise (at a
price of $15.00 per share) of an option.
(4) Includes 10,000 shares of AIQ issuable upon the exercise (at a price of
$1.00 per share) of an option.
(5) Represents 12,000 shares of AIQ held jointly with Mr. Weiss' spouse, 5,000
shares issuable upon the exercise (at a price of $15.00 per share) of an
option, and 36,667 shares of AIQ issuable upon the exercise (at an exercise
price of $2.75 per share) of an option.
(6) Represents 6,800 shares of AIQ issuable upon the exercise (at a price of
$2.75 per share) of an option, and 6,667 shares of AIQ issuable upon the
exercise (at a price of $37.50 per share) of an option.
(7) Includes 25,000 shares of AIQ issuable upon the exercise (at a price of
$1.00 per share) of an option.
(8) Includes 50,000 shares of AIQ issuable upon the exercise (at a price of
$2.00 per share) of an option.
(9) Includes 27,971 shares of AIQ held by immediate family members and 45,000
shares of AIQ issuable upon the exercise (at a price of $1.00 per share) of
an option.
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FAIRNESS OPINION
The Board of Directors of the Company has obtained a fairness opinion as to
consideration to be received by the Company in connection with the Merger. The
fairness opinion is attached to this Proxy Statement as Appendix " ".
The Board of Directors engaged Business Valuation Services ("BVS") to
perform the fairness evaluation. BVS, in the course of its corporate finance
advisory operations, is regularly engaged to valuate businesses and their
securities in connection with mergers and acquisitions, public and private
financing, and valuations for estate, corporate and other purposes.
BVS elected to apply various financial analyses in connection with its
evaluation of the Merger, including, but not limited to an income approach
valuation as well as a comparison of the consideration and the implied valuation
of AIQ to the market capitalization of public companies with operating and
financial characteristics comparable to those of AIQ.
In connection with its analysis, BVS reviewed various corporate and public
documents, including but not limited to, the Asset Purchase Agreement, AIQ's
financial statements, and industry data, and performed such other financial
studies, analyses, inquiries and investigations as BVS deemed appropriate.
As a result of their analysis, BVS is of the opinion, subject to
assumptions and limitations set forth in Appendix " ", that the consideration
to be received by the Company in connection with the Merger is fair, from a
financial point of view, to the Company and its shareholders.
The consideration to be received by the Company as a result of the Merger
was determined as a result of arms length negotiations between the Company and
AIQ.
COMPENSATION OF FINANCIAL ADVISOR
In connection with its pursuit of a potential merger candidate, the Company
retained the Fong Group as its financial advisor. The Fong Group introduced the
Company to AIQ. In accordance with the Company's agreement, upon completion of
the Merger and as compensation for its services to the Company, the Fong Group
will receive warrants to purchase 1,500,000 shares of the Company's common
stock, 1 million shares of which are purchasable at $5.50 per share and 500,000
shares of which are purchasable at $3.00 per share. In addition, AIQ has agreed
to pay Blake Capital Partners, LLC, a company owned and controlled by Wayne W.
Mills, an affiliate of the Company, a fee of $100,000 upon completion of the
Merger.
REGULATORY APPROVAL
The Company and AIQ each believe that no regulatory approvals are or will
be required in connection with the Merger.
ACCOUNTING TREATMENT
Since, at the effective time of the Merger, the Company will have only
monetary assets and no operations, the Merger will be accounted for as the
issuance of stock by AIQ in exchange for the monetary assets of the Company.
Accordingly, there will be no change in the recorded amount of AIQ's assets and
liabilities. The monetary assets of the Company that are acquired as a result of
the Merger will be recorded at their fair market value and no goodwill will be
recorded.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
RELATING TO THE MERGER AND REINCORPORATION
The Company and AIQ expect that the Merger and the reincorporation merger
will be treated as a tax-free reorganization within the meaning of the Code, and
that no income, gain or loss will be recognized by the Company or its
shareholders as a result of the consummation of either transaction other than
shareholders exercising dissenters' rights under the CBCA. Such dissenting
shareholders of the Company may be subject to state and federal taxation as
described below. It is a condition to the consummation of the Merger that AIQ
and the Company shall have received a federal tax opinion of counsel to the
effect that, among other things, the Merger qualifies as a reorganization under
Section 368(a) of the Code. Unlike a ruling from the Internal Revenue Service
(the "IRS"), an opinion of counsel is not binding on the IRS and there can be no
assurance, and none is hereby given, that the Service will not take a position
contrary to one or more of the positions reflected therein or that the federal
tax opinion will be upheld by the courts if challenged by the Service.
Under currently existing provisions of the Code, the Treasury Regulations
promulgated thereunder, applicable judicial decisions and administrative
rulings, all of which are subject to change, the federal income tax consequences
described below are expected to arise in connection with the exercise of
dissenters' rights. Due to the complexity of the Code, the following discussion
is limited to the material federal income tax aspects of the Merger and
reincorporation for a Company shareholder who properly exercises his or her
dissenters' rights under the CBCA, who is a citizen or resident of the United
States and who, on the date of disposition of such holder's shares of common
stock, holds such shares as a capital asset. The general tax principles
discussed below are subject to retroactive changes that may result from
subsequent amendments to the Code. The following discussion does not address the
material federal income tax aspects of the Merger or the reincorporation for any
dissenting shareholder who is not a citizen or resident of the United States.
The following discussion does not address potential foreign, state, local and
other tax consequences, nor does it address taxpayers subject to special
treatment under the federal income tax laws, such as life insurance companies,
tax-exempt organizations, S corporations, trusts, and taxpayers subject to the
alternative minimum tax. In addition, the following discussion may not apply to
dissenting shareholders who acquired their shares upon the exercise of employee
stock options or otherwise as compensation. The Company has not requested the
IRS to rule or issue an opinion on the federal income tax consequences of the
Merger or the reincorporation.
ALL SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, FOREIGN, STATE, AND LOCAL TAX CONSEQUENCES OF THE DISPOSITION OF THEIR
SHARES IN THE MERGER.
For federal income tax purposes, the exchange of Company common stock for
cash pursuant to the Merger or reincorporation will be treated as a distribution
in redemption of common stock from each holder of the Company's common stock who
properly exercises dissenter's rights, subject to the provisions of Section 302
of the Code. Under the rules of Section 302, the determination of whether the
exchange of common stock for cash pursuant to the exercise of dissenters' rights
has the effect of a distribution of a dividend will be made, on a shareholder by
shareholder basis, by comparing the proportionate, percentage interest of a
shareholder after the Merger or reincorporation with the proportionate,
percentage interest of such shareholder before such transaction. In making this
comparison, there must be taken into account (a) any other shares of common
stock actually owned by such shareholder, and (b) any such shares considered to
be owned by such shareholder by reason of the constructive ownership rules set
forth in Section 318 of the Code. These constructive ownership rules apply in
certain specified circumstances to attribute ownership of shares of a
corporation from the shareholder actually owning the shares, whether an
individual, trust, partnership or corporation, to certain members of such
individual's family or to certain other individuals, trusts, partnerships or
corporations. Under these rules, a shareholder is also considered to own any
shares with respect to which the shareholder holds stock options.
Under applicable IRS guidelines, such a redemption involving a holder of a
minority interest in the Company whose relative stock interest in the Company is
minimal, who exercises no control over the affairs of the Company and who
experiences a reduction in the shareholder's proportionate interest in the
Company,
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both directly and by application of the foregoing constructive ownership rules,
generally will not be deemed to have resulted in a distribution of a dividend
under the rules set forth in Section 302(b)(1) of the Code. Accordingly, the
federal income tax consequences to the Company's shareholders who exercise
dissenters' rights will generally be as follows:
(a) Assuming that the shares of common stock exchanged by a dissenting
shareholder for cash in connection with the Merger or the reincorporation
are capital assets in the hands of the dissenting shareholder at the
effective date of the Merger or the reincorporation (and the exchange does
not result in a distribution of a dividend under Section 302 of the Code),
such dissenting shareholder may recognize a capital gain or loss by reason
of the consummation of the Merger.
(b) The capital gain or loss, if any, will be long-term with respect
to shares of common stock held for more than twelve (12) months as of the
effective date of the Merger, and short-term with respect to such shares
held for twelve (12) months or less.
(c) The amount of capital gain or loss to be recognized by each
dissenting shareholder will be measured by the difference between the
amount of cash received by such dissenting shareholder in connection with
the exercise of dissenters' rights and such dissenting shareholder's
adjusted tax basis in the common stock at the effective date of the Merger.
(d) An individual's long-term capital gain is subject to federal
income tax at a maximum rate of 20 percent, while any capital loss can be
offset only against other capital gains plus $3,000 of other income in any
tax year ($1,500 in the case of a married individual filing a separate
return). Capital losses in excess of these limits can be carried forward to
future years.
(e) A corporation's long-term capital gain is subject to federal
income tax at a maximum rate of 35%, while any capital loss can be offset
only against other capital gains in any tax year, subject to the carryback
and carryforward rules of the Code.
Cash payments made pursuant to the Merger or the reincorporation will be
reported to the extent required by the Code to dissenting shareholders and the
IRS. Such amounts will ordinarily not be subject to withholding of U.S. federal
income tax. However, backup withholding of such tax at a rate of 31% may apply
to certain dissenting shareholders by reason of the events specified in Section
3406 of the Code and the Treasury Regulations promulgated thereunder, which
include failure of a dissenting shareholder to supply the Company or its agent
with such dissenting shareholder's taxpayer identification number. Accordingly,
Company dissenting shareholders (or other payees) will be asked to provide the
dissenting shareholder's taxpayer identification number (social security number
in the case of an individual, or employer identification number in the case of
other dissenting shareholders of the Company) on a Form W-9 and to certify that
such number is correct. Withholding may also apply to Company dissenting
shareholders who are otherwise exempt from such withholding, such as a foreign
person, if such person fails to properly document its status as an exempt
recipient. Each dissenting shareholder of the Company, and, if applicable, each
other payee, should complete and sign a Form W-9 to provide the information and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to the Company.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO YOU AS A RESULT OF THE PROPOSED TRANSACTIONS
(INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX
LAWS).
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CERTAIN INFORMATION CONCERNING THE COMPANY
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you
about the Company by referring you to documents that we have previously filed
with the SEC. The information incorporated by reference is considered to be a
part of this proxy statement. Any later information that we file with the SEC
will automatically update and supersede the information contained in this proxy
statement. If you desire a copy of any document incorporated by reference but
not delivered to you as part of this proxy statement, upon written or oral
request to Meteor Industries, Inc., 1401 Blake Street, Suite 200, Denver, CO
80202, attention: Richard E. Kisser, Secretary, telephone (303) 572-1135, a copy
of such document(s) will be sent to you by first class mail or equally prompt
means within one business day of receipt of such request.
We incorporate by reference the documents listed below and any further
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
- Annual Report on Form 10-K filed with the SEC on April 14, 2000;
- Amended Annual Report on Form 10-K/A filed with the SEC on May 1, 2000;
- Quarterly Report on Form 10-Q dated November 14, 2000; and
- Current Report on Form 8-K filed with the SEC on February 11, 2000
MARKET PRICE AND DIVIDEND DATA
Prices for Meteor common stock are as quoted on the NASDAQ SmallCap market
System.
BID PERIOD HIGH LOW
- - - ---------- ----- -----
Quarter Ended March 31, 1998................................ $4.38 $2.63
Quarter Ended June 30, 1998................................. $4.50 $2.81
Quarter Ended September 30, 1998............................ $4.44 $3.63
Quarter Ended December 31, 1998............................. $3.38 $3.00
Quarter Ended March 31, 1999................................ $3.00 $2.38
Quarter Ended June 30, 1999................................. $3.50 $2.50
Quarter Ended September 30, 1999............................ $4.06 $3.13
Quarter Ended December 31, 1999............................. $3.50 $2.63
Quarter Ended March 31, 2000................................ $3.13 $2.31
Quarter Ended June 30, 2000................................. $4.88 $3.19
Quarter Ended September 30, 2000............................ $6.38 $4.69
There are approximately 620 holders of the Company's common stock, of which
approximately 565 hold their shares in "street name".
DIVIDENDS
The Company has paid no cash dividends on its Common Stock and has no
present intention of paying cash dividends in the foreseeable future. It is the
present policy of the Board of Directors to retain all earnings to provide for
the growth of the Company. Payment of cash dividends in the future will depend,
among other things, upon the Company's future earnings, requirements for capital
improvements and financial condition. The Company's ability to pay any cash
dividends on the Company's Common Stock in the future are limited by the
dividend requirements of the Preferred Stock of a Subsidiary.
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CERTAIN INFORMATION CONCERNING AIQ
OVERVIEW
AIQ was incorporated under Minnesota law in 1996. Originally founded with
the purpose of investing in privately-held companies, since early 1999 AIQ has
been devoted to the development of products and services that provide
Internet-based solutions to business problems. AIQ currently has or is
developing two products, Epoxy(sm), a platform that connects a suite of
e-business applications directly with a customers back end system and servers,
and Active CC, which is designed to allow businesses to automate document
content categorization. Through its recent acquisition of Edge Technologies
Incorporated, AIQ has expanded the range of e-commerce enabling products it
offers.
Epoxy(sm) [Formerly Commerce Connection]
AIQ's Epoxy(sm) service provides an e-business platform that currently
offers integrated e-commerce, CRM and Account Tracking. More services are being
created through in-house development and partnerships with third parties. One
such partnership is AIQ's relationship with IntraNet Solutions, Inc. to offer
Web content management solutions to small and medium-sized businesses worldwide
through the Epoxy(sm) platform. Epoxy(sm) is offered on a monthly subscription
basis depending on the size of the business and the number of services
subscribed to. AIQ's application software is built on the eXtensible Markup
Language standard, or XML. Epoxy(sm) allows suppliers of all sizes to meet the
challenges of a changing world. AIQ believes its Epoxy(sm) service gives
customers the power and control they need to participate and effectively compete
in e-business.
Active CC
Active CC is a proprietary technology developed by AIQ that will allow the
customers of IntraNet Solutions, Inc. using its core Xpedio product to automate
content categorization and expedite the document check in process. AIQ recently
released Active CC to IntraNet Solutions for distribution to its existing
customer base of over 800 companies at a price of $30,000 per license. Under the
terms of the agreement with IntraNet Solutions, AIQ will receive as revenue
approximately 30 percent of the proceeds from the sales of Active CC.
Edge Technologies, Inc.
In January 2001, AIQ completed its acquisition of Las Vegas-based Edge
Technologies, Inc., which will continue as an operating subsidiary of AIQ. Edge
Technologies is the creator of a fully integrated e-commerce website service
called Account Wizard. AIQ is currently in the process of re-branding "Account
Wizard" to be included within its Epoxy(sm) service. Account Wizard allows users
to build a dynamic, secure, interactive website by extracting data from a
variety of supported business accounting systems. The building process usually
is minimal and is accompanied by full technical support from Edge. Through
automated daily updates, an Account Wizard enabled website is self-maintaining.
After the initial build, there is no need to enter transactions twice, since
Account Wizard accesses the accounting system directly. AIQ intends to re-brand
Account Wizard as part of its EpoxySMservices.
INDUSTRY BACKGROUND
The Internet is changing the way business is conducted. To succeed in the
new economy, AIQ believes that businesses must have the flexibility to adapt to
and capitalize on the new markets and efficiencies created by e-business. The
rise of net markets and e-procurement can both cost effectively broaden a
supplier's reach and reduce process-related costs.
AIQ expects the adoption of e-business techniques will have a profound
effect throughout the industrialized world. Not only have industry giants
embraced e-commerce by allocating large budgets to developing e-commerce sales
channels, but thousands of pure Internet-based businesses have also emerged in
recent years. E-commerce is progressively eliminating traditional barriers to
entry, thereby eroding geographic boundaries and increasing customer choice and
power. Entirely new business models now pose competitive
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threats to traditional market leaders. These competitive pressures force
businesses to continuously advance their Internet commerce capabilities. AIQ
believes that as the move toward e-commerce accelerates and the advantage
becomes more apparent, a wide range of companies will be driven to become viable
members of the new economy.
E-procurement is leading the way as an area of rapid and extreme change in
how businesses interact with each other. According to recent research by the
Aberdeen Group implementing indirect automated procurement solutions will lead
to dramatic economic benefits for any enterprises such as:
- Companies implementing e-procurement solutions achieve a 5 to 15 percent
drop in product costs and a 70 percent decrease in process costs.
- An average cost of $30 is required to process an order through an
e-procurement system, compared with $107 per requisition for orders
processed manually.
Larger companies have the financial luxury of being able to keep up with
these rapid changes and trends. Middle market companies, however, must find
innovative solutions in order to effectively participate in e-business.
THE EPOXY(SM) APPROACH
Epoxy(sm) is a platform providing customers with quick and credible access
to e-business services and applications. Epoxy(sm) provides a single point of
integration to e-business and delivers on critical, business requirements:
speed, flexibility, scalability, and real-time enterprise integration. AIQ
believes that its Epoxy(sm) solution provides the following advantages to its
customers:
- Epoxy(sm) gives middle market companies within a specific industry the
ability to expand their sales and distribution channels.
- With Epoxy(sm), middle market companies have the ability to seamlessly
connect and disseminate information to an ever-growing number of global
net markets.
- Epoxy(sm) manages the information relationship under a serviced-based
model. This model allows middle market companies the ability to focus on
their core business.
- Epoxy(sm) provides companies the ability to seamlessly post data once,
thus eliminating the multiple entry problem.
- Businesses can leverage their existing technology infrastructure and
processes quickly to collect relevant e-business information from
wherever it resides in the enterprise-electronic resource planning
systems, enterprise databases, or Word and Excel files.
- Product information is transformed and delivered automatically to net
markets and e-procurement systems using the XML formats and schemas they
require.
- Businesses maintain their competitive advantage by rapidly and
incrementally updating product and pricing information across all
channels.
AIQ also provides a solution for trading exchanges that have not invested
in a transaction standard for seller integration. Epoxy(sm) enables transaction
exchanges to quickly access our seller community and to deliver other sellers a
transaction standard for seamless integration. Epoxy(sm) transforms a static
"infomediary" exchange to a dynamic hub for real-time transaction.
PRODUCTS AND SERVICES
AIQ's Epoxy(sm) services provide real-time integration from the customer's
systems into multiple e-business services and applications. The Epoxy(sm)
platform offers customers multiple e-business services
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without investment in disparate transaction standards and e-business protocols.
AIQ's solution offers the following benefits:
- Increased sales opportunities
- Direct integration into your host order management systems
- Transparent communication of product and order information
- Insurance against a dynamic, chaotic e-business landscape
- Decreased processing costs -- the cost of processing an electronic order
is dramatically lower than the cost of processing a phone or fax order
- Tighter operating controls -- by using a single e-commerce system to
serve multiple operations, you dramatically increase your return on
investment while maintaining a high level of control over your entire
operation.
- Capacity to expand -- whether you require a system to support 10, 100, or
1,000 users, you can add more capacity as needed. As your product
inventory grows, you can continue to add new information to your host
database with no impact on Epoxy(sm).
- Notification to your company of new markets and changes in the
e-procurement landscape.
- Transparent access to all net marketplaces regardless of the transaction
standard or protocol.
AIQ'S STRATEGY
AIQ believes it is a pioneer in bringing new Internet commerce solutions to
market and in developing new services to deliver those solutions. Its objective
is to provide the service infrastructure that supports a leading share of
commerce conducted over the Internet for middle market companies.
AIQ's technology integrates with the major-sized accounting/ERP software
packages. AIQ plans on taking advantage of that current customer base and offer
its service as an added value. To date AIQ has successfully integrated its
solution with over 15 accounting/ERP packages.
AIQ plans to develop its sales presence and market coverage through
strategic alliances. It also intends to expand its distribution efforts by
forming alliances with leading providers of complementary software and services,
including VARs, ASPs, systems integrators, and Internet strategy consulting
firms. AIQ's management expects to cultivate these relationships and others like
them to
- leverage its sales and marketing efforts for increased lead generation
and revenues from a larger base of clients;
- increase the number of trained professionals who can perform
implementation and application management services for clients, thereby
increasing the potential distribution volume of AIQ's service;
- gain business expertise in targeted industries to assist clients with
site implementations and to provide input for solutions development;
- obtain technical expertise for developing new service functionality and
capabilities.
AIQ has identified several key indicators, or metrics, of financial
performance for e-commerce sites. The Epoxy(sm) platform and the integrated
e-commerce service provide the ability to track, analyze, and customize these
performance metrics. AIQ plans to continue focusing on performance metrics as
e-commerce evolves. Based on these metrics, AIQ intends on developing tools and
techniques to evaluate e-commerce business opportunities and performance. AIQ
also plans to provide interactive decision-making models that forecast potential
return based on different configurations and features of the market-specific
pricing function. In addition, AIQ expects to continue to prioritize its
development efforts based on areas its management identifies as providing the
most significant contributions to the financial success of e-business efforts to
promote its clients' and its own competitive advantage.
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AIQ's strategy includes focusing on specific vertical markets to gain
domain expertise. It initially plans to focus on the medical suppliers industry
with development efforts in the following vertical markets; electronics,
maintenance repair and operating supplies, hospitality & leisure, and
agriculture.
TECHNOLOGY
Epoxy(sm) is built upon an innovative solutions architecture that combines
AIQ's advanced Java and XML expertise with experience in the development of
legacy ERP software. Over 30 man-years of technical development has been
invested in the various components and modules of its architecture.
Accounting/ERP Data Conversion Engine
The Data Conversion Engine consists of a series of modules, processors, and
XML composition tools to collect, manipulate, and standardize information stored
throughout a customer's enterprise.
The adapter collects data using database APIs such as ODBC and JDBC,
application APIs, and XML messaging. The Epoxy(sm) Adapter provides secure,
reliable retrieval of both structured and unstructured data sources from local
and remote data repositories. Because it integrates seamlessly and unobtrusively
with a customer's existing infrastructure, there's no need to adapt business
processes to Epoxy(sm).
Structured data can be collected from relational databases, ERP systems,
office productivity applications like spreadsheets, and standardized reports and
web pages, as well as enterprise applications.
Using sophisticated text processing and pattern matching capabilities, the
Epoxy(sm) Adapter can even retrieve information from inconsistent formats like
desktop publishing and word processing applications, as well HTML and XML pages.
Currently modules for the following accounting/ERP software publishers are
available: AccountMate, Business Vision, Accounting Central, Accura Software,
New Data Systems, CCI Software, Champion Business Systems, Cougar Mountain
Software, Millennium Software, Positive Software, Red Wing Business Systems, and
Uptrends Management Software, with further modules and relationships being
created.
SALES AND MARKETING
Sales Strategy
AIQ will focus its sales effort on accounting firms, value-added resellers,
and systems integrators. Through intensive seminars and training on the
Epoxy(sm) platform AIQ intends to leverage its partners' existing sales
channels.
A key element of this strategy is to leverage its channel and alliance
partners for the distribution of its Epoxy(sm) services. AIQ intends to target
middle market companies, new businesses planning to use the Internet as a
significant business channel and primarily, companies in the distribution and
manufacturing industries.
Marketing Strategy
AIQ is engaged in a variety of marketing activities, including strategy
development, corporate and product marketing, market research, and market
launch. AIQ uses a broad mix of programs, targeting its efforts in the following
areas:
- brand-building and marketplace awareness;
- generating and developing client leads;
- educating the market on the advantages of the Epoxy(sm) platform ;
- building and enhancing relationships with press, media, and industry
analysts;
- co-branding AIQ's service with other respected technology solutions.
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AIQ produces a variety of materials, including brochures, white papers,
presentations, and demonstrations. AIQ also leverages its strategic partners
through joint marketing activities.
STRATEGIC RELATIONSHIPS
IntraNet Solutions
IntraNet Solutions, Inc. (www.IntraNetsolutions.com) headquartered in Eden
Prairie, Minnesota, offers web content management solutions for intranet,
extranet, and Internet applications. IntraNet Solutions' products are preferred
by customers because they deliver key benefits, such as rapid deployment and
return on investment, ease of use, enterprise-strength scalability and security,
and a commitment to web-based standards. In 1997, IntraNet Solutions launched
the first web-based document and content management software product that was
built especially for the web environment. In 1999, the company introduced its
Xpedio Content Management product line, the first end-to-end content management
solution for the enterprise. IntraNet Solutions and its subsidiary, InfoAccess,
have a combined user base of 800 enterprise server customers. Key customers
include Agilent Technologies, Allina Health System, British Aerospace Airbus,
Ltd., Cargill Financial Services Corporation, Dayton Hudson Corporation,
Ericsson Telecom AB, Furon, GE Capital Corporation, Honeywell Engines and
Systems, Land O' Lakes, Network Solutions, and Toyota.
AIQ has created a proprietary technology for IntraNet Solutions that will
allow Xpedio customers to automate content categorization and expedite the
document check in process. The product will be released in conjunction with the
release of Xpedio 4.5. AIQ is also licensing the Xpedio product with content
servers from IntraNet Solutions for use in content management modules of AIQ's
service. AIQ will use the Xpedio solution to help manage unstructured
product-and sales-related data the supplier wants to push through the net
markets. AIQ also recently became a non-exclusive reseller of Xpedio, as well as
IntraNet Solution's Content Categorizer and Dynamic Converter products. Pursuant
to its agreements with IntraNet, AIQ is entitled to a 40 percent discount off of
IntraNet Solutions' list price for purchases of IntraNet Solution's products, as
well as a 20 percent discount from the list price for maintenance and support
fees. Additionally, AIQ will receive a fee for referring customers to IntraNet
Solutions.
AccountMate Software Corporation
AIQ has established a business partnership with AccountMate Software
Corporation of Novato, California. Through this partnership, AIQ intends to
ensure the continued technical exchange between the two companies as AIQ
develops its adapter modules, which integrate seamlessly with AccountMate's
Visual AccountMate product line. In addition, AccountMate will actively market
the Epoxy(SM) solution to its sales force of over 1,000 VARs and from there to
its customer base of over 120,000 installations in over 200 industries
worldwide. Since its inception in 1984, AccountMate has earned an outstanding
reputation throughout the industry for development of leading-edge, modifiable
accounting solutions designed for businesses of virtually every type and size,
from small startups all the way to divisions of Fortune 1000 corporations. Some
of the more notable end users of AccountMate products include Magic Johnson
Foundation, Citicorp, Exxon, United Cerebral Palsy, MGM, McDonalds, Johnson &
Johnson, Jockey International, NATO, Smithsonian Institute, Sarah Lee Direct,
Holiday Inn, and the United Way Agency. AccountMate Software Corporation also
maintains strategic corporate alliances with Microsoft Corporation and IBM.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
AIQ may file patent registration applications covering its core technology
concepts and intends to institute a patent program to reward patent
contributions from its staff and properly identify and protect new inventions.
AIQ may also make international filings of selected patent applications to
protect its intellectual property rights overseas. It will protect its
copyrights, service marks, trademarks, and trade secrets through the combination
of existing laws and tactical contractual restrictions such as confidentiality
or nondisclosure agreements. AIQ plans to register its trademarks and service
marks in the United States and internationally.
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However, effective trademark, service mark, copyright, and trade secret
protection may not be available in every country in which AIQ's services are
made available online.
COMPETITION
AIQ's competitors vary in size, in the scope and breadth of their products
and services, and in their technical, financial, and human resources. It has
three primary sources of competition:
- in-house development efforts by potential clients and systems integration
firms that build customized solutions using development platform
application server products;
- Internet application software vendors such as Art Technology Group,
BroadVision, Ariba, Commerce One, TRADE'ex, InterWorld, OpenMarket, and
Vignette;
- vendors of platform application server products and sell-side solutions
similar to ours, such as Web Methods, Acta, Cailco, Comergent, Order
Fusion and Firepond.
In addition, AIQ faces potential competition from vendors of other Internet
commerce software applications as they expand the functionality of their product
offerings. These vendors may include Allaire Corporation and other vendors of
software designed to enable Internet commerce or management of customer
relationships.
EMPLOYEES
AIQ currently has 20 employees: a chief executive officer/chief financial
officer, a president/chief operating officer, an executive vice president, a
vice president of strategic development, a vice president of engineering, a vice
president of AIQ's Edge Technologies subsidiary, a vice president of sales of
Edge Technologies, a vice president of vertical sales, a director of marketing,
a director of channel programming, an accountant/controller, an office manager,
and 8 software engineers. AIQ continues to look to employ key information
technology professionals and hire independent contractors to develop and market
its products.
FACILITIES
AIQ's corporate headquarters are located at 601 Carlson Parkway,
Minnetonka, Minnesota. AIQ also maintains an engineering facility located at 54
Middlesex Turnpike, Bedford, Massachusetts. The Massachusetts facility houses
nearly all of AIQ's operations, including the partner support and programming
and development staff. As a result of its recent acquisition of Edge
Technologies, Inc., AIQ also leases offices space in Las Vegas, Nevada, from
which Edge Technologies' operations are conducted.
LEGAL PROCEEDINGS
To AIQ's knowledge, it is not involved in any material legal actions and
there is no threatened litigation against AIQ.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
AIQ was incorporated in Minnesota on April 11, 1996, and is a development
stage company. AIQ provides Internet commerce application software and services.
Since its inception, AIQ's efforts have been devoted to the development of its
business plan and raising capital.
AIQ is in the development stage and has yet to generate any significant
revenues. Substantial time may pass before AIQ realizes significant revenues, if
any. Further, during the period required to develop significant revenues, AIQ
may require additional funds that may not be available. AIQ is subject to risks
and uncertainties common to growing technology-based companies, including rapid
technological change, growth and commercial acceptance of the Internet,
dependence on suppliers and users for product, new product
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development, new product introductions and other activities of competitors,
dependence on key personnel, security and privacy issues, dependence on
strategic relationships and limited operating history.
Results of Operations for the Years Ended December 31, 1997, 1998 and 1999,.
and the Nine Months Ended September 30, 1999 and 2000
Revenues -- AIQ had no revenues for the period from April 11, 1996
(inception) to December 31, 1999.
Costs and Expenses -- For the year ended December 31, 1997, AIQ had a net
income of $8,167 compared with a net loss of $144,492 for the year ended
December 31, 1998. In 1997, AIQ realized a gain on certain available-for-sale
securities and had limited operating activities. The net loss for the year ended
December 31, 1998 is primarily attributed to a realized loss on certain
available-for-sale securities and limited operating activities.
For the year ended December 31, 1998, AIQ had a net loss of $144,492
compared with a net loss of $461,981 for the year ended December 31, 1999. The
net loss for the year ended December 31, 1999 is largely attributed to
additional expenses incurred as AIQ increased its corporate overhead structure
for the development of Internet commerce application products.
For the nine months ended September 30, 1999, AIQ had a net loss of $99,722
compared to a net loss of $2,020,954 for the nine months ended September 30,
2000. The net loss for the nine months ended September 30, 2000, is largely
attributable to additional expenses incurred as AIQ increased its corporate
overhead structure for the development of internet commerce applications.
Liquidity and Capital Resources
AIQ has met its capital requirements through stockholder advances, issuance
of common stock for property, conversion of debt to equity, private placement of
common stock, the sale of common stock and issuance of common stock for
services.
In 1999, AIQ received net stockholder advances of $55,000.
In May 1999, AIQ issued 83,333 shares of common stock valued at $.75 per
share in exchange for intellectual property.
In August 1999, AIQ converted $47,180 of debt to additional paid-in
capital.
During August through September 1999, AIQ issued 88,266 shares of common
stock at $1.50 per share through a private placement, resulting in $132,400 of
net proceeds.
In October and November 1999, AIQ issued 23,000 shares of common stock at
$37.50 per share, resulting in $503,750 in net proceeds (net of a stock
subscription receivable of $328,750).
In March 2000, AIQ issued 4,667 shares of common stock at $37.50 per share,
resulting in $175,000 in net proceeds.
In June 2000, AIQ issued 1,789,633 shares of common stock at $.38 per
share, resulting in $670,862 in net proceeds.
In July 2000, AIQ issued 151,200 shares of common stock at $2.50 per share,
resulting in $378,000 in net proceeds.
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In August through September 2000, AIQ issued 749,864 shares of common stock
at $2.75 per share, resulting in $1,645,977 in net proceeds.
For the year ended December 31, 1997, AIQ used $24,167 in cash flows for
operating activities. For the year ended December 31, 1998, AIQ received $41,232
in cash flows from operating activities. For the year ended December 31, 1999,
AIQ used $292,736 in cash flows for operating activities. For the nine months
ended September 30, 1999, AIQ used $76,168 in cash flows for operating
activities. For the nine months ended September 30, 2000, AIQ used $1,420,771 in
cash flows for operating activities.
Since inception, AIQ's principal capital requirements have been the funding
of its development activities. There is no assurance that additional capital
will be available on terms acceptable or favorable to AIQ.
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RISK FACTORS
You are urged to read and carefully consider the following risk factors in
deciding whether to approve the Merger.
RISKS RELATING TO THE MERGER
The Company may not realize the anticipated benefits of the Merger and is
selling
its operating assets to a related party.
As a condition of the Merger, the Company is selling all of its assets and
discontinuing its petroleum related business operations. Capco, the purchaser,
is also the Company's largest shareholder. Three of the Company's board members
are members of the board of directors of Capco, and Capco is not withdrawing
from the independent petroleum product distribution business. The Company is
taking the consideration paid by Capco in the Asset Sale and investing it, by
way of the Merger in AIQ, a development Stage company. The Company's decision to
withdraw from the petroleum related business may be premature. Economic
conditions change quickly, and AIQ's business plan may never be realized. It is
possible that the Company has decided to sell its assets to a related party at
the bottom of the economic cycle for independent petroleum distributors while
investing the proceeds in a "B2B" internet company at the top of the market.
Nevertheless, the Company's board of directors believes that by abandoning
the Company's current business operations and implementing AIQ's business will
permit the combined companies to achieve a greater level of success than is
possible with the Company's current business. However, AIQ is still a
development stage company with no significant operating history on which to base
an evaluation of its business and prospects. Accordingly, there can be no
assurance that, following the Merger, the Company will ever be successful.
The Merger will dilute your percentage ownership of the Company's common
stock.
The Merger will dilute the percentage ownership held by the Company's
shareholders when compared to their ownership prior to the Merger. Based upon
the estimated capitalization of both the Company and AIQ at the effective time
of the Merger, the Company's shareholders will hold approximately 51 percent of
the Company's outstanding capital stock following the Merger, and 66 percent of
the Company's capital stock on a fully-diluted basis after giving effect to the
issuance of the shares and warrants to AIQ shareholders and the assumption of
AIQ's options and warrants outstanding prior to the Merger.
The aggregate number of shares of the Company's common stock issued to AIQ
shareholders in the Merger is fixed and will not be adjusted in the event of
any change in the stock price.
Under the Merger Agreement, each outstanding share of AIQ common stock will
be exchange for one share of the Company's common stock (giving effect for the
proposed reincorporation), plus each AIQ shareholder will receive a warrant to
purchase two more shares of Company common stock at a fixed price of $5.50 per
share for every three shares of AIQ common stock held by such shareholder. The
Company will also assume all outstanding options and warrants to purchase AIQ
common stock at the price determined in the respective option and warrant
agreements. Notwithstanding a potential adjustment to the aggregate number of
shares issued to AIQ shareholders as a result of the amount of cash the Company
has available at the effective time of the Merger, the number of shares and
warrants issued to AIQ shareholders in the Merger is fixed and will not be
adjusted for any fluctuation in the market price of the Company's common stock.
Even following the Merger the Company may be exposed to liabilities resulting
from its current business operations.
As a condition to the proposed merger with AIQ, the Company must dispose of
all of its assets (except for a minimum of $4.5 million of cash) and
liabilities, known or unknown, contingent or otherwise. Pursuant to the
Company's asset purchase agreement with Capco, Capco has agreed to indemnify the
Company for all liabilities, including all liabilities that may have arisen
prior to the closing of the Asset Sale. Even though
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Meteor will have disposed of all such liabilities, there can be no assurance
that Capco will be able or even willing to pay such liabilities. In that case,
the Company (as the surviving corporation in the Merger) may be responsible for
satisfying any such liabilities. In particular, because the nature of the
Company's existing business, there is potential that the Company and its
operating subsidiaries could be exposed to governmental and third party
liability resulting from violations of state and federal environmental
protection laws. AIQ's management has indicated that it intends to purchase
insurance to protect the post-Merger Company against liabilities under
environmental laws that may have arisen prior to the effective time of the
Merger. However, there can be no assurance that such insurance will be available
at an acceptable cost or that it will adequately protect against such
environmental liabilities.
The Company's common stock could be delisted from the Nasdaq Small Cap Market
System.
As a result of our proposal to dispose of all of our assets, the merger
with AIQ and the change in our business operations, we may be delisted from the
Nasdaq SmallCap Market upon completion of the Asset Sale and Merger and informed
by Nasdaq that we must reapply for listing on the SmallCap Market. If we are
required to reapply for Nasdaq listing, there is no assurance that we will be
able to meet all of Nasdaq's initial listing requirements. Although continued
listing on Nasdaq is a condition to our and AIQ's obligations to consummate the
Merger, both parties may agree to waive this condition and complete the Merger
anyway.
In that event our common stock is delisted from the Nasdaq SmallCap Market
and we and AIQ nevertheless agree to proceed with the Merger, trading, if any,
in our common stock would thereafter be conducted in the over-the-counter
markets in the so-called "pink sheets" or in the National Association of
Securities Dealers' "Electronic Bulletin Board." Consequently, the liquidity of
our common stock would likely be significantly impaired, not only in the number
of shares which could be bought and sold, but also through delays in the timing
of the transactions, reduction in coverage by securities analysts and the news
media, and lower prices for our common stock that might otherwise prevail. In
addition, our common stock would likely become subject to the SEC's rules
relating to "penny stocks." These rules require broker-dealers to make special
suitability determinations for purchasers other than established customers and
certain institutional investors and to receive the purchasers' prior written
consent for a purchase transaction prior to sale. These "penny stock rules" may
therefore adversely affect the ability of broker-dealers to sell our common
stock and may adversely affect your ability to sell shares of our common stock
in the secondary market.
RISK FACTORS RELATING TO AIQ'S BUSINESS
AIQ has no meaningful operating history on which the evaluate its business or
prospects.
AIQ was formed in April 1996 under a different name. Its original business
plan contemplated investments in newly organized privately-held businesses,
however AIQ's management ultimately determined to allocate all of its resources
toward the development of the company's technology. AIQ has no operating history
on which you can base an evaluation of its business and prospects. Accordingly,
its business prospects must be considered in the light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets, such as online commerce, using new and unproven business
models. These risks include AIQ's:
- substantial dependence on products with only limited market acceptance;
- need to create sales and support organizations;
- competition;
- need to manage changing operations;
- customer concentration;
- reliance on strategic relationships; and
- dependence on key personnel.
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AIQ also depends heavily on the growing use of the Internet for commerce
and communication and on general economic conditions. AIQ's management cannot be
certain that its business strategy will be successful or that it will
successfully address these risks.
AIQ's management anticipates incurring losses for the foreseeable future.
For the nine months ended September 30, 2000, AIQ had a net loss of
$2,020,954, and since its inception in April 1996 through September 30, 2000,
AIQ has incurred an aggregate net loss of $2,655,966. As of September 30, 2000,
AIQ had total assets of $2,278,052. Its management expects operating losses to
continue for the foreseeable future and there can be no assurance that it will
ever be able to operate profitably. Furthermore, to the extent AIQ's business
strategy is successful, it must manage the transition to higher volume
operations, which will require it to control overhead expenses and add necessary
personnel.
AIQ's success depends, in part, on its ability to successfully integrate Edge
Technologies with its business plan.
On January 12, 2001, AIQ acquired Edge Technologies, Inc. AIQ is currently
integrating the business and products of Edge Technologies, including its
Account Wizard software application, with AIQ's existing business and products.
AIQ may incur unanticipated costs in the course of this integration. In
addition, the integration of Edge Technologies with AIQ's operations involves
the following risks:
- failure to develop complementary product offerings and marketing
strategies;
- failure to maintain the customer relationships of Edge Technologies;
- failure to retain the employees of Edge Technologies;
- failure to effectively coordinate product development efforts;
- diversion of management's time and attention from other aspects of AIQ's
business; and
- failure to manage operations that are geographically diverse.
AIQ cannot be sure that it will be successful in integrating the business and
products of Edge Technologies with its business and products. If AIQ is not, its
business, operating results and financial condition may be materially adversely
affected.
The success of AIQ's Active CC product is solely dependent on the efforts of a
third party.
AIQ recently completed the development of its Active CC product and has
licensed the product to IntraNet Solutions, Inc. Active CC was designed to allow
IntraNet Solutions to use its core Xpedio(TM) product to automate content
categorization and expedite the document check-in process. Although Active CC
has been released to IntraNet, there is no assurance that AIQ's efforts to
develop the product will be successful. The marketing of Active CC will be
solely dependent upon the efforts of IntraNet Solutions. In addition to the
high-risk nature of any product introduction, there is no assurance that
IntraNet Solutions will devote the resources necessary in order for AIQ to
derive any significant revenue from Active CC. If IntraNet Solutions is
unsuccessful in its marketing of this product, AIQ's financial condition may be
materially adversely affected.
AIQ relies heavily on third-party systems and its strategic relationships.
AIQ licenses key elements of its services from third parties, including
IntraNet Solution's Xpedio.(TM) Termination of such licenses would adversely
affect AIQ's business.
AIQ believes that its success in penetrating its target markets depends in
part on its ability to develop and maintain strategic relationships with key
software vendors, distribution partners and customers, including Intranet
Solutions. AIQ's management believes these relationships are important in order
to validate AIQ's technology, facilitate broad market acceptance of its
products, and enhance its sales, marketing and
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distribution capabilities. If AIQ is unable to develop key relationships or
maintain and enhance existing relationships, it may have difficulty selling its
products and services.
AIQ will also possibly license minor components from others such as
reporting functions, charting functions and security features and incorporate
them into our products. If these licensed components are not maintained, it
could impair the functionality of AIQ's products and require it to obtain
alternative products from other sources or to develop this software internally,
either of which could involve costs and delays as well as diversion of
engineering resources.
Following the Merger the Company will require future financings in order to
complete the development of AIQ's products and services, which may not be
available on acceptable terms.
When the proposed merger with Meteor is consummated, AIQ anticipates that
further financing will be needed in approximately 12 months in order to complete
development of AIQ's products and develop our brand and services. Product
development, brand development and other aspects of Internet-related businesses
are extremely expensive, and there is no precise way to predict when further
financing will be needed or how much will be needed. Moreover, there can be no
guarantee that the additional financing will be available when needed. If it is
not available, the Company may be forced to discontinue its business, and your
investment may be lost. If the financing is available only at a low valuation of
the Company, your investment may be substantially diluted. The continued health
of the market for Internet-related securities and other factors beyond the
Company's control will have a major impact on the valuation of the Company when
it raises capital in the future.
If the Merger is completed, the Company's future success is highly dependent
on the continued availability of AIQ's key employees.
In connection with the continued development of AIQ's products and
services, it is substantially dependent upon on the continued service of its
existing engineering personnel. However, there is currently a great demand for
the services of software engineers and, accordingly, one or more of AIQ's
engineers may receive and accept an employment offer from another technology
company. Although AIQ's engineers have entered into confidentiality and
invention assignment agreements, none have entered into noncompete agreements
with AIQ. The loss of one or more of AIQ's engineers could delay the ongoing
development of its products and services, which would adversely affect its
business.
Potential fluctuations in results of operations; difficulty in predicting
results of operations
AIQ expects its anticipated revenues and operating results to vary
significantly from quarter to quarter. As a result, quarter-to-quarter
comparisons of AIQ's revenues and operating results may not be meaningful. In
addition, due to the fact that it has no operating history with its new and
unproven technology, AIQ cannot predict its future revenues or results of
operations accurately.
AIQ's current and future expense levels are based largely on its investment
plans and estimates of future revenues and are, to a large extent, fixed.
Accordingly, it may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall, and any significant shortfall
in revenues relative to its planned expenditures could have an immediate adverse
effect on AIQ's business and results of operations.
Lack of operating history and rapid growth makes it difficult for AIQ's
management to assess the effect of seasonality and other factors outside AIQ's
control. Nevertheless, AIQ expects its business to be subject to fluctuations,
reflecting a combination of various Internet-related factors.
AIQ's inability to develop successful customer relationships will hinder its
profitability.
As stated above, the success of AIQ's Active CC product is dependent upon
Intranet Solutions' ability to sublicense the product to its customers. AIQ also
intends to establish relationships with various types of customers and partners,
such as e-Business portal customers, vertical market makers, technology
partners, consulting partners and value-added resellers. Each of these
relationships will involve negotiation of terms and
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fees. AIQ cannot be certain that it will be able to negotiate profitable
relationships or that it can successfully fulfill its obligations under
development agreements that will allow it to continue these relationships.
Risks associated with new products, features and functions
An essential part of AIQ's growth strategy requires that new products with
a broader range of features be developed. AIQ expects to incur substantial
expense and use significant resources in trying to expand the type and range of
the products that it offers. However, AIQ may not be able to attract customers
to purchase them. In addition, if end-users do not favorably receive the
products and services AIQ has developed, our reputation and the value of the
ActiveIQ Technologies, Inc. brand could be damaged.
Risks associated with brand development
AIQ's management believes that recognition and a favorable end-user
perception of the ActiveIQ-enabled applications are essential to AIQ's future
success. Successful positioning of AIQ's brand will largely depend on:
- the success of AIQ's advertising and promotional efforts;
- an increase in sales of ActiveIQ-based products and services including
the Epoxy(sm) services; and
- AIQ's ability to continue to provide high quality applications.
AIQ believes that end-users will associate the ActiveIQ brand primarily
with better, intelligent applications. To grow its business, AIQ believes it
needs to expand awareness of the ActiveIQ brand to a wide range of applications.
To increase awareness of the ActiveIQ brand and expand it to a wide range
of services, AIQ may need to spend significant amounts on advertising and
promotion. These expenditures may not result in a sufficient increase in
revenues to cover such advertising and promotion expenses. In addition, even if
brand recognition increases, sales of ActiveIQ-based products may not increase.
AIQ's markets are highly competitive
AIQ competes in markets that are new, intensely competitive, highly
fragmented and rapidly changing. AIQ faces competition in the overall Internet,
Corporate Intranet and Extranet infrastructure market as well as the Internet
search segments of this market. AIQ will experience increased competition from
current and potential competitors, many of which have significantly greater
financial, technical, marketing and other resources.
AIQ competes with a number of companies to provide intelligent
software-based solutions, many of which have operated services in the market for
a longer period, have greater financial resources, have established marketing
relationships with leading online software vendors, and have secured greater
presence in distribution channels.
AIQ's business does not depend on significant amounts of proprietary rights
and, therefore, its technology does not pose a significant entry barrier to
potential competitors. Additionally, its competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements
than AIQ can. In addition, AIQ's current and potential competitors may bundle
their products with other software or hardware, including operating systems and
browsers, in a manner that may discourage users from purchasing services and
products offered by AIQ. Also, current and potential competitors have greater
name recognition, more extensive customer bases that could be leveraged, and
access to proprietary content. Increased competition could result in price
reductions, fewer customer orders, fewer search queries served, reduced gross
margins and loss of market share.
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E-business technology is rapidly changing
The Internet, Corporate Intranet and Extranet infrastructure market is
characterized by rapid technological change, frequent new product introductions,
changes in customer requirements and evolving industry standards. The
introduction of products embodying new technologies and the emergence of new
industry standards could render our existing products obsolete. AIQ's future
success will depend upon its ability to develop and introduce a variety of new
products and product enhancements to address the increasingly sophisticated
needs of its customers. AIQ may be unable to develop any products on a timely
basis, or at all, and it may experience delays in releasing new products and
product enhancements. Material delays in introducing new products and
enhancements may cause AIQ customers to forego purchases of our products and
purchase those of its competitors.
AIQ needs to create and grow its sales and support organizations
AIQ will need to create and substantially grow its direct and indirect
sales operations, both domestically and internationally, in order to create and
increase market awareness and sales of its products. AIQ's products and services
will require a sophisticated sales effort targeted at several people within its
prospective customers. Competition for qualified sales personnel is intense, and
AIQ might not be able to hire the kind and number of sales personnel it is
targeting. In addition, AIQ's management believes that its future success is
dependent upon establishing successful relationships with a variety of
distribution partners, including value added resellers. AIQ cannot be certain
that it will be able to reach agreement with additional distribution partners on
a timely basis or at all, or that these distribution partners will devote
adequate resources to selling AIQ's products. There is also no assurance that
AIQ's pricing model relating to its EpoxySM product will be accepted by AIQ's
customers.
Similarly, the anticipated complexity of AIQ's products and services and
the difficulty of customizing them require highly trained customer service and
support personnel. AIQ will need to hire staff for its customer service and
support organization. Hiring customer service and support personnel is very
competitive in AIQ's industry due to the limited number of people available with
the necessary technical skills and understanding of the Internet.
AIQ's initial revenues will be dependent on a small group of customers
AIQ anticipates that initially, a substantial portion of its revenues, if
any, will come from revenues from its Edge Technologies subsidiary, as well as
revenues from its relationship with IntraNet Solutions and a limited number of
other customers. AIQ's management also expects that a small number of customers
will continue to account for a substantial portion of revenues for the
foreseeable future. As a result, if AIQ loses a major customer, or if there is a
decline in usage of any customer's service, AIQ's revenues would be adversely
affected. In addition, AIQ cannot be certain that customers that will account
for significant revenues, individually or as a group, will continue to generate
revenues in any future period.
AIQ's future success is dependent on the management of its potential growth
AIQ's ability to successfully offer products and services and implement its
business plan in a rapidly evolving market requires an effective planning and
management process. Rapid growth will place a significant strain on AIQ's
management systems and resources. AIQ's management expects that they will need
to continually improve AIQ's financial and managerial controls and reporting
systems and procedures, and will need to continue to expand, train and manage
AIQ's work force. Furthermore, AIQ expects that it will be required to manage
multiple relationships with various customers and other third parties.
AIQ's success depends on its ability to retain and recruit key personnel
AIQ's products and technologies are complex and it is substantially
dependent upon the continued service of its existing engineering personnel. AIQ
is also highly dependent on Kenneth Brimmer, its Chairman and Chief Executive
Officer, and Pete Rockers, its President and Chief Operating Officer. AIQ also
expects to continue to add other important personnel in the near future. The
loss of any of those individuals may have a
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material adverse impact on its business. AIQ intends to hire a significant
number of sales, support, marketing, and research and development personnel in
calendar 2001 and beyond. Competition for these individuals is intense, and AIQ
may not be able to attract, assimilate or retain additional highly qualified
personnel in the future. AIQ's future success also depends upon the continued
service of its executive officers and other key sales, marketing and support
personnel.
Some of AIQ's revenues will be derived from license agreements, which may be
disputed
AIQ anticipates that it will license its products, portions of its products
and intellectual property, including any patents, to third parties. If the
nature or scope of such licenses are disputed, AIQ will be compelled to
institute proceedings to enforce its rights either under the licensing agreement
or under patent laws. Such proceedings are generally time-consuming and
expensive, and may distract management from AIQ's other business issues.
AIQ's success depends on its ability to protect its proprietary technology
If AIQ is unable to protect its intellectual property, or incurs
significant expense in doing so, its business, operating results and financial
condition may be materially adversely affected. Any steps AIQ takes to protect
its intellectual property may be inadequate, time consuming and expensive. AIQ
currently has no patents, registered trademarks or service marks or pending
patent, trademark or service mark applications. Without significant patent,
trademark, service mark or copyright protection, AIQ may be vulnerable to
competitors who develop functionally equivalent products and services. AIQ may
also be subject to claims that its products infringe on the intellectual
property rights of others. Any such claim may have a material adverse effect on
AIQ's business, operating results and financial condition.
AIQ's success and ability to compete are substantially dependent upon its
internally developed products and services, which it intends to protect through
a combination of patent, copyright, trade secret and trademark law. AIQ
generally enters into confidentiality or license agreements with its employees,
consultants and corporate partners, and generally control access to and
distribution of its software, documentation and other proprietary information.
Despite AIQ's efforts to protect its proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use its products or technology. As
with any knowledge-based product, AIQ anticipates that policing unauthorized use
of its products will be difficult, and it cannot be certain that the steps it
intends to take to prevent misappropriation of its technology, particularly in
foreign countries where the laws may not protect our proprietary rights as fully
as in the United States, will be successful. Other businesses may also
independently develop substantially equivalent information.
AIQ's technology may infringe on the proprietary rights of others
AIQ also anticipates that software product developers will be increasingly
subject to infringement claims due to growth in the number of products and
competitors in its industry, and the overlap in functionality of products in
difference industries. AIQ also believes that many of its competitors in the
intelligent applications business have filed or intend to file patent
applications covering aspects of their technology that they may claim AIQ's
technology infringes. AIQ cannot be certain that these competitors or other
third parties will not make a claim of infringement against it with respect to
AIQ's products and technology. Any infringement claim, regardless of its merit,
could be time-consuming, expensive to defend, or require AIQ to enter into
royalty or licensing agreements. Such royalty and licensing agreements may not
be available on commercially favorable terms, or at all. AIQ is not currently
involved in any intellectual property litigation.
AIQ's products and services operate in part by making copies of material
available on the Internet and other networks and making this material available
to end users. This creates the potential for claims to be made against AIQ
(either directly or through contractual indemnification provisions with
customers) for defamation, negligence, copyright or trademark infringement,
personal injury, invasion of privacy or other legal theories based on the
nature, content or copying of these materials. These claims have been brought,
and sometimes successfully pressed, against online service providers in the
past. Although AIQ will carry general
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liability insurance, that insurance may not cover potential claims of this type
or may not be adequate to protect AIQ from all liability that may be imposed.
Government regulation and legal uncertainties
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. Recent sessions of the United States
Congress have resulted in Internet laws regarding children's privacy,
copyrights, taxation and the transmission of sexually explicit material. The
European Union recently enacted its own privacy regulations. The law of the
Internet, however, remains largely unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws such as those governing intellectual property, privacy, libel and taxation
apply to the Internet. In addition, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional burdens on
companies conducting business online. The adoption or modification of laws or
regulations relating to the Internet could adversely affect AIQ's business.
Potential acquisitions may consume significant resources
While AIQ has no current agreements with respect to any potential
acquisitions, AIQ may make acquisitions following the Merger. Acquisitions
entail numerous risks, including difficulties in the assimilation of acquired
operations and products, diversion of management's attention to other business
concerns, amortization of acquired intangible assets and potential loss of key
employees of acquired businesses. No assurance can be given as to the ability of
AIQ to consummate any acquisitions or integrate successfully any operations,
personnel, services or products that might be acquired in the future, and the
failure of AIQ to do so could have a material adverse effect on AIQ's business,
financial condition and operating results.
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PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma unaudited consolidated financial information
consists of Pro Forma Unaudited Consolidated Statements of Operations of Meteor
Industries, Inc. for the year ended December 31, 1999 and for the nine months
ended September 30, 2000 and a Pro Forma Unaudited Consolidated Balance Sheet of
Meteor Industries, Inc. as of September 30, 2000. The unaudited Pro Forma
Consolidated Financial Statements give effect to the proposed acquisition of
Edge Technologies Incorporated (a development stage company) and activeIQ
Technologies, Inc. (a development stage company). The Pro Forma Unaudited
Consolidated Statements of Operations give effect to the acquisitions as if they
occurred on January 1, 1999. The Pro Forma Unaudited Consolidated Balance Sheets
give effect to the acquisitions as if they occurred on September 30, 2000.
On October 26, 2000, Meteor Industries, Inc. entered into a letter of
intent to merge with activeIQ Technologies, Inc. The proposed acquisition of
activeIQ Technologies, Inc. requires Meteor Industries, Inc. to issue each
shareholder of activeIQ Technologies, Inc. one share of Meteor Industries, Inc.
common stock and a common stock warrant to purchase two-thirds of a share of
Meteor Industries common stock at a price of $5.50 per full share in exchange
for each common share of activeIQ Technologies, Inc. The letter of intent
further contemplates the satisfaction of certain conditions to the closing of
the transaction, including the requirements that Meteor Industries, Inc. will
(a) have sold all of its assets relating to its current operations (including
all of its operating subsidiaries), (b) have no debt or payables and (c) have at
least $4.5 million in cash available. Prior to the closing of the proposed
merger, Meteor Industries, Inc. has agreed to purchase 400,000 shares of
activeIQ Technologies, Inc. of common stock for $1.1 million in cash. To finance
this purchase and obtain additional working capital, Meteor Industries, Inc.
intends to sell to private investors, some of which are current shareholders of
Meteor Industries, Inc., 120,000 units of its securities at a price of $15 per
unit, each unit consisting of 5 shares of Meteor Industries, Inc. common stock
and a warrant to purchase 3 shares of Meteor Industries, Inc. common stock at a
price of $5.50 per share. The merger is subject to several conditions including
shareholder approval and regulatory approvals.
In addition, on October 28, 2000 activeIQ Technologies, Inc. entered into a
letter of intent to acquire 100% of the stock of Edge Technologies Incorporated.
The letter of intent states activeIQ Technologies, Inc. will issue 325,000
shares of activeIQ Technologies, Inc. common stock and pay $300,000 of cash. In
addition, if activeIQ Technologies, Inc. merges with a publicly traded company
within 120 days of the merger date, Edge Technologies Incorporated shareholders
will receive shares of common stock in the publicly traded company valued at
$893,750 and an additional $400,000 in cash. If, however, activeIQ Technologies,
Inc. does not merge with a public company within 120 days of the closing of the
proposed merger, then Edge Technologies Incorporated shareholders will be
entitled to another 325,000 shares of activeIQ Technologies, Inc. common stock
and $400,000 in cash. The acquisition of Edge Technologies Incorporated closed
in January 2001.
Following the proposed merger with activeIQ Technologies, Inc., Meteor
Industries, Inc, will own 100% of activeIQ Technologies, Inc. and Edge
Technologies Incorporated. The Pro Forma Unaudited Consolidated Statements give
effect to certain adjustments, including: (a) the issuance of common stock and
warrants, (b) allocation of purchase price associated with the Edge acquisition
to computer software and technology and related amortization, and (c) the
elimination of certain revenues and costs of Meteor Industries related to the
disposition of current operations.
The Pro Forma Unaudited Consolidated Financial Statements and accompanying
notes should be read in conjunction with the consolidated financial statements
and notes thereto appearing elsewhere or incorporated by reference in this
proxy. Since Meteor Industries, Inc. will be a shell company with only monetary
assets, the merger will be accounted for as the issuance of stock by activeIQ
Technologies, Inc. in exchange for monetary assets of Meteor Industries, Inc.
Accordingly, there will be no change in the recorded amount of activeIQ
Technologies, Inc. assets and liabilities. The monetary assets of the Company
that are acquired as a result of the merger will be recorded at their fair
market value and no goodwill will be recorded. The Pro Forma Unaudited
Consolidated Financial Statements do not purport to represent what the results
of operations or financial position of Meteor Industries, Inc. would actually
have been if the aforementioned transactions in fact had occurred on January 1,
1999 or on September 30, 2000 or at any future date.
64
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METEOR INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
ACTIVEIQ
TECHNOLOGIES, RECORD
EDGE INC. EDGE
METEOR ACTIVEIQ TECHNOLOGIES OFFERING TECHNOLOGIES
INDUSTRIES, INC. TECHNOLOGIES, INC. INCORPORATED CLOSING MERGER
---------------- ------------------ ------------ ------------- ------------
Current assets:
Cash and cash equivalents.............. $ 270 $ 1,690 $ 13 $1,067(A) $ (750)(B)
Restricted cash........................ 1,957 0 0 0 0
Stock subscription receivable.......... 0 0 0 0 0
Prepaid expenses....................... 612 62 0 0 0
Accounts and notes receivable and
inventory............................ 21,202 0 2 0 0
Deferred income taxes.................. 335 0 0 0 0
Accounts and notes receivable related
parties.............................. 2,385 0 0 0 0
------- ------- ---- ------ ------
Total current assets............. 26,761 1,752 15 1,067 (750)
------- ------- ---- ------ ------
Property and equipment, net............. 16,783 503 6 0 2,536(B)
------- ------- ---- ------ ------
Intangibles............................. 1,274 0 0 0 0
Notes receivable related party.......... 1,190 0 0 0 0
Investments in closely held
businesses............................. 1,495 0 0 0 0
Deposit and other assets................ 447 23 0 0 0
------- ------- ---- ------ ------
$47,950 $ 2,278 $ 21 $1,067 $1,786
======= ======= ==== ====== ======
Current liabilities:
Note payable -- bank................... $ 7,062 $ 99 $ 0 $ 0 $ 0
Notes payable -- stockholders.......... 0 293 0 0 0
Current portion of long-term debt....... 2,928 0 3 0 0
Accounts payable....................... 12,271 164 35 0 0
Accounts payable-related party......... 97 0 20 0 0
Accrued interest....................... 0 0 4 0 0
Accrued fuel taxes and accrued
expenses............................. 4,996 0 0 0 0
Accrued compensation................... 0 100 0 0 0
------- ------- ---- ------ ------
Total current liabilities........ 27,354 656 62 0 0
------- ------- ---- ------ ------
Long-term debt.......................... 8,350 0 0 0 0
Deferred taxes.......................... 2,606 0 0 0 0
Minority interest in subsidiaries....... 250 0 0 0 0
Stockholders' equity (deficit):
Capital stock.......................... 369 34 38 5(A) 7(B)
Additional paid-in-capital............. 5,577 4,596 0 1,062(A) 1,779(B)
Stock subscription receivable.......... 0 (363) 0 0 0
Deficit accumulated during the
development stage.................... 3,933 (2,656) (79) 0 0
Treasury stock......................... (489) 0 0 0 0
Deferred compensation.................. 0 (131) 0 0 0
Warrants............................... 0 142 0 0 0
------- ------- ---- ------ ------
Total stockholders' equity
(deficit)....................... 9,390 1,622 (41) 1,067 1,786
------- ------- ---- ------ ------
$47,950 $ 2,278 $ 21 $1,067 $1,786
======= ======= ==== ====== ======
Variance................................ -- -- -- -- --
PRE-MERGER
ADJUSTMENTS ELIMINATIONS PRO FORMA
----------- ------------ ---------
Current assets:
Cash and cash equivalents.............. 5,329(C) $ (200)(D) $ 7,419
Restricted cash........................ (1,957)(C) 0
Stock subscription receivable.......... 0 0
Prepaid expenses....................... (612)(C) 62
Accounts and notes receivable and
inventory............................ (21,202)(C) 2
Deferred income taxes.................. (335)(C) 0
Accounts and notes receivable related
parties.............................. (2,385)(C) 0
-------- ------- -------
Total current assets............. (21,162) (200) 7,483
-------- ------- -------
Property and equipment, net............. (16,783)(C) 3,045
-------- ------- -------
Intangibles............................. (1,274)(C) 0
Notes receivable related party.......... (1,190)(C) 0
Investments in closely held
businesses............................. (1,495)(C) 0
Deposit and other assets................ (447)(C) 23
-------- ------- -------
$(42,351) $ (200) $10,551
======== ======= =======
Current liabilities:
Note payable -- bank................... $ (7,062)(C) $ $ 99
Notes payable -- stockholders.......... 0 293
Current portion of long-term debt....... (2,928)(C) 3
Accounts payable....................... (12,271)(C) 199
Accounts payable-related party......... (97)(C) 20
Accrued interest....................... 0 4
Accrued fuel taxes and accrued
expenses............................. (4,996)(C) 0
Accrued compensation................... 0 100
-------- ------- -------
Total current liabilities........ (27,354) 718
-------- ------- -------
Long-term debt.......................... (8,350)(C) 0
Deferred taxes.......................... (2,606)(C) 0
Minority interest in subsidiaries....... (250)(C) 0
Stockholders' equity (deficit):
Capital stock.......................... 6(C) (371)(E) 88
Additional paid-in-capital............. 1,644(C) (200)(D) 13,242
Stock subscription receivable.......... 0 (1,216)(E) (363)
Deficit accumulated during the
development stage.................... (5,441)(C) 1,587 (2,656)
Treasury stock......................... 0 (489)
Deferred compensation.................. 0 (131)
Warrants............................... 0 142
-------- ------- -------
Total stockholders' equity
(deficit)....................... (3,791) (200) 9,833
-------- ------- -------
$(42,351) $ (200) $10,551
======== ======= =======
Variance................................ -- -- --
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METEOR INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
METEOR ACTIVEIQ EDGE TECHNOLOGIES EDGE TECHNOLOGIES PRO FORMA
INDUSTRIES, INC. TECHNOLOGIES, INC. INCORPORATED MERGER ADJUSTMENT ADJUSTMENTS PRO FORMA
---------------- ------------------ ----------------- ----------------- ----------- ---------
Revenues................ $ 155,211 $ 0 $ 60 $ 0 $(155,211)(G) $ 60
Cost of sales........... 130,417 0 0 0 (130,417)(G) 0
--------- ----- ---- ----- --------- ---------
Gross Profit............ 24,794 0 60 0 (24,794)(G) 60
Operating expenses...... 23,232 414 69 845(F) 23,232(G) 1,328
--------- ----- ---- ----- --------- ---------
Income (loss) from
operations............ 1,562 (414) (9) (845) (1,562)(G) (1,268)
Other income
(expense)............. (602) (48) (8) 0 602(G) (56)
--------- ----- ---- ----- --------- ---------
Income (loss) before
income taxes and
minority interest..... 960 (462) (17) (845) (960)(G) (1,324)
Income tax (benefit)
expense............... 210 0 0 0 (210)(G) 0
Minority interest....... 491 0 0 0 (491)(G) 0
--------- ----- ---- ----- --------- ---------
Net income (loss)....... $ 259 $(462) $(17) $(845) $ (259)(G) $ (1,324)
========= ===== ==== ===== ========= =========
Earnings (loss) per
share:
Basic................. $ 0.07 $ (0.15)
Diluted............... $ 0.07 $ (0.15)
Weighted average common
shares and common
share equivalents:
Basic................. 3,454,146 5,335,672(H) 8,789,819
Diluted............... 3,459,798 5,335,672(H) 8,795,471
65
71
METEOR INDUSTRIES, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
RECORD
ACTIVEIQ EDGE EDGE PRE-MERGER METEOR
TECHNOLOGIES, TECHNOLOGIES TECHNOLOGIES ACTIVEIQ INDUSTRIES, DIVEST PRE-MERGER
INC. INCORPORATED ACQUISITION TECHNOLOGIES INC. METEOR (K) METEOR
------------- ------------ ------------ ------------ ----------- ---------- ----------
Revenues............. $ 0 $ 58 $ 0 $ 58 $ 144,108 $(144,108) $ 0
Cost of sales........ 0 0 0 0 127,438 (127,438) 0
------- ---- ------- ------- ---------- --------- -------
Gross Profit......... 0 58 0 58 16,670 (16,670) 0
Operating expenses... 1,985 64 0 2,049 15,309 (15,309) 0
------- ---- ------- ------- ---------- --------- -------
Income (loss) from
operations......... (1,985) (6) 0 (1,991) 1,361 (1,361) 0
0
Other income
(expense).......... (35) (5) 0 (40) (1,697) 1,697 0
------- ---- ------- ------- ---------- --------- -------
Income (loss) before
income taxes and
minority
interest........... (2,020) (11) 0 (2,031) (336) 336 0
Income tax (benefit)
expense............ 0 0 0 0 (153) 153 0
Minority interest.... 0 0 0 0 368 (368) 0
------- ---- ------- ------- ---------- --------- -------
Net income (loss).... $(2,020) $(11) $ 0 $(2,031) $ (551) $ 551 $ 0
======= ==== ======= ======= ========== ========= =======
Earnings (loss) per
share:
Basic.............. $ (0.16)
Diluted............ $ (0.16)
Weighted average
common shares and
common share
equivalents:
Basic............ 3,527,509
Diluted.......... 3,527,509
PRO FORMA
ADJUSTMENTS PRO FORMA
----------- ---------
Revenues............. $ 0 $ 58
Cost of sales........ 0 0
------------- ----------
Gross Profit......... 0 58
Operating expenses... 644 (L) 2,693
------------- ----------
Income (loss) from
operations......... (644) (2,635)
Other income
(expense).......... 0 (40)
------------- ----------
Income (loss) before
income taxes and
minority
interest........... (644) (2,675)
Income tax (benefit)
expense............ 0 0
Minority interest.... 0 0
------------- ----------
Net income (loss).... $ (644) $ (2,675)
============= ==========
Earnings (loss) per
share:
Basic.............. $ (0.32)
Diluted............ $ (0.32)
Weighted average
common shares and
common share
equivalents:
Basic............ 4,743,006 (M) 8,270,515
Diluted.......... 4,743,006 (M) 8,270,515
66
72
METEOR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(A) Reflects acquisition of Edge Technologies Incorporated of activeIQ
Technologies, Inc. which occurred in January 2001.
Shares of activeIQ Technologies, Inc. issued to Edge
Technologies Incorporated shareholders.................... 325
Share price............................................... $ 2.75
--------
Total............................................. 893(a)
Cash issued to Edge Technologies Incorporated
shareholders........................................... (2) 750
--------
1,643
--------
Proposed Meteor Industries, Inc. common shares issued to
Edge Technologies, Inc. shareholders as a result of
Merger................................................. 196
Share price............................................... $ 4.56
--------
Total................................................ (1) 893(b)
--------
Grand total............................................... $ 2,536
========
Total common stock issued............................ $1,786(a)+(b)
========
(1) To record issuance of publicly traded Company stock pursuant to the
letter of intent with Edge Technologies Incorporated. Share price based
on closing price as of January 29, 2001.
(2) Includes issuance costs of $50.
(B) Reflects the closing of the Private Placement offering of activeIQ
Technologies, Inc. Total proceeds are as follows:
activeIQ Technologies, Inc. common shares to be issued...... 450
Share price................................................. $ 2.75
------
Total proceeds.................................... 1,238
Less: offering costs...................................... (171)
------
$1,067
======
(C) Reflect investment in activeIQ Technologies, Inc. which occurred in January
2001.
(D) To reflect proceeds of private offering conducted by Meteor to provide cash
for investment in activeIQ Technologies, Inc. which occurred in January
2001.
(E) Reflects sale of all current operations of Meteor Industries, Inc. pursuant
to Stock Purchase Agreement dated as of January 30, 2001, between Meteor
Industries, Inc. and Capco Energy, Inc. and the transactions contemplated
by that agreement, including the sale of substantially all the assets of
Meteor Industries, Inc. The Stock Purchase Agreement provides for a total
purchase price of $5.5 million. The estimated closing cost of the
transaction of $.75 million have been netted against the gross cash
resulting in net cash of $4.75 million.
(F) To record estimated legal, accounting and other costs of merger.
(G) To record transaction elimination. The adjustment to additional paid in
capital is as follows:
Total stockholders' equity of pre-merger Meteor Industries,
Inc....................................................... $6,120
Less: elimination of Meteor Industries, Inc's investment
in activeIQ
Technologies, Inc...................................... (1,100)
Less: estimated costs of merger........................... (200)
Less: reflect reclass of par value of stock issued........ (38)
------
Net....................................................... $4,782
======
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73
METEOR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(H) To reflect the reverse merger as if it had occurred on January 1, 1999.
Since Meteor Industries, Inc. will be a non-operating entity at the date of
the proposed merger, none of the revenues or expenses of Meteor Industries,
Inc. would have resulted had the proposed merger occurred on January 1,
1999. Accordingly, the adjustment reflects the removal of these revenue and
expense items.
(I) Reflects computer software and technology acquired in the Edge Technologies
Incorporated merger amortized on a straight-line basis over 3 years.
(J) Reflects issuance of shares of common stock to activeIQ Technologies, Inc.
shareholders in exchange for their shares of common stock pursuant to the
letter of intent. Also reflects issuance of shares of Meteor Industries,
Inc. common stock in connection with private placement offering. In
addition, reflects the subtraction of the impact of dilutive securities in
earnings per share since the pro forma results reflect a loss.
(K) To reflect the reverse merger as if it had occurred on January 1, 2000.
Since Meteor Industries, Inc. will be a non-operating entity at the date of
the proposed merger, none of the revenues or expenses of Meteor Industries,
Inc. would have resulted had the proposed merger occurred on January 1,
2000. Accordingly, the adjustment reflects the removal of these revenue and
expense items.
(L) Reflects computer software and technology acquired in the Edge Technologies
Incorporated merger amortized on a straight-line basis over 3 years for the
nine months ended September 30, 2000.
(M) Reflects issuance of shares of common stock to activeIQ Technologies, Inc.
shareholders in exchange for their shares of common stock pursuant to the
letter of intent. Also reflects issuance of shares of Meteor Industries,
Inc. common stock in connection with private placement offering. In
addition, reflects the subtraction of the impact of dilutive securities in
earnings per share since the pro forma results reflect a loss.
69
74
RIGHTS OF DISSENTING SHAREHOLDERS
Set forth below is a summary of dissenters' rights available to the
Company's shareholders relating to the proposals to be considered at the Special
Meeting. This summary is not intended to be a complete statement of applicable
Colorado law and is qualified in its entirety by reference to Article 113 of the
CBCA, set forth in its entirety as Appendix F.
THE COMPANY HAS RESERVED THE RIGHT TO TERMINATE THE ASSET SALE AGREEMENT IF
HOLDERS OF MORE THAN 3% OF THE OUTSTANDING SHARES OF THE COMPANY DISSENT FROM
THE SALE OF ASSETS AND SEEK PAYMENT FOR THEIR SHARES IN ACCORDANCE WITH THE
CBCA. SIMILARLY, A CONDITION TO THE CONSUMMATION OF THE MERGER AGREEMENT IS THAT
HOLDERS OF NO MORE THAN 3% OF THE COMPANY'S OUTSTANDING SHARES MAY DISSENT FROM
THE ASSET SALE, THE MERGER OR THE REINCORPORATION.
Right to Dissent. Shareholders of the Company are entitled to dissent from
any of the proposals discussed in this Proxy Statement and obtain payment of the
fair value of their shares if and when the Sale of Assets and/or Merger is
effectuated. A shareholder entitled to dissent and to obtain payment for the
shareholder's shares under Article 113 of the CBCA may not challenge the
corporate action (i.e. the Sale of Assets and/or Merger) creating the right to
dissent unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation
Under Section 7-113-103 of the CBCA, a record shareholder may asset
dissenter's rights as to fewer than all the shares registered in the record
shareholder's name only if the record shareholder dissents with respect to all
shares beneficially owned by any one person and causes the corporation to
receive written notice which states such dissent and the name, address and
federal taxpayer identification number, if any, of each person on whose behalf
the record shareholder asserts
Section 7-113-103(2) of the CBCA provides that a beneficial shareholder may
assert dissenters' rights as to the shares held on the beneficial shareholder's
behalf only if (a) the beneficial shareholder causes the corporation to receive
the record shareholder's written consent to the dissent no later than the time
the beneficial shareholder asserts dissenters' rights, and (b) the beneficial
shareholder dissents with respect to all shares beneficially owned by the
beneficial shareholder.
The Company will require that, when a record shareholder dissents with
respect to the shares held by any one or more beneficial shareholders, each such
beneficial shareholder must certify to the Company that beneficial shareholder
and the record shareholder or record shareholders of all shares owned
beneficially by the beneficial shareholder have asserted, or will timely assert,
dissenters' rights as to all such shares as to which there is no limitation on
the ability to exercise dissenters' rights.
Procedure for Exercise of Dissenters' Rights. The notice accompanying the
Proxy Statement states that shareholders are entitled to assert dissenters'
rights under Article 113 of the CBCA. A Company shareholder who wishes to assert
dissenters' rights must (a) cause the Company to receive, before the vote is
taken on the Asset Sale, reincorporation and/or Merger, written notice of the
shareholder's intention to demand payment for the shareholder's shares if the
Asset Sale, reincorporation and/or Merger is effectuated; and (b) not vote the
shares in favor of the Asset Sale, reincorporation and/or Merger. A SHAREHOLDER
WHO DOES NOT SATISFY THE FOREGOING REQUIREMENTS WILL NOT BE ENTITLED TO DEMAND
PAYMENT FOR HIS OR HER SHARES UNDER ARTICLE 113 OF THE CBCA.
If the Asset Sale, reincorporation and/or Merger is authorized, the Company
must give a written notice to dissenters who are entitled to demand payment for
their shares. The notice required to be given by the Company must be given no
later than 10 days after the effective date of the transactions and (a) state
that the Asset Sale, reincorporation and/or Merger was authorized and state the
effective date or proposed effective date; (b) inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after a payment
demand is received; (c) supply a form for demanding payment, which form will
request a dissenter to state an address to which payment is to be made; (d) set
the date by which the Company must receive the payment demand, which date must
not be less than 30 days after the date the notice is given; (e) state that if a
record shareholder dissents with respect to the shares held by any one or more
beneficial shareholders, each such beneficial shareholder must certify to the
Company that the beneficial shareholder and the record shareholder or record
shareholders of all shares owned beneficially by the beneficial shareholder have
asserted,
70
75
or will timely assert, dissenters' rights as to all such shares as to which
there is no limitation of the ability to exercise dissenters' rights; and (f) be
accompanied by a copy of Article 113 of the CBCA.
A shareholder who is given a dissenters' notice to assert dissenters'
rights and who wishes to exercise dissenters' rights must, in accordance with
the terms of the dissenters' notice, cause the Company to receive a payment
demand, which may be a payment demand form supplied by the Company, duly
completed, or some other acceptable writing. A shareholder who demands payment
in accordance with the foregoing retains all rights of a shareholder, except the
right to transfer the shares, until the effective date of the transaction, and
has only the right to receive payment for the shares after the effective date.
The demand for payment is irrevocable, except that if the effective date does
not occur within 60 days after the date set by the Company by which it must
receive the payment demand, the Company must release the transfer restrictions
imposed on uncertificated shares. If the effective date occurs more than 60 days
after the date set by the Company, by which it must receive the payment demand,
then the Company must send a new dissenters' notice. A SHAREHOLDER WHO DOES NOT
DEMAND PAYMENT AS REQUIRED BY THE DATE OR DATES SET IN THE DISSENTERS' NOTICE IS
NOT ENTITLED TO PAYMENT FOR HIS OR HER SHARES.
At the effective date or upon a receipt of a payment demand, whichever is
later, the Company will pay each dissenter who complied with the notice
requirements discussed above the Company's estimate of the fair value of the
dissenter's shares, plus accrued interest. Payment will be accompanied by the
Company's audited balance sheet as of the end of its most recent fiscal year, an
income statement for that year, an audited statement of changes in shareholders'
equity for that year and an audited statement of cash flow for that year, as
well as the latest available financial statements for the interim period, which
interim financial statements need not be audited. Payment will also be
accompanied by a statement of the Company's estimate of the fair value of the
shares and an explanation of how the interest was calculated, along with a
statement of the dissenter's right to demand payment if the dissenter is
dissatisfied with the payment and a copy of Article 113 of the CBCA.
If a dissenter is dissatisfied with the payment, the dissenter may give
notice to the Company in writing of the dissenter's estimate of fair value of
the dissenter's shares and of the amount of interest due and may demand payment
of such estimate, less any payment made prior to such notice, or the dissenter
may reject the Company's offer and demand payment of the fair value of the
shares and interest due if: (a) the dissenter believes that the amount paid or
offered is less than the fair value of the shares or that the interest was
incorrectly calculated; (b) the Company fails to make payment within 60 days
after the date set by the Company by which it must receive the payment demand;
or (c) the Company does not release the transfer restrictions imposed on
uncertificated shares, then the Company must send a new dissenters' notice. A
DISSENTER WAIVES THE RIGHT TO DEMAND PAYMENT UNDER THIS PARAGRAPH UNLESS THE
DISSENTER CAUSES THE COMPANY TO RECEIVE THE NOTICE REQUIRED WITHIN 30 DAYS AFTER
THE COMPANY MADE OR OFFERED PAYMENT FOR THE SHARES OF THE DISSENTER.
Judicial Appraisal of Shares. If a demand for payment made by a
dissatisfied dissenter as set forth above is unresolved, the Company may, within
60 days after receiving the payment demand, commence a proceeding and petition a
court to determine the fair value of the shares and accrued interest. If the
Company does not commence the proceeding within the 60-day period, it must pay
to each dissenter whose demand remains unresolved the amount demanded. The
Company must commence the proceeding described above in the District Court of
the City and County of Denver, Colorado. The Company must make all dissenters
whose demands remain unresolved parties to the proceeding as in an action
against their shares, and all parties must be served with a copy of the
petition. The jurisdiction of the court in which the proceeding is commenced is
plenary and exclusive. One or more persons may be appointed by the court as
appraisers to receive evidence and recommend a decision on the question of fair
value. The proceeding will be entitled to the same discovery rights as parties
in other civil proceedings. Each dissenter made a party to the proceeding will
be entitled to judgment for the amount, if any, by which the court finds the
fair value of the dissenter's shares, plus interest, exceeds the amount paid by
the Company, or the fair value, plus interest, of a dissenter's shares for which
the Company elected to withhold payment.
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76
The court in an appraisal proceeding will determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court will assess the costs against the Company,
except that the court may assess costs against all or some of the dissenters, in
the amount the court finds equitable, to the extent the court finds that
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the courts find equitable: (a) against
the Company and in favor of any dissenters if the court finds that the Company
did not substantially comply with the procedures for the exercise of dissenters'
rights set forth above; or (b) against either the Company or one or more
dissenters, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by Article 113 of the
CBCA. If the court finds that the services of counsel for any dissenter were of
substantial benefit to the other dissenters similarly situated, and that the
fees for those services should not be assessed against the Company, the court
may award to said counsel reasonable fees to be paid out of the amount awarded
to the dissenters who were benefited.
OTHER MATTERS
Management and the Board of Directors of the Company know of no matters to
be brought before the Meeting other than as set forth herein. However, if any
such other matters properly are presented to the shareholders for action at the
Meeting and any adjournments or postponements thereof, it is the intention of
the proxy holder named in the enclosed proxy to vote in his discretion on all
matters on which the shares represented by such proxy are entitled to vote.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of PricewaterhouseCoopers LLP, our independent public
accountants, are not expected to be present at the Meeting. Representatives of
PricewaterhouseCoopers LLP will, however, have the opportunity to make a
statement to be read at the Meeting if they desire to do so and will be
available to respond to appropriate questions submitted to them.
72
77
activeIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants.................... 73
Balance Sheets.............................................. 74
Statements of Operations.................................... 75
Statements of Stockholders' Equity (Deficit)................ 76
Statements of Cash Flows.................................... 77
Notes to Financial Statements............................... 78
73
78
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To activeIQ Technologies Inc.:
We have audited the accompanying balance sheets of activeIQ Technologies
Inc. (a Minnesota corporation in the development stage) as of December 31, 1998
and 1999, and the related statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1999, and for the period from inception (April 11, 1996) to
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of activeIQ Technologies Inc.
as of December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, and for
the period from inception (April 11, 1996) to December 31, 1999, in conformity
with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, the Company is a development stage enterprise with no significant
operating results to date. The factors discussed in Note 1 to the financial
statements raise a substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Arthur Andersen LLP
Minneapolis, Minnesota,
December 15, 2000
74
79
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1998 1999 2000
------------ ------------ -------------
(UNAUDITED)
ASSETS:
Current assets --
Cash and cash equivalents......................... $ 38,672 $ 409,917 $ 1,689,730
Available-for-sale securities..................... 25,522 -- --
Prepaid expenses.................................. -- -- 62,250
Due from stockholders............................. 7,820 -- --
--------- ---------- -----------
Total current assets......................... 72,014 409,917 1,751,980
Property and equipment, net.......................... -- 17,092 502,855
Other assets......................................... -- 46,655 23,217
--------- ---------- -----------
$ 72,014 $ 473,664 $ 2,278,052
========= ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities --
Bank line of credit............................... $ 241,827 $ 200,000 $ 98,596
Stockholder note payable, net of debt discount of
$7,125.......................................... -- -- 292,875
Accounts payable.................................. -- 88,592 164,544
Accrued compensation.............................. -- 713 100,000
--------- ---------- -----------
Total current liabilities.................... 241,827 289,305 656,015
--------- ---------- -----------
Commitments and contingencies (Notes 1 and 6)
Stockholders' equity (deficit)-
Capital stock, $.01 par value, 6,666,666 shares
authorized, 152,000, 373,626 and 3,405,206
common shares issued and outstanding............ 1,520 3,736 34,052
Additional paid-in capital........................ 1,480 1,144,385 4,595,789
Stock subscription receivables.................... -- (328,750) (362,500)
Deferred compensation............................. -- -- (131,250)
Warrants.......................................... -- -- 141,912
Deficit accumulated during the development
stage........................................... (173,031) (635,012) (2,655,966)
Accumulated other comprehensive income............ 218 -- --
--------- ---------- -----------
Total stockholders' equity (deficit)......... (169,813) 184,359 1,622,037
--------- ---------- -----------
$ 72,014 $ 473,664 $ 2,278,052
========= ========== ===========
The accompanying notes are an integral part of these balance sheets.
75
80
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
PERIOD FROM
APRIL 11,
YEAR ENDED 1996 NINE MONTHS NINE MONTHS
------------------------------------------ (INCEPTION) TO ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999 1999 2000
------------ ------------ ------------ -------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
REVENUES.................... $ -- $ -- $ -- $ -- $ -- $ --
-------- --------- --------- --------- -------- -----------
OPERATING EXPENSES:
Selling, general and
administrative.......... 5,177 12,305 413,982 439,771 56,407 1,555,459
Product development....... 2,500 -- -- 12,149 -- 430,023
-------- --------- --------- --------- -------- -----------
Total operating
expenses.......... 7,677 12,305 413,982 451,920 56,407 1,985,482
-------- --------- --------- --------- -------- -----------
Loss from
operations........ (7,677) (12,305) (413,982) (451,920) (56,407) (1,985,482)
-------- --------- --------- --------- -------- -----------
OTHER INCOME (EXPENSE):
Other income.............. 1,797 86,613 -- 88,410 -- 790
Interest expense.......... (18,287) (33,076) (24,445) (75,808) (19,761) (36,262)
Gain (loss) on
available-for-sale
securities.............. 32,334 (185,724) (23,554) (195,694) (23,554) --
-------- --------- --------- --------- -------- -----------
Total other income
(expense)......... 15,844 (132,187) (47,999) (183,092) (43,315) (35,472)
-------- --------- --------- --------- -------- -----------
Net income (loss)... $ 8,167 $(144,492) $(461,981) $(635,012) $(99,722) $(2,020,954)
======== ========= ========= ========= ======== ===========
BASIC AND DILUTED NET INCOME
(LOSS) PER COMMON SHARE... $ 0.04 $ (0.79) $ (1.92) $ (2.92) $ (0.50) $ (1.77)
======== ========= ========= ========= ======== ===========
BASIC AND DILUTED WEIGHTED
AVERAGE COMMON SHARES
OUTSTANDING............... 228,000 183,667 240,394 217,353 201,134 1,140,790
======== ========= ========= ========= ======== ===========
PERIOD FROM
APRIL 11,
1996
(INCEPTION) TO
SEPTEMBER 30,
2000
--------------
(UNAUDITED)
REVENUES.................... $ --
-----------
OPERATING EXPENSES:
Selling, general and
administrative.......... 1,995,230
Product development....... 442,172
-----------
Total operating
expenses.......... 2,437,402
-----------
Loss from
operations........ (2,437,402)
-----------
OTHER INCOME (EXPENSE):
Other income.............. 89,200
Interest expense.......... (112,070)
Gain (loss) on
available-for-sale
securities.............. (195,694)
-----------
Total other income
(expense)......... (218,564)
-----------
Net income (loss)... $(2,655,966)
===========
BASIC AND DILUTED NET INCOME
(LOSS) PER COMMON SHARE... $ (5.56)
===========
BASIC AND DILUTED WEIGHTED
AVERAGE COMMON SHARES
OUTSTANDING............... 478,094
===========
The accompanying notes are an integral part of these financial statements.
76
81
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
DEFICIT
ACCUMULATED
COMMON ADDITIONAL STOCK DURING THE
STOCK PAID-IN SUBSCRIPTION DEFERRED DEVELOPMENT
SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION WARRANTS STAGE
--------- ------- ---------- ------------ ------------ -------- -----------
ISSUANCE OF COMMON STOCK IN APRIL 1996 FOR
CASH AT $.02 PER SHARE................... 228,000 $2,280 $ 720 $ -- $ -- $ -- $ --
Net loss................................. -- -- -- -- -- -- (36,706)
--------- ------- ---------- --------- --------- -------- -----------
BALANCE, December 31, 1996................ 228,000 2,280 720 -- -- -- (36,706)
Unrealized loss on available-for-sale
securities............................. -- -- -- -- -- -- --
Net income............................... -- -- -- -- -- -- 8,167
Comprehensive loss....................... -- -- -- -- -- -- --
--------- ------- ---------- --------- --------- -------- -----------
BALANCE, December 31, 1997................ 228,000 2,280 720 -- -- -- (28,539)
Repurchase of shares from shareholder in
May 1998............................... (76,000) (760) 760 -- -- -- --
Unrealized gain on available-for-sale
securities............................. -- -- -- -- -- -- --
Net loss................................. -- -- -- -- (144,492)
Comprehensive income..................... -- -- -- -- -- -- --
--------- ------- ---------- --------- --------- -------- -----------
BALANCE, December 31, 1998................ 152,000 1,520 1,480 -- -- -- (173,031)
Issuance of common stock in May 1999 in
exchange for intellectual property..... 83,333 833 61,667 -- -- -- --
Capital contribution from shareholders in
August 1999............................ -- -- 47,180 -- -- -- --
Issuance of common stock in August
through September 1999 at $1.50 per
share.................................. 88,266 883 131,517 -- -- -- --
Issuance of common stock in October 1999
for services at $1.50 per share........ 27,027 270 40,271 -- -- -- --
Issuance of common stock in October and
November 1999 at $37.50 per share...... 23,000 230 862,270 (328,750) -- -- --
Unrealized loss on available-for-sale
securities............................. -- -- -- -- -- -- --
Net loss................................. -- -- -- -- -- -- (461,981)
Comprehensive loss....................... -- -- -- -- -- -- --
--------- ------- ---------- --------- --------- -------- -----------
BALANCE, December 31, 1999................ 373,626 3,736 1,144,385 (328,750) -- -- (635,012)
Issuance of common stock in March 2000 at
$37.50 per share (unaudited)........... 4,667 47 174,953 -- -- -- --
Issuance of warrants in June 2000 in
payment of accounts payable
(unaudited)............................ -- -- -- -- -- 22,682 --
Issuance of common stock in June 2000 at
$.38 per share (net of offering costs
of $10,000) (unaudited)................ 1,789,633 17,896 652,966 16,250 -- -- --
Conversion of accounts payable to common
stock in June 2000 at $.38 per share
(unaudited)............................ 216,216 2,162 78,919 -- -- -- --
Issuance of options as part of severance
in June 2000 (unaudited)............... -- -- 25,800 -- -- -- --
Issuance of common stock in July 2000 for
assets at $2.50 per share
(unaudited)............................ 151,200 1,512 376,488 -- -- -- --
Issuance of common stock in August
through September 2000 at $2.75 per
share (net of offering costs of
$311,169) (unaudited).................. 749,864 7,499 1,638,478 -- -- 104,980 --
Issuance of common stock in September
2000 at $2.75 per share to director
(unaudited)............................ 100,000 1,000 274,000 (50,000) -- -- --
Issuance of warrants in August 2000 in
conjunction with stockholder note
payable (unaudited).................... -- -- -- -- -- 14,250 --
Conversion of notes payable to common
stock in September 2000 at $2.75 per
share (unaudited)...................... 20,000 200 54,800 -- -- -- --
Deferred compensation related to
September 2000 option grants
(unaudited)............................ -- -- 175,000 -- (175,000) -- --
Deferred compensation expense
(unaudited)............................ -- -- -- -- 43,750 -- --
Net loss (unaudited)..................... -- -- -- -- -- (2,020,954)
--------- ------- ---------- --------- --------- -------- -----------
BALANCE, September 30, 2000 (unaudited)... 3,405,206 $34,052 $4,595,789 $(362,500) $(131,250) $141,912 $(2,655,966)
========= ======= ========== ========= ========= ======== ===========
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
INCOME (LOSS) TOTAL INCOME
------------- ----------- -------------
ISSUANCE OF COMMON STOCK IN APRIL 1996 FOR
CASH AT $.02 PER SHARE................... $ -- $ 3,000
Net loss................................. -- (36,706)
-------- -----------
BALANCE, December 31, 1996................ -- (33,706)
Unrealized loss on available-for-sale
securities............................. (28,135) (28,135) $ (28,135)
Net income............................... -- 8,167 8,167
-------------
Comprehensive loss....................... -- -- $ (19,968)
-------- ----------- =========
BALANCE, December 31, 1997................ (28,135) (53,674)
Repurchase of shares from shareholder in
May 1998............................... -- --
Unrealized gain on available-for-sale
securities............................. 28,353 28,353 $ 28,353
Net loss................................. -- (144,492) (144,492)
-------------
Comprehensive income..................... -- -- $(116,139)
-------- ----------- =========
BALANCE, December 31, 1998................ 218 (169,813)
Issuance of common stock in May 1999 in
exchange for intellectual property..... -- 62,500
Capital contribution from shareholders in
August 1999............................ -- 47,180
Issuance of common stock in August
through September 1999 at $1.50 per
share.................................. -- 132,400
Issuance of common stock in October 1999
for services at $1.50 per share........ -- 40,541
Issuance of common stock in October and
November 1999 at $37.50 per share...... -- 533,750
Unrealized loss on available-for-sale
securities............................. (218) (218) $ (218)
Net loss................................. -- (461,981) (461,981)
-------------
Comprehensive loss....................... -- -- $(462,199)
-------- ----------- =========
BALANCE, December 31, 1999................ -- 184,359
Issuance of common stock in March 2000 at
$37.50 per share (unaudited)........... -- 175,000
Issuance of warrants in June 2000 in
payment of accounts payable
(unaudited)............................ -- 22,682
Issuance of common stock in June 2000 at
$.38 per share (net of offering costs
of $10,000) (unaudited)................ -- 687,112
Conversion of accounts payable to common
stock in June 2000 at $.38 per share
(unaudited)............................ -- 81,081
Issuance of options as part of severance
in June 2000 (unaudited)............... -- 25,800
Issuance of common stock in July 2000 for
assets at $2.50 per share
(unaudited)............................ -- 378,000
Issuance of common stock in August
through September 2000 at $2.75 per
share (net of offering costs of
$311,169) (unaudited).................. -- 1,750,957
Issuance of common stock in September
2000 at $2.75 per share to director
(unaudited)............................ -- 225,000
Issuance of warrants in August 2000 in
conjunction with stockholder note
payable (unaudited).................... -- 14,250
Conversion of notes payable to common
stock in September 2000 at $2.75 per
share (unaudited)...................... -- 55,000
Deferred compensation related to
September 2000 option grants
(unaudited)............................ -- --
Deferred compensation expense
(unaudited)............................ -- 43,750
Net loss (unaudited)..................... -- (2,020,954)
-------- -----------
BALANCE, September 30, 2000 (unaudited)... $ -- $ 1,622,037
======== ===========
The accompanying notes are an integral part of these financial statements.
77
82
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
PERIOD FROM
PERIOD FROM NINE MONTHS NINE MONTHS APRIL 11, 1996
APRIL 11, 1996 ENDED ENDED (INCEPTION) TO
YEAR ENDED DECEMBER 31, (INCEPTION) TO SEPTEMBER 10, SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- DECEMBER 31, 1999 2000 2000
1997 1998 1999 1999 (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- --------- -------------- ------------- ------------- --------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)......... $ 8,167 $(144,492) $(461,981) $(635,012) $(99,722) $(2,020,954) $(2,655,966)
Adjustments to reconcile
net income (loss) to
cash flows from
operating activities --
Depreciation and
amortization.......... -- -- 20,833 20,833 -- 57,188 78,021
Realized (gain) loss on
sale of
available-for-sale
securities............ (32,334) 185,724 23,554 195,694 23,554 -- 195,694
Issuance of options as
part of severance..... -- -- -- -- -- 25,800 25,800
Common stock issued for
services.............. -- -- 40,541 40,541 -- 225,000 265,541
Deferred compensation
expense............... -- -- -- -- -- 43,750 43,750
Amortization of original
issue discount........ -- -- -- -- -- 7,125 7,125
Changes in operating assets
and liabilities --........
Prepaid expenses.......... -- -- -- -- -- (15,000) (15,000)
Accounts payable.......... -- -- 88,592 88,592 -- 179,715 268,307
Accrued compensation...... -- -- 713 713 -- 99,287 100,000
Other assets.............. -- -- (4,988) (4,988) -- -- (4,988)
--------- --------- --------- --------- -------- ----------- -----------
Cash flows from
operating
activities........ (24,167) 41,232 (292,736) (293,627) (76,168) (1,398,089) (1,691,716)
--------- --------- --------- --------- -------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of
available-for-sale
securities.............. (331,338) (20,875) -- (370,963) -- -- (370,963)
Proceeds from sale of
available-for-sale
securities.............. 232,283 132,253 1,750 366,286 1,750 -- 366,286
Purchases of property and
equipment............... -- -- (17,092) (17,092) -- (188,763) (205,855)
--------- --------- --------- --------- -------- ----------- -----------
Cash flows from
investing
activities........ (99,055) 111,378 (15,342) (21,769) 1,750 (188,763) (210,532)
--------- --------- --------- --------- -------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net increase (decrease) in
bank line of credit..... 174,328 (182,501) (41,827) 200,000 (41,827) (101,404) 98,596
Net increase (decrease) in
stockholder note
payable................. 5,184 -- 55,000 (143,837) 55,000 355,000 211,163
Proceeds from sale of
common stock warrants... -- -- -- -- -- 22,682 22,682
Proceeds from sale of
common stock............ -- -- 666,150 669,150 108,650 2,613,069 3,282,219
--------- --------- --------- --------- -------- ----------- -----------
Cash flows from
financing
activities........ 179,512 (182,501) 679,323 725,313 121,823 2,866,665 3,591,978
--------- --------- --------- --------- -------- ----------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS...... 56,290 (29,891) 371,245 409,917 47,405 1,279,813 1,689,730
CASH AND CASH EQUIVALENTS,
beginning of period....... 12,273 68,563 38,672 -- 38,672 409,917 --
--------- --------- --------- --------- -------- ----------- -----------
CASH AND CASH EQUIVALENTS,
end of period............. $ 68,563 $ 38,672 $ 409,917 $ 409,917 $ 86,077 $ 1,689,730 $ 1,689,730
========= ========= ========= ========= ======== =========== ===========
SUPPLEMENTAL CASH FLOWS
INFORMATION:
Cash paid for interest.... $ 18,287 $ 33,076 $ 24,445 $ 75,808 $ 19,761 $ 33,698 $ 109,506
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of accounts
payable to common
stock................... -- -- -- -- -- 81,081 81,081
Issuance of warrants in
payment of accounts
payable................. -- -- -- -- -- 22,682 22,682
Conversion of notes
payable to common
stock................... -- -- -- -- -- 55,000 55,000
Issuance of common stock
for equipment........... -- -- -- -- -- 378,000 378,000
Issuance of stockholder
notes in exchange for
available-for-sale
securities.............. 150,000 -- -- 150,000 -- -- 150,000
Issuance of common stock
in exchange for
intellectual property... -- -- 62,500 62,500 -- -- 62,500
Receipt of
available-for-sale
securities for payment
on stockholder notes.... -- 142,180 -- 142,180 -- -- 142,180
Issuance of common stock
to director............. -- -- -- -- -- 225,000 225,000
Purchase of common stock
with nonrecourse note
receivable.............. -- -- 312,500 312,500 -- -- --
Common stock issued in
exchange for
subscription
receivable.............. -- -- 16,250 16,250 -- 50,000 66,250
The accompanying notes are an integral part of these financial statements.
78
83
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
activeIQ Technologies Inc. (the Company) was incorporated in Minnesota on
April 11, 1996, and is considered a development stage company. The Company was
formed to develop and provide Internet commerce application software and
services. Since its inception, the Company's efforts have been devoted to the
development of its principal product and raising capital.
The Company is in the development stage and has yet to generate any
significant revenues. Substantial time may pass before the Company realizes
significant revenue, if any. Further, during the period required to develop
significant revenue, the Company may require additional funds that may not be
available. The Company is subject to risks and uncertainties common to growing
technology-based companies, including rapid technological change, growth and
commercial acceptance of the Internet, dependence on suppliers and users for
product, new product development, new product introductions and other activities
of competitors, dependence on key personnel, security and privacy issues,
dependence on strategic relationships and limited operating history.
The accompanying financial statements have been prepared on the basis that
the Company will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of business. As
shown in the accompanying financial statements, the Company has incurred
$2,655,966 in cumulative losses since inception. This factor creates an
uncertainty about the Company's ability to continue as a going concern.
Management plans to raise additional capital through the issuance of capital
stock. Such capital may not be available or, if available, may not be available
on terms acceptable to the Company. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Interim financial statements
The balance sheet as of September 30, 2000 and the related statements of
operations and cash flows for the nine months ended September 30, 1999 and 2000,
and the period from inception (April 11, 1996) to September 30, 2000, and the
statement of stockholders' equity for the nine months ended September 30, 2000,
are unaudited. Such unaudited statements have been prepared on the same basis as
the audited financial statements and in the opinion of management include all
adjustments (consisting of only normal recurring adjustments) necessary for the
fair presentation of the results for the interim periods presented. The results
of operations for the unaudited nine months ended September 30, 2000, are not
necessarily indicative of the results that may be expected for the entire 2000
fiscal year.
Cash and cash equivalents
The Company includes as cash equivalents certificates of deposit and all
other investments with maturities of three months or less when purchased which
are readily convertible into known amounts of cash. The Company maintains its
cash in high-quality financial institutions. The balances, at times, may exceed
federally insured limits.
Available-for-sale securities
During the years ended December 31, 1997, 1998 and 1999, the Company sold
certain available-for-sale securities. For purpose of determining gross realized
gains, the cost of available-for-sale securities is based on specific
identification.
79
84
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Property and equipment
Property and equipment are recorded at cost. Depreciation is provided for
using the straight-line method over periods ranging from 3 to 10 years.
Maintenance, repairs and minor renewals are expensed when incurred. Property and
equipment consists of the following:
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1998 1999 2000
------------ ------------ -------------
(UNAUDITED)
Computer equipment............................. $-- $ 7,293 $444,784
Furniture and equipment........................ -- 9,799 76,071
Accumulated depreciation....................... -- -- (18,000)
--- ------- --------
Net property and equipment........... $-- $17,092 $502,855
=== ======= ========
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Software development costs
Effective January 1, 1999, the Company implemented Statement of Position
(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." Pursuant to SOP 98-1, software development costs are expensed
during the preliminary project stage. For the years ended December 31, 1997,
1998 and 1999, and the nine months ended September 30, 2000, the Company
expensed all software or other development costs as research and development
since such costs were incurred during the preliminary project stage.
Income taxes
The Company accounts for income taxes using the asset and liability
approach, which requires the recognition of deferred tax assets and liabilities
for the tax consequences of temporary differences by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
Deferred tax assets are reduced by a valuation allowance to the extent that
realization is not assured.
Net loss per common share
Basic loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the year.
Basic and diluted loss per share is the same as there were no potential dilutive
securities outstanding in 1997 and the Company recorded a net loss in all
subsequent periods. Options and warrants totaling 0, 56,997, 46,664 and
1,261,999 for the years ended December 31, 1998 and 1999 and the nine months
ended September 30, 1999 and 2000, respectively, were excluded from the
computation of diluted earnings per share as their effect is antidilutive.
Comprehensive income
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Comprehensive income consists of the Company's net income (loss) and net
80
85
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
unrealized gain on available-for-sale securities and is presented in the
statement of stockholders' equity (deficit). SFAS No. 130 only requires
additional disclosures in the financial statements; it does not affect the
Company's financial position or results of operations.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Ultimate results could differ from those estimates.
Derivatives
On January 1, 1999, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts, be
recorded on the balance sheet at fair value. As the Company does not currently
engage or plan to engage in derivative or hedging activities, the adoption of
SFAS No. 133 had no impact to the Company's results of operations, financial
position or cash flows.
2. BANK LINE OF CREDIT
The Company had a $200,000 revolving line of credit with a bank which
expired May 2000. Prior to February 1999, the Company had a similar line with a
limit of $300,000. Borrowings under the revolving line of credit accrued
interest at prime plus 1 percent (9.5 percent at December 31, 1999). Outstanding
borrowings were $241,827 and $200,000 at December 31, 1998 and 1999. In June
2000, the Company paid down a portion of the revolving line of credit and
refinanced the balance of $100,000 under a term note with the same bank which is
due June 2001. The term note requires monthly principal and interest payments of
$1,358. Borrowings under the term note accrue interest at prime plus 1 percent
(10.5 percent at September 30, 2000) and are personally guaranteed by one of the
Company's stockholders. Outstanding borrowings were $98,596 at September 30,
2000.
3. STOCKHOLDER NOTE PAYABLE
In August 2000, one of the Company's stockholders advanced the Company
$300,000 under a promissory note which is due on October 31, 2001. The note
bears interest at 8 percent and can be converted to equity in the Company's next
financing and at the holder's option at the offering price per share of such
financing. In conjunction with the promissory note, the stockholder was granted
a warrant to purchase 20,000 shares of the Company's common stock at $2.75 per
share. The Company recorded original issue discount of $14,250, which is being
amortized to interest expense through October 31, 2001.
4. INCOME TAXES
Through December 31, 1999, the Company generated a net operating loss for
tax reporting purposes of approximately $326,000, which, if not used, will begin
to expire in 2019. Future changes in the ownership of the Company may place
limitations on the use of this net operating loss carryforward. The Company has
recorded a full valuation allowance against its deferred tax asset, which
consists primarily of operating loss carryforwards, due to the uncertainty of
realizing the related benefit.
81
86
ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDERS' EQUITY
Stock splits
In May 1999, the Company declared a 1,140-for-1 stock split. In June 2000,
the Company declared a 1-for-15 reverse stock split. The stock splits have been
retroactively reflected in the accompanying financial statements.
Common stock sales
In May 1999, the Company issued 83,333 shares of common stock valued at
$.75 per share in exchange for intellectual property. The intellectual property
is recorded in other assets in the accompanying balance sheet and is being
amortized over 24 months.
During August through September 1999, the Company sold 88,266 shares of
common stock through a private placement, resulting in $132,400 of net proceeds.
During November 1999 and March 2000, the Company sold an additional 14,667 and
4,667 shares of common stock, resulting in net proceeds of $533,750 and
$175,000, respectively.
In June 2000, the Company conducted a rights offering whereby existing
shareholders purchased 1,789,633 shares of common stock for net proceeds of
$687,112.
During August through September 2000, the Company sold 749,864 shares of
common stock in a private placement for net proceeds of $1,750,957.
Nonrecourse note receivable
In October 1999, a director of the Company purchased 8,333 shares of the
Company's common stock at $37.50 per share in exchange for a nonrecourse note
totaling $312,500. The note is due and payable in full 90 days following the
date the individual ceases to be a director of the Company and is recorded as
stock subscription receivable on the accompanying balance sheet. In the event
that the director ceases to be a member of the Company's board of directors
through October 2001, the Company shall have the option to repurchase up to
3,333 shares of the common stock held by the director for $37.50 per share.
Warrants
In June 2000, the Company issued 22,682 warrants to purchase common stock
at $1.00 per share as payment for $22,682 of accounts payable to the law firm
discussed in Note 6.
In addition to the warrants discussed above and in Note 3, the Company has
issued warrants through September 30, 2000 to purchase 97,320 shares of common
stock at exercise prices ranging from $2.75 to $60.00 per share primarily in
conjunction with certain financings. The fair value of these warrants has been
recorded as a separate caption in stockholders' equity. The warrants expire
through July 2007.
Stock option plan
The Company has a 1999 Stock Option Plan and 2000 Director Stock Option
Plan (the Plans), pursuant to which options to acquire an aggregate of 1,550,000
shares of the Company's common stock may be granted as determined by the board
of directors. Stock options, stock appreciation rights, restricted stock and
other stock and cash awards may be granted under the Plans. In general, options
vest over a period of approximately three years and expire 10 years from the
date of grant.
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ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Information regarding the Company's stock options is summarized below:
WEIGHTED
AVERAGE EXERCISE RANGE OF OPTION
SHARES PRICE EXERCISE PRICE
--------- ---------------- ---------------
Outstanding at December 31, 1998.............. -- $ -- $ --
Granted..................................... 46,997 29.52 15.00-37.50
Canceled or expired......................... -- -- --
Exercised................................... -- -- --
--------- ------ ------------
Outstanding at December 31, 1999.............. 46,997 29.52 15.00-37.50
Granted (unaudited)......................... 1,105,000 1.24 1.00-2.75
Canceled or expired (unaudited)............. (20,000) 37.50 37.50
Exercised (unaudited)....................... -- -- --
--------- ------ ------------
Outstanding at September 30, 2000............. 1,131,997 $ 1.78 $ 1.00-37.50
========= ====== ============
Options exercisable at September 30, 2000..... 310,664 $ 2.58 $ 1.00-37.50
========= ====== ============
Options outstanding at December 31, 1999 have a weighted average remaining
contractual life of 3.39 years. Options outstanding at September 30, 2000 have a
weighted average remaining contractual life of 9.78 years.
The Company recorded deferred compensation for the difference between the
exercise price and the deemed fair value of the Company's common stock on
options to purchase 100,000 shares at exercise prices of $1.00 in September
2000. The Company has recorded a deferred compensation charge of $175,000
related to such options, which will be amortized over a three-year vesting
period. The Company recognized $43,750 of deferred compensation expense during
the nine months ended September 30, 2000.
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, the Company accounts for
its stock option plan in accordance with Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB Opinion
No. 25, no compensation expense is recognized if the exercise price of the
employee stock option or warrant equals the market price on the grant date. Had
compensation costs been recognized based upon the fair value of options at the
grant date consistent with the provisions of SFAS No. 123, the Company's results
would have been as follows:
DECEMBER 31
------------------------------
1997 1998 1999
------ --------- ---------
Net loss:
As reported........................................ $8,167 $(144,492) $(461,981)
Pro forma.......................................... 8,167 (144,492) (475,480)
Basic and diluted net loss per share:
As reported........................................ 0.04 (0.79) (1.92)
Pro forma.......................................... 0.04 (0.79) (1.98)
The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions:
risk-free interest rate of 6.5 percent, expected life of five years, expected
dividend yield of 0 percent and expected volatility of 0 percent. The weighted
average fair value of options granted was $1.15 for 1999.
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ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases space for its activities under a lease which expires in
December 2000. The lease is renewable for an additional one-year term as defined
in the lease. Monthly base rent including utilities is $4,988. Rent expense was
$44,888 for the nine months ended September 30, 2000.
The Company entered a lease for its administrative office under a sublease
which expires in February 2001. Monthly base rent is $5,000 and the Company is
required to pay the sublandlord its pro rata share of operating expenses. Rent
expense was $2,500 for the nine months ended September 30, 2000.
Employment agreements
The Company has entered into employment agreements with two of its
officers. One agreement requires salary of $100,000 commencing upon the
completion of a private placement offering of at least $2,500,000 and a payment
of $250,000 upon completion of an initial public offering of at least
$10,000,000. The other agreement requires annual compensation of $100,000 upon
the completion of a private placement offering of at least $2,500,000. The
Company completed a $2,600,000 offering in December 2000 which will cause the
compensation element of the officers' salaries to commence.
Related-party transactions
The law firm of one of the Company's stockholders provides legal services
to the Company. Total cost incurred was $0, $0, $48,580, $0 and $9,782 for the
years ended December 31, 1997, 1998 and 1999, and the nine months ended
September 30, 1999 and 2000, respectively. Accounts payable to the same
stockholder was $0, $35,049 and $4,022 at December 31, 1998 and 1999, and
September 30, 2000, respectively.
The Company's $300,000 promissory note discussed in Note 3 was borrowed
from by a stockholder of the Company. In addition, in July 2000 the Company
purchased software and related maintenance from this stockholder in exchange for
the issuance of 151,200 shares of the Company's common stock valued at $2.50 per
share.
7. SUBSEQUENT EVENTS
Mergers
On January 12, 2001, the Company completed its acquisition of Edge
Technologies Incorporated by merging a wholly owned subsidiary of the Company
with and into Edge Technologies Incorporated. In connection with this
transaction, the Company issued 325,000 shares of its common stock and $300,000
of cash to the former shareholders of Edge Technologies Incorporated. The merger
agreement further provides that if the Company merges with a publicly traded
company within 120 days of the merger date, the former Edge Technologies
Incorporated shareholders will receive shares of common stock in the publicly
traded company valued at $893,750 and $400,000 in cash. If, however, the Company
does not merge with a public company within 120 days of the closing of the
proposed merger, then the former Edge Technologies Incorporated shareholders
will be entitled to another 325,000 shares of the Company's common stock and
$400,000 in cash.
In October 2000, the Company also entered into a letter of intent to merge
with and into a wholly owned subsidiary of Meteor Industries, Inc., a publicly
traded company. The agreement is subject to approval of the shareholders and
boards of directors of both companies, regulatory review and due diligence.
Pending these approvals, the completion of the merger is expected in early 2001.
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ACTIVEIQ TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Licensing agreement
In December 2000, the Company modified its software licensing agreement
with one of its shareholders and entered into a reseller arrangement which
allows the Company to resell the third party's software. In conjunction with the
agreement, the Company paid $150,000 in cash and issued 127,273 shares of common
stock valued at $2.75 per share as consideration for a nonrefundable, prepaid
minimum royalty. Royalties payable under the reseller agreement will be applied
to this balance.
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APPENDIX B
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ACTIVEIQ TECHNOLOGIES, INC.,
A MINNESOTA CORPORATION,
METEOR INDUSTRIES, INC.,
A COLORADO CORPORATION,
AND
MI MERGER, INC.,
A MINNESOTA CORPORATION
January 11, 2001
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
91
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.................................................. B-1
ARTICLE II MERGER...................................................... B-6
2.1 Reincorporation Merger...................................... B-6
2.2 Effect of Merger............................................ B-6
2.3 Effect on AIQ Capital Stock and Merger Sub Capital Stock.... B-7
2.4 Rights of Holders of AIQ Capital Stock...................... B-8
2.5 Procedure for Exchange of AIQ Common Stock.................. B-9
2.6 Dissenting Shares........................................... B-10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AIQ...................... B-11
3.1 Organization and Qualification.............................. B-11
3.2 Authority Relative to this Agreement; Non-Contravention..... B-11
3.3 Capitalization.............................................. B-12
3.4 Financial Statements........................................ B-12
3.5 Litigation.................................................. B-12
3.6 No Brokers or Finders....................................... B-13
3.7 Absence of Undisclosed Liabilities.......................... B-13
3.8 No Material Adverse Change.................................. B-13
3.9 Leased Premises............................................. B-13
3.10 Tax Matters................................................. B-14
3.11 Contracts and Commitments................................... B-14
3.12 Intellectual Property Rights................................ B-15
3.13 Employees................................................... B-18
3.14 Employee Benefit Plans...................................... B-19
3.15 Insurance................................................... B-19
3.16 Affiliated Transactions..................................... B-19
3.17 Compliance with Laws; Permits............................... B-20
3.18 Environmental Matters....................................... B-20
3.19 Absence of Certain Developments............................. B-22
3.20 Disclosure.................................................. B-22
3.21 Proxy Statement............................................. B-22
3.22 Securities Act Sales........................................ B-23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MI........................ B-23
4.1 Organization and Qualification.............................. B-23
4.2 Authority Relative to This Agreement; Non Contravention..... B-23
4.3 Capitalization.............................................. B-24
4.4 Exchange Act Reports........................................ B-24
4.5 Subsidiaries................................................ B-25
4.6 Absence of Certain Developments............................. B-25
4.7 Absence of Undisclosed Liabilities.......................... B-26
4.8 No Material Adverse Change.................................. B-26
4.9 Litigation.................................................. B-26
4.10 No Brokers or Finders....................................... B-26
4.11 Proxy Statement............................................. B-26
4.12 Validity of the Surviving Company Common Stock.............. B-27
4.13 Tax Matters................................................. B-27
4.14 Contracts and Commitments................................... B-27
4.15 Intellectual Property....................................... B-28
4.16 Employees................................................... B-28
4.17 Employee Benefit Plans...................................... B-28
4.18 Insurance................................................... B-29
4.19 Affiliate Transactions...................................... B-29
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4.20 Control of Subsidiaries..................................... B-30
4.21 Compliance with Laws, Permits............................... B-30
4.22 Environmental Matters....................................... B-30
4.23 Disclosure.................................................. B-31
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER....................... B-32
5.1 Conduct of Business by MI................................... B-32
5.2 Conduct of Business by AIQ.................................. B-32
ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS......................... B-33
6.1 Governmental Filings........................................ B-33
6.2 Expenses.................................................... B-33
6.3 Due Diligence; Access to Information; Confidentiality....... B-33
6.4 Proxy Statement............................................. B-34
6.5 Tax Treatment............................................... B-35
6.6 Press Releases.............................................. B-35
6.7 Securities Reports.......................................... B-35
6.8 NASDAQ Listing.............................................. B-35
6.9 Shareholder Approvals....................................... B-35
6.10 No Solicitation............................................. B-36
6.11 Failure to Fulfill Conditions............................... B-36
6.12 Tax Opinion................................................. B-36
6.13 Resignations and Election of Directors...................... B-36
6.14 Notification of Certain Matters............................. B-37
6.15 Covenant Not to Register.................................... B-37
6.16 Continuing Liability........................................ B-37
ARTICLE VII CONDITIONS................................................. B-38
7.1 Conditions to Obligations of Each Party..................... B-38
7.2 Additional Conditions to Obligations of MI.................. B-39
7.3 Additional Conditions to Obligation of AIQ.................. B-40
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER......................... B-42
8.1 Termination................................................. B-42
8.2 Amendment................................................... B-43
8.3 Waiver...................................................... B-43
ARTICLE IX GENERAL PROVISIONS.......................................... B-44
9.1 Notices..................................................... B-44
9.2 Interpretation.............................................. B-44
9.3 Severability................................................ B-45
9.4 Miscellaneous............................................... B-45
9.5 Non-Survival of Representations, Warranties and Covenants... B-45
9.6 Schedules................................................... B-45
9.7 Counterparts................................................ B-45
9.8 Third Party Beneficiaries................................... B-45
Exhibit A Form of Reincorporation Articles of Merger
Exhibit B Form of Articles of Merger
Exhibit C Form of New MI Articles of Incorporation
Exhibit D Form of New MI Bylaws
Exhibit E Form of Agreement and Plan of Reincorporation Merger
Exhibit F Form of Merger Warrant
Exhibit G Form of Investment Letter
Exhibit H AIQ Lock-Up Agreement
Exhibit I MI Shareholder Lock-Up Agreement
Exhibit J MI Director and Officer Lock-Up Agreement
Exhibit K Environmental Liability Opinions
[Exhibits have been intentionally omitted.]
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of January
11, 2001, by and among ACTIVEIQ TECHNOLOGIES, INC., a Minnesota corporation
("AIQ"), METEOR INDUSTRIES, INC., a Colorado corporation ("MI") and MI MERGER,
INC., a Minnesota corporation and a wholly-owned subsidiary of MI ("Merger
Sub").
WITNESSETH
WHEREAS, the Boards of Directors of AIQ and MI have determined that it is
in the best interests of such corporations and their respective shareholders to
consummate the merger of Merger Sub, a newly-formed wholly-owned subsidiary of
MI, with and into AIQ with AIQ as the surviving corporation (the "Merger");
WHEREAS, AIQ and MI desire that the Merger be made on the terms and subject
to the conditions set forth in this Agreement and qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended; and
WHEREAS, as a condition to the Merger, AIQ requires that MI merge into a
newly-formed Minnesota corporation ("New MI"), after which Merger Sub will merge
into AIQ, which will then be a wholly-owned subsidiary of New MI.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following meanings (such
meaning to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" has the meaning as defined in Regulation 12b-2 promulgated
under the Exchange Act, as such regulation is in effect on the date hereof.
"AIQ Dissenting Shares" shall have the meaning ascribed thereto in
SECTION 2.5(a).
"AIQ Financial Statements" shall have the meaning ascribed thereto in
SECTION 3.4.
"AIQ Intellectual Property" means any Technology and Intellectual
Property Rights including AIQ Registered Intellectual Property Rights (as
defined below) that are owned (in whole or in part) by or exclusively
licensed to AIQ.
"AIQ Latest Balance Sheet" shall have the meaning ascribed thereto in
SECTION 3.7.
"AIQ Leases" shall have the meaning ascribed thereto in SECTION 3.9.
"AIQ Permits" shall have the meaning ascribed thereto in SECTION 3.17(b).
"AIQ Real Property" shall have the meaning ascribed thereto in SECTION
3.9.
"AIQ Registered Intellectual Property Rights" has the meaning set
forth in SECTION 3.12(a).
"Articles" shall, with respect to any corporation, mean those
instruments that at the time constitute its articles of incorporation or
other charter document as filed or recorded under the general corporation
or other applicable law of the jurisdiction of its incorporation or
organization, including the articles or certificate of incorporation and
any and all amendments thereto.
"Articles of Merger" shall mean the articles of merger in
substantially the form attached hereto as EXHIBIT B.
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94
"Available Cash" shall have the meaning ascribed thereto in SECTION
7.3(b).
"CBCA" means the Colorado Business Corporations Act, as amended
(Colorado Revised Statutes, Title 7, Articles 101 through 117).
"Closing" shall have the meaning ascribed thereto in SECTION 2.1(e).
"Closing Date" shall have the meaning ascribed thereto in SECTION
2.1(e).
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor legislation.
"Copyrights" has the meaning set forth in the definition of
Intellectual Property Rights.
"Effective Date" shall have the meaning ascribed thereto in SECTION
2.1(e).
"Effective Time" shall have the meaning ascribed thereto in SECTION
2.1(e).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning ascribed thereto in SECTION
2.2(a).
"GAAP" shall mean Generally Accepted Accounting Principles as in
effect from time to time.
"Governmental Body" means any:
(a) nation, province, state, county, city, town, village, district,
or other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"IRS" shall mean the Internal Revenue Service of the United States.
"Intellectual Property Rights" shall mean any or all of the following
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.
"Liabilities" shall mean any and all debts, liabilities, accounts
payable, Taxes, claims and other obligations, absolute or contingent,
mature or not mature, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whenever arising (unless otherwise specified in this
Agreement), including all costs and expenses relating thereto, and
including, without limitation, those debts, liabilities and obligations
arising under any law, rule, regulation, or any actual or threatened
action, suit, proceeding or investigation by or before any court, any
governmental or other regulatory or administrative agency or
B-2
95
commission or any arbitration tribunal, any order or consent decrees of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Material Adverse Effect" shall, with respect to an entity, mean any
condition, event, change or occurrence, individually or collectively, that
has had or may reasonably be expected to have a material adverse effect on
the business, operations, results of operations or financial condition of
such entity on a consolidated basis.
"MBCA" shall mean the Minnesota Business Corporations Act, as amended
(Minnesota Statutes, Chapter 302A).
"Merger" shall have the meaning ascribed thereto in the preambles of
this Agreement.
"Merger Warrant" shall mean the common stock purchase warrant to be
issued to the holders of AIQ Common Stock in accordance with SECTION 2.2(a)
in substantially the form of EXHIBIT F attached hereto.
"MI" means Meteor Industries, Inc., a Colorado corporation and, for
purposes of this Agreement, does not include any of its subsidiaries,
unless otherwise expressly stated herein.
"MI Board" shall mean the Board of Directors of MI immediately prior
to the Effective Date.
"MI Common Stock" shall mean the common stock, par value $.001 per
share, of MI prior to the Effective Date.
"MI Dissenting Shares" shall have the meaning ascribed thereto in
SECTION 2.5(b).
"MI 8-K Reports" shall have the meaning ascribed thereto in SECTION
4.4.
"MI Latest Balance Sheet" shall have the meaning ascribed thereto in
SECTION 4.7.
"MI Private Placement" shall mean the proposed private placement by MI
of 120,000 units of its securities at a price of $15.00 per unit, each unit
consisting of five (5) shares of MI Common Stock and a warrant (in
substantially the form of the Merger Warrant) to purchase three (3) shares
of MI Common Stock at a price of $5.50 per share.
"MI Proxy Statements" shall have the meaning ascribed thereto in
SECTION 4.4.
"MI Real Property" shall mean all of the real property owned, used or
occupied by MI.
"MI Subsidiary" (or collectively, "MI Subsidiaries") shall mean each
corporation, limited liability company or other business entity in which MI
owns a majority of the outstanding shares of capital stock and,
notwithstanding the forgoing, shall include Meteor Office, LLC and, upon
its formation, Meteor Enterprises, Inc. and all of its direct subsidiaries.
"MI 10-K Reports" shall have the meaning ascribed thereto in SECTION
4.4.
"MI 10-Q Reports" shall have the meaning ascribed thereto in SECTION
4.4.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.
"PTO" has the meaning set forth in SECTION 3.12(a).
"Patents" has the meaning set forth in the definition of Intellectual
Property Rights.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union, or
other entity or Governmental Body.
"Proxy Statement" shall have the meaning ascribed thereto in SECTION
6.4.
"Registered Intellectual Property Rights" all United States,
international and foreign: (a) Patents, including applications therefor;
(b) registered Trademarks, applications to register Trademarks, including
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96
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
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.
"Reincorporation Articles of Merger" shall mean the articles of merger
in substantially the form attached hereto as EXHIBIT A.
"Reincorporation Merger" shall mean the merger of MI with and into New
MI, as described in ARTICLE II.
"Requisite AIQ Shareholder Vote" shall have the meaning ascribed
thereto in SECTION 3.2.
"Requisite MI Shareholder Vote" shall have the meaning ascribed
thereto in SECTION 4.2.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and
payable, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of
money.
"Schedules" or "Schedule" shall refer to the disclosure schedules
prepared by the parties hereto and attached as a part of this Agreement.
"Subsidiary" shall, with respect to any entity, mean each corporation
in which such entity owns directly or indirectly fifty percent (50%) or
more of the voting securities of such corporation and shall, unless
otherwise indicated, be deemed to refer to both direct and indirect
subsidiaries of such entity.
"Surviving Company" shall have the meaning ascribed thereto in ARTICLE
II.
"Surviving Company Common Stock" shall mean the common stock, par
value $.01 per share, of the Surviving Company.
"Tax or Taxes" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, environmental
taxes, customs duties, capital stock, franchise, employees' income
withholding, foreign or domestic withholding, social security,
unemployment, disability, workers' compensation, employment-related
insurance, real property, personal property, sales, use, transfer, value
added, alternative or add-on minimum or other governmental tax, fee,
assessment or charge of any kind whatsoever including any interest,
penalties or additions to any Tax or additional amounts in respect of the
foregoing.
"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.
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97
ARTICLE II
MERGER
Subject to the satisfaction or waiver of the conditions set forth in
ARTICLE VII, at the Effective Time, (i) MI will merge with and into New MI (the
"Reincorporation Merger"), (ii) Merger Sub will merge with and into AIQ, (iii)
AIQ will become a wholly-owned subsidiary of New MI, and (iv) New MI will change
its name to "Active IQ Technologies, Inc.," or such other name acceptable to
AIQ. AIQ, as a wholly-owned subsidiary of New MI after giving effect to the
Merger, shall be defined herein as the "Surviving Company." The Reincorporation
Merger will be effected pursuant to the Reincorporation Articles of Merger and
the Merger will be effected pursuant to the Articles of Merger, both pursuant to
the provisions of, and with the effect provided in, Section 302A.641 of the
MBCA.
2.1 REINCORPORATION MERGER. The articles of incorporation and bylaws of
New MI shall be in the forms attached hereto as EXHIBITS C and D, respectively.
The Reincorporation Merger shall be effected in accordance with the Agreement
and Plan of Merger attached hereto as EXHIBIT E.
2.2 EFFECT OF MERGER.
(a) From and after the Effective Time and until further amended in
accordance with law, (i) the Articles of Incorporation of AIQ as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Company, and (ii) the Bylaws of AIQ as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Company. From
and after the Effective Time, the directors and officers of the Surviving
Company shall be the persons who were directors of AIQ immediately prior to the
Effective Time and the officers of AIQ immediately prior to the Effective Time.
These directors and officers of the Surviving Company shall hold office for the
term specified in, and subject to the provisions contained in, the Articles of
Incorporation and Bylaws of the Surviving Company and applicable law. If, at or
after the Effective Time, a vacancy shall exist on the Board of Directors or in
any of the offices of the Surviving Company, such vacancy shall be filled in the
manner provided in the Articles of Incorporation and Bylaws of the Surviving
Company.
The initial Board of Directors of New MI immediately after the Effective
Time will consist of seven (7) persons of which six (6) will be designated by
AIQ's Board of Directors and approved by MI's Board of Directors immediately
prior to the Effective Time and one (1) will be designated by MI's Board of
Directors immediately prior to the Effective Time. Immediately after the
Effective Time, the Board of Directors of New MI will elect the officers of AIQ
immediately prior to the Effective Time as the officers of New MI. The initial
directors and officers of New MI shall hold office for the term specified in,
and subject to the provisions contained in, the articles of incorporation and
bylaws of New MI and applicable law. If, at or after the Effective Time, a
vacancy shall exist on the Board of Directors or in any of the offices of New
MI, such vacancy shall be filled in the manner provided in the Articles and
Bylaws of New MI.
(b) At the Effective Time, the Surviving Company shall thereupon and
thereafter be responsible and liable for all the liabilities, debts, duties,
restrictions, disabilities and obligations of each of AIQ and the Merger Sub,
all without further action.
(c) At the Effective Time, the Surviving Company shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises, of a
public as well as of a private nature, of each of AIQ and the Merger Sub; all
property, real, personal and mixed, and all debts due on whatever account, and
all and every other interest, of or belonging to or due to each of AIQ and the
Merger Sub, shall be taken and deemed to be transferred to and vested in the
Surviving Company without further act or deed; and the title to any real estate
or any interest therein, vested in AIQ and the Merger Sub shall not revert or be
in any way impaired by reason of the Merger.
(d) MI, New MI, the Merger Sub and AIQ, respectively, shall each use its
best efforts to take all such action as may be necessary or appropriate to
effectuate the Merger under the MBCA at the Effective Time. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Company with full
right, title and possession to all properties, rights,
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privileges, immunities, powers and franchises of either AIQ or Merger Sub, the
officers of the Surviving Company are fully authorized in the name of New MI,
AIQ and Merger Sub or otherwise to take, and shall take, all such lawful and
necessary action.
(e) Subject to the provisions of ARTICLES VII AND VIII hereof, the closing
(the "Closing") of the transactions contemplated hereby shall take place at such
location, on such date (the "Closing Date") and at such time as AIQ and MI
mutually agree at the earliest practicable time after the satisfaction or waiver
of the conditions in ARTICLE VII, but in no event later than ten (10) business
days after all such conditions have been satisfied or waived, or on such other
date as may be mutually agreed by the parties hereto. On the Closing Date, to
effect the Merger, the parties hereto will cause the Reincorporation Articles of
Merger and the Articles of Merger to be filed with the Minnesota Secretary of
State in accordance with the MBCA. The Merger, shall be effective when the
Articles of Merger are filed with the Minnesota Secretary of State (the
"Effective Time"). As used herein, the term "Effective Date" shall mean the date
on which the Articles of Merger are filed with the Minnesota Secretary of State.
2.3 EFFECT ON AIQ CAPITAL STOCK AND MERGER SUB CAPITAL STOCK. To
effectuate the Merger, and subject to the terms and conditions of this
Agreement, at the Effective Time:
(a) each issued and outstanding share of AIQ Common Stock immediately prior
to the Effective Time (other than shares to be extinguished pursuant to SECTION
2.2(e) below and AIQ Dissenting Shares as defined in SECTION 2.5 below) shall be
converted into and exchangeable for 1.000 share (the "Exchange Ratio") of New MI
Common Stock (after giving effect to the Reincorporation Merger) and New MI
shall issue to holders of AIQ Common Stock (i) shares of New MI Common Stock
based on the Exchange Ratio, subject to adjustment as provided in SECTION
7.3(b), in exchange for such outstanding shares of AIQ Common Stock and (ii) a
Merger Warrant to purchase two (2) shares of New MI Common Stock at a price of
$5.50 per share for every three (3) shares of AIQ Common Stock owned by such
holders;
(b) all stock option plans duly adopted by MI prior to the date hereof and
all outstanding options to purchase shares of MI Common Stock issued pursuant to
such plans shall be continued by New MI in accordance with the terms thereof;
(c) all stock option plans duly adopted by AIQ prior to the date hereof and
all outstanding options to purchase shares of AIQ Common Stock issued pursuant
to the such plans shall be continued by New MI and shall convert to the right to
purchase the same number of shares of New MI Common Stock;
(d) all other warrants or other options to purchase shares of AIQ Common
Stock outstanding immediately prior to the Effective Time shall convert to the
right to purchase the same number of shares of New MI Common Stock;
(e) each share of AIQ Common Stock issued and outstanding immediately prior
to the Effective Time and owned by Merger Sub, MI or New MI shall be cancelled
and extinguished without any conversion thereof and no payment shall be made
with respect thereto; and
(f) all issued and outstanding shares of common stock, $.01 par value per
share, of the Merger Sub held by MI immediately prior to the Effective Time
shall be cancelled and extinguished without any conversion thereof and no
payment shall be made with respect thereto.
2.4 RIGHTS OF HOLDERS OF AIQ CAPITAL STOCK.
(a) On and after the Effective Date and until surrendered for exchange,
each outstanding stock certificate that immediately prior to the Effective Date
represented shares of AIQ Common Stock (except Dissenting Shares and shares
extinguished pursuant to SECTION 2.2(e)) shall be deemed for all purposes, to
evidence ownership of and to represent (i) the number of whole shares of New MI
Common Stock into which such shares of AIQ Common Stock shall have been
converted pursuant to SECTION 2.2(a) above and (ii) a Merger Warrant to purchase
the number of shares of New MI Common Stock and at the price described in
SECTION 2.2(A). The record holder of each such outstanding certificate
representing shares of AIQ Common Stock, shall, after the Effective Date, be
entitled to vote the shares of New MI Common Stock into which such shares of AIQ
Common Stock shall have been converted on any matters on which the holders of
record
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of the New MI Common Stock, as of any date subsequent to the Effective Date,
shall be entitled to vote. In any matters relating to such certificates of AIQ
Common Stock, New MI may rely conclusively upon the record of shareholders
maintained by AIQ containing the names and addresses of the holders of record of
AIQ Common Stock on the Effective Date.
(b) On and after the Effective Date, New MI shall reserve a sufficient
number of authorized but unissued shares of New MI Common Stock for issuance in
connection with (i) the conversion of AIQ Common Stock into New MI Common Stock,
(ii) the exercise of all options and warrants to purchase shares of AIQ Common
Stock outstanding immediately prior to the Effective Time, and (iii) the
exercise of the Merger Warrants.
(c) The Exchange Ratio set forth in SECTION 2.2(a) shall be adjusted
equitably to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
AIQ Common Stock or MI Common Stock), reorganization or other like change
occurring after the date of this Agreement and prior to the Effective Time.
2.5 PROCEDURE FOR EXCHANGE OF AIQ COMMON STOCK.
(a) After the Effective Date, holders of certificates theretofore
evidencing outstanding shares of AIQ Common Stock (except Dissenting Shares and
shares extinguished pursuant to SECTION 2.2(e)), upon surrender of such
certificates to the Secretary of New MI, shall be entitled to receive (i)
certificates representing the number of whole shares of New MI Common Stock into
which shares of AIQ Common Stock theretofore represented by the certificates so
surrendered shall have been converted as provided in SECTION 2.2(a) hereof, and
(ii) Merger Warrants to purchase two (2) shares of New MI Common Stock for every
three (3) shares of AIQ Common Stock theretofore represented by the AIQ Common
Stock certificates so surrendered. New MI shall not be obligated to deliver the
consideration to which any former holder of shares of AIQ Common Stock is
entitled as a result of the Merger until such holder surrenders the certificate
or certificates representing such shares. Upon surrender, each certificate
evidencing AIQ Common Stock shall be canceled. If there is a transfer of AIQ
Common Stock ownership which is not registered in the transfer records of AIQ, a
certificate representing the proper number of shares of New MI Common Stock may
be issued to a person other than the person in whose name the certificate so
surrendered is registered if: (x) upon presentation to the Secretary of the
Surviving Company, such certificate shall be properly endorsed or otherwise be
in proper form for transfer, (y) the person requesting such payment shall pay
any transfer or other taxes required by reason of the issuance of shares of New
MI Common Stock to a person other than the registered holder of such certificate
or establish to the reasonable satisfaction of the Surviving Company that such
tax has been paid or is not applicable, and (z) the issuance of such New MI
Common Stock shall not, in the sole discretion of the Surviving Company, violate
the requirements of the Regulation D "safe harbor" of the Securities Act with
respect to the private placement of New MI Common Stock that will result from
the Merger.
(b) No fractional shares of New MI Common Stock shall be issued in exchange
for shares of AIQ Common Stock. In lieu thereof, New MI shall pay to the owner
thereof cash equal to the pro rata market price of a share of MI Common Stock
based on the closing sales price of the MI Common Stock on the Effective Date as
reported on the NASDAQ Small Cap Market.
(c) All shares of New MI Common Stock issued upon the surrender for
exchange of AIQ Common Stock in accordance with the above terms and conditions
shall be deemed to have been issued and paid in full satisfaction of all rights
pertaining to such shares of AIQ Common Stock.
(d) In the event any certificate for AIQ Common Stock shall have been lost,
stolen or destroyed, New MI shall issue and pay in exchange for such lost,
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, such shares of the New MI Common Stock and cash for
fractional shares, if any, as may be required pursuant to this Agreement;
provided, however, that the New MI, in its discretion and as a condition
precedent to the issuance and payment thereof, may require the owner of such
lost, stolen or destroyed certificate to deliver a bond in such sum as it may
direct as indemnity against any
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claim that may be made against New MI or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
2.6 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, if Section
302A.471 of the MBCA shall be applicable to the Merger, shares of AIQ Common
Stock that are issued and outstanding immediately prior to the Effective Time
and which are held by shareholders who have not voted such shares in favor of
the Merger, who shall have delivered, prior to any vote on the Merger, a written
demand for the fair value of such shares in the manner provided in Section
302A.473 of the MBCA and who, as of the Effective Time, shall not have
effectively withdrawn or lost such right to dissenters' rights ("AIQ Dissenting
Shares") shall not be converted into or represent a right to receive shares of
New MI Common Stock pursuant to SECTION 2.2(a) above, but the holders thereof
shall be entitled only to such rights as are granted by Section 302A.473 of the
MBCA. Each holder of AIQ Dissenting Shares who becomes entitled to payment for
such shares pursuant to Sections 302A.471 and 302A.473 of the MBCA shall receive
payment therefor from the Surviving Company in accordance with the MBCA;
provided, however, that if any such holder of AIQ Dissenting Shares shall have
effectively withdrawn such holder's demand for appraisal of such shares or lost
such holder's right to appraisal and payment of such shares under Section
302A.473 of the MBCA, such holder or holders (as the case may be) shall forfeit
the right to appraisal of such shares and each such share shall thereupon be
deemed to have been canceled, extinguished and converted, as of the Effective
Time, into and represent the right to receive payment from New MI of shares of
New MI Common Stock as provided in SECTION 2.2(a) above.
(b) Notwithstanding anything in this Agreement to the contrary, if Section
7-113-102 of the CBCA shall be applicable to the sale by MI of all or
substantially all of its assets (as contemplated by SECTION 7.3(a)) (the "MI
Asset Sale"), which is a condition to AIQ's obligation to close, shares of MI
Common Stock that are issued and outstanding immediately prior to the effective
date of the MI Asset Sale and which are held by shareholders who have not voted
such shares in favor of such sale, who shall have delivered, prior to any vote
on the MI Asset Sale, a written demand for the fair value of such shares in the
manner provided in Sections 7-113-202 and 7-113-203 of the CBCA and who, as of
the effective date of the MI Asset Sale, shall not have effectively withdrawn or
lost such right to dissenters' rights ("MI Dissenting Shares") shall not be
converted into or represent a right to receive shares of New MI Common Stock as
a result of the Reincorporation Merger, but the holders thereof shall be
entitled only to such rights as are granted by Article 113 of the CBCA. Each
holder of MI Dissenting Shares who becomes entitled to payment for such shares
pursuant to Article 113 of the CBCA shall receive payment therefor from the
Surviving Company in accordance with the CBCA; provided, however, that if any
such holder of MI Dissenting Shares shall have effectively withdrawn such
holder's demand for appraisal of such shares or lost such holder's right to
appraisal and payment of such shares under Article 113 of the CBCA, such holder
or holders (as the case may be) shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been canceled,
extinguished and converted, as of the Effective Date, into and represent the
right to receive payment from New MI of shares of New MI Common Stock as a
result of the Reincorporation Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIQ
AIQ hereby represents and warrants as follows:
3.1 ORGANIZATION AND QUALIFICATION. AIQ is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
and has the requisite corporate power to carry on its business as now conducted.
The copies of the Articles and Bylaws of AIQ, which have been made available to
MI prior to the date of this Agreement, are correct and complete copies of such
documents as in effect as of the date of this Agreement. As used in this
Agreement, the term "Articles" with respect to any corporation shall mean those
instruments that at that time constitute its articles of incorporation as filed
or recorded under the general corporation or other applicable law of the
jurisdiction of its incorporation or organization, including the articles or
certificate of incorporation and any and all amendments thereto. AIQ is licensed
or qualified to
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do business in every jurisdiction in which the nature of its business or its
ownership of property requires it to be licensed or qualified, except where the
failure to be so licensed or qualified would not have a Material Adverse Effect
on AIQ.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION. AIQ has the
requisite corporate power and authority to enter into this Agreement and the
Articles of Merger and to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Articles of Merger by AIQ
and the consummation by AIQ of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of AIQ and, except for
approval of this Agreement and the Merger by the requisite vote of AIQ's
shareholders, no other corporate proceedings on the part of AIQ are necessary to
authorize the execution and delivery of this Agreement, the Articles of Merger
and the consummation of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by AIQ and, assuming it is a
valid and binding obligation of MI, constitutes a valid and binding obligation
of AIQ enforceable in accordance with its terms except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. The Articles of Merger, when executed
and delivered by AIQ, will constitute the valid and binding obligation of AIQ,
enforceable in accordance with its terms. Except as set forth in SCHEDULE 3.2,
AIQ is not subject to, or obligated under, any provision of (a) its Articles or
Bylaws, (b) any agreement, arrangement or understanding, (c) any license,
franchise or permit or (d) subject to obtaining the approvals referred to in the
next sentence, any law, regulation, order, judgment or decree, which would
conflict with, be breached or violated, or in respect of which a right of
termination or acceleration or any security interest, charge or encumbrance on
any of its assets would be created, by the execution, delivery or performance of
this Agreement, the Articles of Merger, or the consummation of the transactions
contemplated hereby or thereby, other than any such conflicts, breaches,
violations, rights of termination or acceleration or security interests, charges
or encumbrances which, in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect on AIQ. Except for (i) the approval of the
Merger, the Articles of Merger and this Agreement by a requisite vote of the
shareholders of AIQ (the "Requisite AIQ Shareholder Vote"), (ii) approvals under
applicable Blue Sky laws, (iii) the filing of the Articles of Merger and the
Reincorporation Articles of Merger with the Secretaries of State of the States
of Minnesota and Colorado (as appropriate) in accordance with the MBCA and the
CBCA, and (iv) such filings, authorizations or approvals as may be set forth in
SCHEDULE 3.2, no authorization, consent or approval of, or filing with, any
public body, court or authority is necessary on the part of AIQ for the
consummation by AIQ of the transactions contemplated by this Agreement, except
for such authorizations, consents, approvals and filings as to which the failure
to obtain or make the same will not, in the aggregate, have a Material Adverse
Effect on AIQ or adversely affect the consummation of the transactions
contemplated hereby.
3.3 CAPITALIZATION. The authorized, issued and outstanding shares of
capital stock of AIQ as of the date hereof is correctly set forth on SCHEDULE
3.3. The issued and outstanding shares of capital stock of AIQ are duly
authorized, validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive rights. AIQ has no other equity securities
or securities containing any equity features authorized, issued or outstanding.
Except as set forth in SCHEDULE 3.3 hereto, there are no agreements or other
rights or arrangements existing which provide for the sale or issuance of
capital stock by AIQ and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or otherwise
acquire from AIQ any shares of capital stock or other securities of AIQ of any
kind. Except as set forth on SCHEDULE 3.3, there are no agreements or other
obligations (contingent or otherwise) which may require AIQ to repurchase or
otherwise acquire any shares of its capital stock.
3.4 FINANCIAL STATEMENTS. Prior to the execution of this Agreement, AIQ
shall have delivered or made available to MI complete and accurate copies of
AIQ's audited financial statements for the year ended December 31, 1999, and
unaudited balance sheets and income statements at and for the quarterly period
ended September 30, 2000 (the "AIQ Financial Statements"). As of their
respective date, or as subsequently amended prior to the date hereof, such
documents (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The AIQ Financial Statements are
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based upon the information contained in the books and records of AIQ and fairly
present the financial condition of AIQ as of the dates thereof and results of
operations for the periods referred to therein. The audited AIQ Financial
Statements have been prepared in accordance with GAAP. The unaudited AIQ
Financial Statements have been prepared in accordance with GAAP applicable to
unaudited interim financial statements (and thus may not contain all notes and
may not contain prior period comparative data which are required to be prepared
in accordance with GAAP) consistently with the audited AIQ Financial Statements
and reflect all adjustments necessary to a fair statement of the results for the
interim periods presented.
3.5 LITIGATION. As of the date hereof, there are no actions, suits,
proceedings, orders or investigations pending or threatened against AIQ, at law
or in equity, or before or by any federal, state or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign which challenges or seeks to make illegal or to delay or otherwise
directly or indirectly to restrain or prohibit the consummation of the
transactions contemplated hereby or seeks to obtain material damages in
connection with the transactions contemplated hereby.
3.6 NO BROKERS OR FINDERS. Except as disclosed on SCHEDULE 3.6, there are
no claims for brokerage commissions, finders' fees, investment advisory fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement, understanding, commitment or agreement made
by or on behalf of AIQ.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in the
unaudited balance sheet of AIQ dated September 30, 2000 (the "AIQ Latest Balance
Sheet Date"), AIQ has no liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether known or
unknown, and regardless of when asserted) arising out of transactions or 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 AIQ Latest Balance
Sheet Date 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), or (ii) as otherwise set forth in SCHEDULE 3.7
attached hereto.
3.8 NO MATERIAL ADVERSE CHANGE. Since the AIQ Latest Balance Sheet Date,
there has been no material adverse change in the assets, financial condition,
operating results, customer, employee or supplier relations, or business
condition of AIQ.
3.9 LEASED PREMISES.
(a) AIQ owns no real property. The real property demised to AIQ by the
leases described in SCHEDULE 3.9 (the "AIQ Leases") hereto constitutes all of
the real property used or occupied by AIQ (the "AIQ Real Property").
(b) The AIQ Leases are in full force and effect, and AIQ holds a valid and
existing leasehold interest under each of the AIQ Leases for the term set forth
in SCHEDULE 3.9 hereto. AIQ is not in default, and there exist no circumstances
which, if unremedied, would, either with or without notice or the passage of
time or both, result in such default under any of the AIQ Leases; nor is any
other party to any of the AIQ Leases in default.
(c) Each of the tangible properties and tangible assets reflected on the
AIQ 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) liens set forth in SCHEDULE 3.9 hereto, (iii) the properties
subject to the AIQ Leases, (iv) assets disposed of since the date of the AIQ
Latest Balance Sheet in the ordinary course of business, (v) liens imposed by
law and incurred in the ordinary course of business for obligations not yet due
to carriers, warehousemen, laborers and materialmen and (vi) liens in respect of
pledges or deposits under workers' compensation laws.
3.10 TAX MATTERS.
(a) AIQ has: (i) timely filed (or has had timely filed on its behalf) all
returns, declarations, reports, estimates, information returns, and statements
("Returns") required to be filed or sent by it in respect of any Taxes or
required to be filed or sent by it by any taxing authority having jurisdiction;
(ii) timely and properly
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paid (or has had paid on its behalf) all Taxes shown to be due and payable on
such Returns; (iii) established on the AIQ Latest Balance Sheet, in accordance
with GAAP, reserves that are adequate for the payment of any Taxes not yet due
and payable; (iv) complied with all applicable laws, rules, and regulations
relating to the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Sections 1441 and 1442 of the Code, or
similar provisions under any foreign laws), and timely and properly withheld
from individual employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws.
(b) There are no liens for Taxes upon any assets of AIQ, except liens for
Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against AIQ that has not been resolved and paid in full. Except as disclosed in
SCHEDULE 3.10, no waiver, extension or comparable consent given by AIQ regarding
the application of the statute of limitations with respect to any Taxes or
Returns is outstanding, nor is any request for any such waiver or consent
pending. Except as disclosed in SCHEDULE 3.10, there has been no Tax audit or
other administrative proceeding or court proceeding with regard to any Taxes or
Returns, nor is any such Tax audit or other proceeding pending, nor has there
been any notice to AIQ by any Taxing authority regarding any such Tax, audit or
other proceeding, nor is any such Tax audit or other proceeding threatened with
regard to any Taxes or Returns. AIQ does not expect the assessment of any
additional Taxes of AIQ for any period prior to the date hereof and is not aware
of any unresolved questions, claims or disputes concerning the liability for
Taxes of AIQ which would exceed the estimated reserves established on their
respective books and records.
(d) Except as set forth on SCHEDULE 3.10, AIQ is not a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code and the consummation of the transactions
contemplated by this Agreement will not be a factor causing payments to be made
by AIQ that are not deductible (in whole or in part) under Section 280G of the
Code.
(e) Except as set forth on SCHEDULE 3.10, AIQ has not requested any
extension of time within which to file any Return, which Return has not since
been filed.
3.11 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 3.11 hereto lists the following agreements, whether oral or
written, to which AIQ is a party, which are currently in effect, and which
relate to the operation of AIQ'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; (iii) hospitalization
insurance or other welfare benefit plan or practice, whether formal or informal;
(iv) stock purchase or stock option plan; (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) confidentiality
agreement; (vii) contract, agreement or understanding relating to the voting of
AIQ Common Stock or the election of directors of AIQ; (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 AIQ; (ix) guaranty of any
obligation for borrowed money or otherwise; (x) lease or agreement under which
AIQ is lessee of, or holds or operates any property, real or personal, owned by
any other party, for which the annual rental exceeds $10,000; (xi) lease or
agreement under which AIQ is lessor of, or permits any third party to hold or
operate, any property, real or personal, for which the annual rental exceeds
$10,000; (xii) contract which prohibits AIQ from freely engaging in business
anywhere in the world; (xiii) license agreement or agreement providing for the
payment or receipt of royalties or other compensation by AIQ in connection with
the intellectual property rights listed in SCHEDULE 3.12 hereto; (xiv) contract
or commitment for capital expenditures in excess of $10,000; (xv) agreement for
the sale of any capital asset; (xvi) contract with any AIQ Affiliate thereof
which in any way relates to AIQ (other than for employment on customary terms);
or (xvii) other agreement which is either material to AIQ's business or was not
entered into in the ordinary course of business.
(b) AIQ has performed all obligations required to be performed by it in
connection with the contracts or commitments required to be disclosed in
SCHEDULE 3.11 hereto and are not in receipt of any claim of default
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under any contract or commitment required to be disclosed under such caption;
AIQ 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 AIQ has no knowledge of any breach or anticipated breach by
any other party to any contract or commitment required to be disclosed under
such caption.
3.12 INTELLECTUAL PROPERTY RIGHTS.
(a) SCHEDULE 3.12 lists all Registered Intellectual Property Rights owned
by, filed in the name of, or applied for, by AIQ (the "AIQ 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 AIQ
Registered Intellectual Property Rights or AIQ Intellectual Property.
(b) Each item of AIQ Registered Intellectual Property Rights is valid and
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such AIQ Registered Intellectual Property Rights have been paid
and all necessary documents and certificates in connection with such AIQ
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. There are no actions that must be taken
by AIQ within one hundred twenty (120) days of the Closing Date, including the
payment of any registration, maintenance or renewal fees or the filing of any
responses to PTO office actions, documents, applications or certificates for the
purposes of obtaining, maintaining, perfecting or preserving or renewing any
Registered Intellectual Property Rights. In each case in which AIQ has acquired
any Technology or Intellectual Property Right from any Person, AIQ or such
Subsidiary has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Technology and the associated
Intellectual Property Rights (including the right to seek past and future
damages with respect thereto) to AIQ. To the maximum extent provided for by, and
in accordance with, applicable laws and regulations, AIQ has recorded each such
assignment of a Registered Intellectual Property Right assigned to AIQ with the
relevant Governmental Body, including the PTO, the U.S. Copyright Office, or
their respective equivalents in any relevant foreign jurisdiction, as the case
may be. AIQ 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) AIQ has no Knowledge of any facts or circumstances that would render
any AIQ Intellectual Property invalid or unenforceable. Without limiting the
foregoing, AIQ knows of no information, materials, facts, or circumstances,
including any information or fact that would constitute prior art, that would
render any of the AIQ Registered Intellectual Property Rights invalid or
unenforceable, or would adversely effect any pending application for any AIQ
Registered Intellectual Property Right and AIQ has not misrepresented, or failed
to disclose, and has no Knowledge of any misrepresentation or failure to
disclose, any fact or circumstances in any application for any AIQ Registered
Intellectual Property Right that would constitute fraud or a misrepresentation
with respect to such application or that would otherwise affect the validity or
enforceability of any AIQ Registered Intellectual Property Right.
(d) Each item of AIQ 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. AIQ is the exclusive owner or
exclusive licensee of all AIQ Intellectual Property. Without limiting the
foregoing: (i) AIQ is the exclusive owner of all Trademarks used in connection
with the operation or conduct of the business of AIQ, including the sale,
licensing, distribution or provision of any products or services by AIQ; (ii)
AIQ owns exclusively, and has good title to, all Copyrighted Works that are
products of AIQ or which AIQ otherwise purports to own; and (iii) to the extent
that any Patents would otherwise be infringed by any product or services of AIQ,
such Patents constitute AIQ Intellectual Property.
(e) All AIQ Intellectual Property will be fully transferable, alienable or
licensable by Surviving Corporation and/or Parent without restriction and
without payment of any kind to any third party.
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(f) To the extent that any AIQ Technology has been developed or created by
a third party for AIQ, AIQ has a written agreement with such third party with
respect thereto and AIQ thereby 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, to the fullest extent it is legally possible to
do so.
(g) Except as set forth on SCHEDULE 3.12(g), all Technology used in or
necessary to the conducted or currently contemplated to be conducted by AIQ was
written and created solely by either (i) employees of AIQ acting within the
scope of their employment or (ii) by third parties who have validly and
irrevocably assigned all of their rights, including Intellectual Property Rights
therein, to AIQ, and no third party owns or has any right to any of the AIQ
Intellectual Property.
(h) All employees of AIQ have entered into a valid and binding written
agreement with AIQ sufficient to vest title in AIQ of all Technology, including
all accompanying Intellectual Property Rights, created by such employee in the
scope of his or her employment with AIQ.
(i) AIQ has taken all steps that are reasonably required to protect AIQ's
rights in confidential information and trade secrets of AIQ or provided by any
other Person to AIQ. Without limiting the foregoing, AIQ has, and enforces, a
policy requiring each employee, consultant and contractor to execute a
proprietary information, confidentiality and assignment agreement, substantially
in the form attached hereto as SCHEDULE 3.12(i), and all current and former
employees, consultants and contractors of AIQ have executed such an agreement.
(j) Except as disclosed on SCHEDULE 3.12(j), no person who has licensed
Technology or Intellectual Property to AIQ has ownership rights or license
rights to improvements made by AIQ in such Technology or Intellectual Property
Rights.
(k) AIQ has not transferred ownership of, or granted any exclusive license
of or exclusive right to use, or authorized the retention of any exclusive
rights to use or joint ownership of, any Technology or Intellectual Property
Right that is or was AIQ Intellectual Property, to any other Person.
(l) SCHEDULE 3.12(l) lists all contracts, licenses and agreements to which
AIQ is a party with respect to any Technology or Intellectual Property Rights.
AIQ is not in breach of nor has AIQ failed to perform under, any of the
foregoing contracts, licenses or agreements and, no other party to any such
contract, license or agreement is in breach thereof or has failed to perform
thereunder.
(m) SCHEDULE 3.12(m) lists all material contracts, licenses and agreements
between AIQ and any other Person wherein or whereby AIQ has agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or liability or provide a
right of rescission with respect to the infringement or misappropriation by AIQ
or such other Person of the Intellectual Property Rights of any Person other
than AIQ.
(n) There are no contracts, licenses or agreements between AIQ and any
other Person with respect to AIQ Intellectual Property under which there is any
dispute regarding the scope of such agreement, or performance under such
agreement, including with respect to any payments to be made or received by AIQ
thereunder.
(o) The operation of the business of AIQ as it currently is conducted or is
contemplated to be conducted by AIQ, 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 AIQ does not
and will not and will not when conducted by AIQ, MI, New MI and/or 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 AIQ 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
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AIQ infringes or misappropriates any Intellectual Property Right of any Person
or constitutes unfair competition or trade practices under the laws of any
jurisdiction (nor is there any basis therefor).
(p) No Person is infringing or misappropriating any AIQ Intellectual
Property Right.
(q) No AIQ Intellectual Property or service of AIQ is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by AIQ or may affect the validity, use or enforceability of such AIQ
Intellectual Property.
(r) No (i) product, technology, service or publication of AIQ, (ii)
material published or distributed by AIQ, or (iii) conduct or statement of AIQ
constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates in any material respect any law or regulation.
(s) AIQ Intellectual Property, together with all intellectual property to
be acquired in AIQ's proposed acquisition of Edge Technologies, Inc.,
constitutes all the Technology and Intellectual Property Rights used in and/or
necessary to the conduct of the business of AIQ as it currently is conducted,
and as it is currently planned or contemplated to be conducted by AIQ,
including, without limitation, the design, development, manufacture, use, import
and sale of products, technology and performance of services (including
products, technology or services currently under development).
(t) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to MI, New MI or Surviving Corporation, by
operation of law or otherwise, of any contracts or agreements to which AIQ is a
party, will result in (i) either MI's, New MI 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 MI's, New MI 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 the MI's, New MI or the Surviving
Corporation's being obligated to pay any royalties or other amounts to any third
party in excess of those payable by AIQ or Surviving Corporation, respectively,
prior to the Closing.
(u) Except as disclosed on SCHEDULE 3.12(u), there are no royalties, fees,
honoraria or other payments payable by AIQ to any Person or entity by reason of
the ownership, development, use, license, sale or disposition of AIQ
Intellectual Property, other than salaries and sales commissions paid to
employees and sales agents in the ordinary course of business.
3.13 EMPLOYEES.
(a) Neither any executive employee of AIQ nor any group of AIQ's employees
has any plans to terminate his, her or its employment; (b) AIQ has complied with
all laws relating to the employment of labor, including provisions thereof
relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes; (c) AIQ has no material labor
relations problem pending and its labor relations are satisfactory; (d) there
are no workers' compensation claims pending against AIQ nor is AIQ aware of any
facts that would give rise to such a claim; (e) no employee of AIQ 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 AIQ; and
(f) no employee or former employee of AIQ has any claim with respect to any
intellectual property rights of AIQ set forth in SCHEDULE 3.12 hereto.
3.14 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 3.14 hereto, with respect to all
employees and former employees of AIQ and all dependents and beneficiaries of
such employees and former employees, (i) AIQ does not maintain or contribute to
any nonqualified deferred compensation or retirement plans, contracts or
arrangements; (ii) AIQ does not maintain or contribute to any qualified defined
contribution plans (as defined in Section 3(34) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 414(i) of the
Code; (iii) AIQ does not maintain or contribute to any qualified defined benefit
plans (as defined in Section 3(35) of ERISA or Section 414(j) of the Code); and
(iv) AIQ does not maintain or contribute to any employee welfare benefit plans
(as defined in Section 3(1) of ERISA).
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(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all employee benefit plans (as defined
in Section 3(3) of ERISA) (collectively, the "Plans") which AIQ does maintain or
to which it does contribute comply in all material respects with the
requirements of ERISA and the Code. With respect to such Plans, (i) all required
contributions which are due have been made and a proper accrual has been made
for all contributions due in the current fiscal year; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) AIQ does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. AIQ has no actual or
potential liabilities under Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan. AIQ has no actual or potential liability
for death or medical benefits after separation from employment, other than (i)
death benefits under the employee benefit plans or programs (whether or not
subject to ERISA) set forth in SCHEDULE 3.14 hereto and (ii) health care
continuation benefits described in Section 4980B of the Code.
(d) Neither AIQ nor any of its directors, officers, employees or other
"fiduciaries," as such 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 which would subject AIQ, MI, Merger Sub, the
Surviving Company, or any of their respective directors, officers or employees
to any liability under ERISA or any applicable law.
(e) AIQ has not incurred any liability for any tax or civil penalty or any
disqualification of any employee benefit plan (as defined in Section 3(3) of
ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6 of Title I and
Section 502(i) of ERISA.
3.15 INSURANCE. SCHEDULE 3.15 hereto, lists and briefly describes each
insurance policy maintained by AIQ with respect to AIQ's properties, assets and
operations and sets forth the date of expiration of each such insurance policy.
All of such insurance policies are in full force and effect and are issued by
insurers of recognized responsibility. AIQ is not in default with respect to
their respective obligations under any of such insurance policies.
3.16 AFFILIATE TRANSACTIONS. Except as set forth in SCHEDULE 3.16 hereto,
and other than pursuant to this Agreement, no officer, director or employee of
AIQ, 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
five percent of the stock of which is beneficially owned by any of such persons)
(collectively "AIQ Insiders"), has any agreement with AIQ (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 AIQ
(other than ownership of capital stock of AIQ). None of the AIQ Insiders has any
direct or indirect interest in any competitor, supplier or customer of AIQ or in
any person, firm or entity from whom or to whom AIQ leases any property, or in
any other person, firm or entity with whom AIQ transacts business of any nature.
For purposes of this SECTION 3.16, the members of the immediate family of an
officer, director or employee shall consist of the spouse, parents, children and
siblings of such officer, director or employee.
3.17 COMPLIANCE WITH LAWS; PERMITS.
(a) AIQ, 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, federal, state, local and foreign
laws, ordinances, rules, regulations and other requirements pertaining to equal
employment opportunity, employee retirement, affirmative action and other hiring
practices, occupational safety and health, workers' compensation, unemployment
and building and zoning codes, which materially affect the business of AIQ and
to which AIQ may be subject, and no claims have been filed against AIQ alleging
a violation of any such laws, regulations or other requirements. AIQ is not
relying on any exemption from or deferral of any such applicable law, regulation
or other requirement that would not be available to MI after it acquires AIQ's
properties, assets and business.
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(b) AIQ has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign authorities (including,
without limitation, federal and state agencies regulating occupational health
and safety) necessary to conduct its business and operate its properties (other
than Environmental Permits, as such term is defined in SECTION 3.18 hereof)
(collectively, the "AIQ Permits"). A true, correct and complete list of all the
AIQ Permits is set forth in SCHEDULE 3.17 hereto. AIQ has conducted its business
in compliance with all material terms and conditions of the Permits.
(c) In particular, but without limiting the generality of the foregoing,
AIQ has not violated and has no liability, and has not received a notice or
charge asserting any violation of or liability under, the federal Occupational
Safety and Health Act of 1970 or any other federal or state acts (including
rules and regulations thereunder) regulating or otherwise affecting employee
health and safety.
3.18 ENVIRONMENTAL MATTERS.
(a) As used in this SECTION 3.18, 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 AIQ to any imposition of costs or liability
under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state, local
and foreign 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, local and foreign 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).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether intentional
or unintentional, of any Hazardous Material.
(iv) "Environmental Permits" shall mean all environmental permits,
licenses, certificates of compliance, approvals and other authorizations
necessary to conduct AIQ's business.
(b) AIQ and the AIQ Real Property are in material compliance with all
applicable Environmental Laws.
(c) AIQ has obtained, and maintained in full force and effect, all
Environmental Permits AIQ has conducted their respective business in compliance
with all terms and conditions of the Environmental Permits. AIQ has filed all
reports and notifications required to be filed under and pursuant to all
applicable Environmental Laws.
(d) Except as set forth in SCHEDULE 3.18 hereto, AIQ has not received
notice alleging in any manner that AIQ is, or might be potentially responsible
for any Release of Hazardous Materials, or any costs arising under or violation
of Environmental Laws.
(e) No expenditure will be required in order for MI, New MI, Merger Sub or
the Surviving Company to comply with any Environmental Laws in effect at the
time of the Closing in connection with the operation or continued operation of
the business in order to operate or continue operation of the business of AIQ or
the Real Property in a manner consistent with the current operation thereof by
AIQ.
(f) AIQ is not and has not been listed on the United States Environmental
Protection Agency National Priorities List of Hazardous Waste Sites, or any
other list, schedule, law, inventory or record of hazardous or solid waste sites
maintained by any federal, state or local agency.
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(g) No lien has been attached or filed against AIQ or the AIQ Real Property
in favor of any governmental or private entity for (i) any liability or
imposition of costs under or violation of any applicable Environmental Law; or
(ii) any Release of Hazardous Materials.
3.19 ABSENCE OF CERTAIN DEVELOPMENTS. Since the date of the AIQ Latest
Balance Sheet and except as disclosed on SCHEDULE 3.19, AIQ has not:
(a) borrowed any amount or incurred or become subject to any liability
in excess of $10,000, except (i) current liabilities incurred in the
ordinary course of business and (ii) liabilities under contracts entered
into in the ordinary course of business;
(b) mortgaged, pledged, or subjected to any lien, charge or any other
encumbrance, any of its assets with a fair market value in excess of
$10,000, except (i) liens for current property taxes not yet due and
payable, (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, (iii) liens in respect of pledges or deposits
under workers' compensation laws, (iv) liens set forth in SCHEDULE 3.19
attached hereto, or (v) liens voluntarily created in the ordinary course of
business, all of which liens aggregate less than $10,000;
(c) declared or paid any dividends or other distributions with respect
to any shares of AIQ's capital stock or redeemed or purchased, directly or
indirectly, any shares of AIQ's capital stock or any options;
(d) 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, except as otherwise described in SCHEDULE 3.19
hereto; or
(e) made any change in accounting principles or practices from those
utilized in the preparation of the AIQ Financial Statements.
3.20 DISCLOSURE. The representations and warranties of AIQ contained in
this Agreement are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to AIQ which has not been
disclosed to MI pursuant to this Agreement, the Schedules hereto, all taken
together as a whole, which has had or could reasonably be expected to have a
Material Adverse Effect on AIQ or materially adversely affect the ability of AIQ
to consummate in a timely manner the transactions contemplated hereby.
3.21 PROXY STATEMENT. At the time the Proxy Statement is mailed to the
shareholders of MI in order to obtain approvals referred to in SECTION 6.9
hereof and at all times subsequent to such mailing up to and including the times
of such approvals, the Proxy Statement (including any amendments or supplements
thereto), with respect to all information set forth therein relating to AIQ and
its shareholders, this Agreement, the Articles of Merger, and all other
transactions contemplated hereby, will (a) comply in all material respects with
applicable provisions of the Securities Act and the Exchange Act, and (b) not
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading, except that, in each case, no such representations shall apply to
any written information, including financial statements, of or provided by MI
for such Proxy Statement.
3.22 SECURITIES ACT SALES. Prior to the Closing Date, AIQ has delivered
or made available to MI complete and accurate copies of AIQ's Confidential
Private Offering Summary dated August 15, 2000, including all exhibits,
supplements and amendments thereto. As of their respective dates or as
subsequently amended prior to the date hereof, such documents (i) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and (ii)
complied as to form in all material respects with the applicable rules and
regulations of the SEC.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MI
MI hereby represents and warrants to AIQ as follows:
4.1 ORGANIZATION AND QUALIFICATION. MI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
and has the requisite corporate power to carry on its business as now conducted.
Each of the MI Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the respective state of such subsidiary's
incorporation. The copies of the Articles and Bylaws of MI and Merger Sub, which
have been made available to AIQ on or prior to the date of this Agreement, are
correct and complete copies of such documents as in effect as of the date of
this Agreement. MI is licensed or qualified to do business in every jurisdiction
which the nature of its business or its ownership of property requires it to be
licensed or qualified, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on MI.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION. Each of MI
and Merger Sub has the requisite corporate power and authority to enter into
this Agreement, the Articles of Merger and the other agreements described herein
to which it is or will be a party and to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Articles of
Merger by MI, and the consummation by MI and Merger Sub of the transactions
contemplated hereby and thereby have been duly authorized by the Boards of
Directors of MI and Merger Sub. Except for approval of this Agreement, the
Merger and the Reincorporation Merger by the requisite vote of MI's
shareholders, no other corporate proceedings on the part of MI and Merger Sub
are necessary to authorize the execution and delivery of this Agreement, the
Articles of Merger and the Reincorporation Articles of Merger and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by MI and Merger Sub and, assuming it is a
valid and binding obligation of AIQ, constitutes a valid and binding obligation
of MI and Merger Sub enforceable in accordance with its terms except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. The Articles of Merger, when
executed and delivered by Merger Sub, will constitute the valid and binding
obligation of Merger Sub enforceable in accordance with its terms. Except as set
forth in SCHEDULE 4.2, neither MI nor any of the MI Subsidiaries is subject to,
nor obligated under, any provision of (a) its Articles or Bylaws, (b) any
agreement, arrangement or understanding, (c) any license, franchise or permit,
nor (d) subject to obtaining the approvals referred to in the next sentence, any
law, regulation, order, judgment or decree, which would conflict with, be
breached or violated, or in respect of which a right of termination or
acceleration or any security interest, charge or encumbrance on any of its
assets would be created, by the execution, delivery or performance of this
Agreement and the Articles of Merger, or the consummation of the transactions
contemplated hereby or thereby, other than any such conflicts, breaches,
violations, rights of termination or acceleration or security interests, charges
or encumbrances which, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on MI. Except for (a) the filings, notices,
consents and approvals described in SECTION 3.2 hereof, (b) approval of the
Reincorporation Merger, the Merger, this Agreement and MI's Reincorporation
Articles by the requisite vote of the shareholders of MI (the "Requisite MI
Shareholder Vote"), (c) the filing of the Articles of Merger and the
Reincorporation Articles with the Secretaries of State of Minnesota and Colorado
(as appropriate) in accordance with the MBCA and CBCA, and (d) such filings,
authorizations or approvals as may be set forth in SCHEDULE 4.2, no
authorization, consent or approval of, or filing with, any public body, court or
authority is necessary on the part of MI for the consummation by MI or Merger
Sub of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make the same will not, in the aggregate, have a Material Adverse
Effect on MI or Merger Sub.
4.3 CAPITALIZATION. The authorized, issued and outstanding shares of
capital stock of each of MI and Merger Sub as of the date hereof is correctly
set forth on SCHEDULE 4.3. The issued and outstanding shares of capital stock of
each of MI and Merger Sub are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive rights.
Except as disclosed on SCHEDULE 4.3, there are
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no options, warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating MI or Merger Sub to issue, sell, purchase
or redeem any shares of its capital stock or securities or obligations of any
kind convertible into or exchangeable for any shares of its capital stock.
SCHEDULE 4.3 contains true and correct copies of all such agreements,
arrangements (including all stock plans, but excluding individual stock option
agreements) or commitments. The outstanding shares of MI Common Stock have been
listed for trading on the NASDAQ Small Cap market system.
4.4 EXCHANGE ACT REPORTS. Prior to the Closing Date, MI has delivered or
made available to AIQ complete and accurate copies of (a) MI's Annual Reports on
Form 10-K (as amended) for the years ended December 31, 1997, 1998 and 1999 (the
"MI 10-K Reports") as filed with the SEC, (b) all MI proxy statements and annual
reports to shareholders used in connection with meetings of MI shareholders held
since January 1, 1998 other than the Proxy Statement described in SECTION 6.4
below (the "MI Proxy Statements"); (c) MI's Quarterly Reports on Form 10-Q (as
amended) for the quarters ended March 31, June 30, and September 30, 2000 (the
"MI 10-Q Reports") as filed with the SEC; and (d) all current reports on Form
8-K filed with the SEC after September 30, 2000 (the "MI 8-K Reports"). As of
their respective dates or as subsequently amended prior to the date hereof, such
documents (i) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied as to form in all material respects with the
applicable rules and regulations of the SEC. Since January 1, 1998, MI has filed
in a timely manner all reports that it was required to file with the SEC
pursuant to Section 13(a), 14(a), 14(c) and 15(d) of the Exchange Act. The
aforementioned MI financial statements (including footnotes thereto) contained
in the MI 10-K Reports and the MI 10-Q Reports were prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as
otherwise noted therein) are based upon the information contained in the books
and records of MI and fairly present the financial condition of MI as of the
dates thereof and results of operations for the periods referred to therein.
MI's audited financial statements as set forth in the MI 10-K Reports and MI
Proxy Statements have been prepared in accordance with GAAP. MI's unaudited
financial statements as set forth in the MI 10-Q Reports and the MI Proxy
Statements have been prepared in accordance with GAAP applicable to unaudited
interim financial statements (and thus may not contain all notes and may not
contain prior period comparative data which are required to be prepared in
accordance with GAAP) consistently with MI's audited financial statements as
described above and reflect all adjustments necessary to a fair statement of the
results for the interim periods presented.
4.5 SUBSIDIARIES. For each MI Subsidiary, SCHEDULE 4.5 correctly sets
forth the name of such subsidiary. Except as disclosed on SCHEDULE 4.5, all of
the issued and outstanding shares of capital stock of each MI Subsidiary are
owned directly by MI free and clear of any option, lien, pledge, security
interest, encumbrance or change of any kind. Except as set forth in SCHEDULE
4.5, MI does not own any stock, partnership interest, joint venture interest or
any other security or ownership interest issued by any other corporation,
organization or entity.
4.6 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in MI's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, in its
Proxy Statement dated July 11, 2000, in the MI 8-K Reports or on SCHEDULES 4.6
OR 4.9, unless otherwise expressly contemplated or permitted by this Agreement
or as contemplated in the foregoing Proxy Statement described in SECTION 4.10
below, since September 30, 2000 to the date hereof, MI has not:
(a) issued or sold any of its equity securities other than MI Common
Stock, securities convertible into or exchangeable for its equity
securities other than MI Common Stock, warrants, options or other rights to
acquire its equity securities other than MI Common Stock;
(b) reclassified any of its outstanding shares of capital stock except
pursuant to this Agreement;
(c) entered into a written agreement to do any of the foregoing;
(d) sold or otherwise disposed of any assets other than in the
ordinary course of business;
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(e) except for borrowing from any MI Subsidiary, borrowed any amount
or incurred or become subject to any liability in excess of $10,000, except
(i) current liabilities incurred in the ordinary course of business and
(ii) liabilities under contracts entered into in the ordinary course of
business;
(f) mortgaged, pledged, or subjected to any lien, charge or any other
encumbrance, any of its assets with a fair market value in excess of
$10,000, except (i) liens for current property taxes not yet due and
payable, (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, (iii) liens in respect of pledges or deposits
under workers' compensation laws, (iv) liens set forth in SCHEDULE 4.6
attached hereto, or (v) liens voluntarily created in the ordinary course of
business, all of which liens aggregate less than $10,000;
(g) declared or paid any dividends or other distributions with respect
to any shares of MI's capital stock or redeemed or purchased, directly or
indirectly, any shares of MI's capital stock or any options; or
(h) made any change in accounting principles or practices from those
utilized in the preparation of the Financial Statements.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in the
audited consolidated balance sheet of MI dated December 31, 1999 (the "MI Latest
Balance Sheet"), MI has no liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether known or
unknown, and regardless of when asserted) arising out of transactions or 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 MI
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), or (ii) as otherwise set forth in SCHEDULE 4.7
attached hereto.
4.8 NO MATERIAL ADVERSE CHANGE. Except as disclosed in SCHEDULE 4.8,
since the date of the MI Latest Balance Sheet, there has been no material
adverse change in the assets or financial condition of MI, other than as
disclosed by MI in reports filed with the SEC since the date of the MI Latest
Balance Sheet pursuant to the Exchange Act.
4.9 LITIGATION. Except as set forth in SCHEDULE 4.9, as of the date
hereof, there are no actions, suits, proceedings, orders or investigations
pending or threatened against MI, at law or in equity, or before or by any
federal, state or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which challenges or seeks to make
illegal or to delay or otherwise directly or indirectly to restrain or prohibit
the consummation of the transactions contemplated hereby or seeks to obtain
material damages in connection with the transactions contemplated hereby.
4.10 NO BROKERS OR FINDERS. Except as disclosed on SCHEDULE 4.10, there
are no claims for brokerage commissions, finders' fees, investment advisory fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement, understanding, commitment or agreement made
by or on behalf of MI.
4.11 PROXY STATEMENT. At the time the Proxy Statement is mailed to the
shareholders of MI in order to obtain approvals referred to in SECTION 6.9
hereof and at all times subsequent to such mailing up to and including the times
of such approvals, the Proxy Statement (including any amendments or supplements
thereto), with respect to all information set forth therein relating to MI and
its shareholders, this Agreement, the Articles of Merger, and all other
transactions contemplated hereby, will (a) comply in all material respects with
applicable provisions of the Securities Act and the Exchange Act, and (b) not
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading, except that, in each case, no such representations shall apply to
any written information, including financial statements, of or provided by AIQ
for such Proxy Statement.
4.12 VALIDITY OF THE SURVIVING COMPANY COMMON STOCK. The shares of New MI
Common Stock to be issued to holders of AIQ Common Stock pursuant to this
Agreement will be, when issued, duly authorized,
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validly issued, fully paid and nonassessable. The shares issuable upon exercise
of the Merger Warrants issued to holders of AIQ Common Stock will be duly
authorized, validly issued, fully paid and non-assessable when issued in
accordance with the Merger Warrants.
4.13 TAX MATTERS.
(a) MI has: (i) timely filed (or has had timely filed on its behalf) all
returns, declarations, reports, estimates, information returns, and statements
("Returns") required to be filed or sent by it in respect of any Taxes or
required to be filed or sent by it by any taxing authority having jurisdiction;
(ii) timely and properly paid (or has had paid on its behalf) all Taxes shown to
be due and payable on such Returns; (iii) established on the MI Latest Balance
Sheet, in accordance with GAAP, reserves that are adequate for the payment of
any Taxes not yet due and payable; (iv) complied with all applicable laws,
rules, and regulations relating to the withholding of Taxes and the payment
thereof (including, without limitation, withholding of Taxes under Sections 1441
and 1442 of the Code or similar provisions under any foreign laws), and timely
and properly withheld from individual employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under all applicable laws.
(b) There are no liens for Taxes upon any assets of MI, except liens for
Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against MI that has not been resolved and paid in full or is hereby contested in
good faith, as set forth on SCHEDULE 4.13. Except as disclosed in SCHEDULE 4.13,
no waiver, extension or comparable consent given by MI regarding the application
of the statute of limitations with respect to any Taxes or Returns is
outstanding, nor is any request for any such waiver or consent pending. There
has been no Tax audit or other administrative proceeding or court proceeding
with regard to any Taxes or Returns, nor is any such Tax audit or other
proceeding pending, nor has there been any notice to MI by any Taxing authority
regarding any such Tax, audit or other proceeding, nor is any such Tax audit or
other proceeding threatened with regard to any Taxes or Returns. MI does not
expect the assessment of any additional Taxes of MI and MI is not aware of any
unresolved questions, claims or disputes concerning the liability for Taxes of
MI which would exceed the estimated reserves established on its books and
records.
(d) MI is not a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code and the consummation of
the transactions contemplated by this Agreement will not be a factor causing
payments to be made by MI or any MI Subsidiary that are not deductible (in whole
or in part) under Section 280G of the Code.
(e) Except as set forth in SCHEDULE 4.13, MI has not requested any
extension of time within which to file any Return, which Return has not since
been filed.
4.14 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 4.14 hereto lists the following agreements, whether oral or
written, to which MI is a party, which are currently in effect: (i) collective
bargaining agreement or contract with any labor union; (ii) bonus, pension,
profit sharing, retirement or other form of deferred compensation plan; (iii)
hospitalization insurance or other welfare benefit plan or practice, whether
formal or informal; (iv) stock purchase or stock option plan; (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) confidentiality agreement; (vii) contract, agreement or understanding
relating to the voting of MI Common Stock or the election of directors of MI;
(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 MI;
(ix) guaranty of any obligation of a third party, including any subsidiary of
MI; (x) lease or agreement under which MI is lessee of, or holds or operates any
property, real or personal, owned by any other party, for which the annual
rental exceeds $10,000; (xi) lease or agreement under which MI is lessor of, or
permits any third party to hold or operate, any property, real or personal, for
which the annual rental exceeds $10,000; (xii) contract which prohibits MI from
freely engaging in business anywhere in the world; (xiii) license agreement or
agreement providing for the payment or receipt of royalties or other
compensation by MI in connection with MI's intellectual property rights; (xiv)
contract
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or commitment for capital expenditures in excess of $10,000; (xv) agreement for
the sale of any capital asset; (xvi) contract with any Affiliate that in any way
relates to MI (other than for employment on customary terms); (xvii) agreement
or obligation granting registration rights or preemptive rights; or (xviii)
other agreement which is either material to MI's business or was not entered
into in the ordinary course of business.
(b) MI has performed all material obligations required to be performed by
it in connection with the contracts or commitments required to be disclosed in
SCHEDULE 4.14 hereto and is not in receipt of any claim of default under any
contract or commitment required to be disclosed under such caption; MI 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 MI has no knowledge of any breach or anticipated breach by any
other party to any contract or commitment required to be disclosed under such
caption.
4.15 INTELLECTUAL PROPERTY. MI has not received any notice of any
infringement, misappropriation or violation by MI of any intellectual property
rights of any third parties and MI has not infringed, misappropriated or
otherwise violated any such intellectual property rights.
4.16 EMPLOYEES. Except as otherwise set forth in SCHEDULE 4.16, (a) MI
has complied with all laws relating to the employment of labor, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other taxes; (b) MI has no
material labor relations problem pending and its labor relations are
satisfactory; (c) there are no workers' compensation claims pending against MI
nor is MI aware of any facts that would give rise to such a claim; and (d) no
employee or former employee of MI has any claim with respect to any intellectual
property rights of MI.
4.17 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 4.17 hereto, with respect to all
employees and former employees of MI and all dependents and beneficiaries of
such employees and former employees, (i) MI does not maintain or contribute to
any nonqualified deferred compensation or retirement plans, contracts or
arrangements; (ii) MI does not maintain or contribute to any qualified defined
contribution plans (as defined in Section 3(34) of ERISA, or Section 414(i) of
the Code; (iii) MI does not maintain or contribute to any qualified defined
benefit plans (as defined in Section 3(35) of ERISA or Section 414(j) of the
Code); and (iv) MI does not maintain or contribute to any employee welfare
benefit plans (as defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all employee benefit plans (as defined
in Section 3(3) of ERISA) which MI does maintain or to which it does contribute
(collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made and a proper accrual has been made
for all contributions due in the current fiscal year; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) MI does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. MI has no actual or
potential liabilities under Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan. MI has no actual or potential liability
for death or medical benefits after separation from employment, other than (i)
death benefits under the employee benefit plans or programs (whether or not
subject to ERISA) set forth in SCHEDULE 4.17 hereto and (ii) health care
continuation benefits described in Section 4980B of the Code.
(d) Neither MI nor any of its directors, officers, employees or other
"fiduciaries," as such 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 which would subject MI, Merger Sub, the Surviving
Company, or any of their respective directors, officers or employees to any
liability under ERISA or any applicable law.
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(e) MI has not incurred any liability for any tax or civil penalty or any
disqualification of any employee benefit plan (as defined in Section 3(3) of
ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6 of Title I and
Section 502(i) of ERISA.
4.18 INSURANCE. SCHEDULE 4.18 hereto, lists and briefly describes each
material insurance policy maintained by MI and each MI Subsidiary with respect
to MI's and such MI Subsidiary's properties, assets and operations and sets
forth the date of expiration of each such insurance policy. All of such
insurance policies are in full force and effect and are issued by insurers of
recognized responsibility. MI is not in default with respect to its obligations
under any of such insurance policies.
4.19 AFFILIATE TRANSACTIONS. Except for transactions with any MI
Subsidiaries and as disclosed in SCHEDULE 4.19 hereto, and other than pursuant
to this Agreement, no officer, director or employee of MI 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 material agreement with MI (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 MI (other than ownership
of capital stock of MI). For purposes of this SECTION 4.19, "material agreement"
means any such agreement or contract, whether oral or written, in which one
party is obligated to another to provide value of at least $10,000 on an annual
basis.
4.20 CONTROL OF SUBSIDIARIES. Except as set forth on SCHEDULE 4.20,
within the last two (2) years: MI has owned all of the outstanding shares of
capital stock of each MI Subsidiary; no MI Subsidiary has operated as a division
or department of MI; each MI Subsidiary has been adequately capitalized in
relation to its business operations; MI has not directly paid the salaries or
expenses or losses of any MI Subsidiary in any material amount; and each MI
Subsidiary has observed its corporate form.
4.21 COMPLIANCE WITH LAWS; PERMITS.
(a) MI and its respective officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal, state, local and
foreign laws, ordinances, rules, regulations and other requirements pertaining
to equal employment opportunity, employee retirement, affirmative action and
other hiring practices, occupational safety and health, workers' compensation,
unemployment and building and zoning codes, which materially affect the business
of MI or the MI Real Property and to which MI may be subject, and no claims have
been filed against MI alleging a violation of any such laws, regulations or
other requirements. MI is not relying on any exemption from or deferral of any
such applicable law, regulation or other requirement that would not be available
to the Surviving Company after the Effective Time.
(b) MI has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign 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 4.22
hereof) (collectively, the "Permits"). A true, correct and complete list of all
the Permits is set forth in SCHEDULE 4.21 hereto. MI has conducted its business
in compliance with all material terms and conditions of the Permits.
(c) MI has no material liability and has not received a notice or charge
asserting any violation of or liability under, the federal Occupational Safety
and Health Act of 1970 or any other federal or state acts (including rules and
regulations thereunder) regulating or otherwise affecting employee health and
safety which will exist after the Merger.
4.22 ENVIRONMENTAL MATTERS.
(a) As used in this SECTION 4.22, 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,
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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 MI to any imposition of costs
or liability under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state, local
and foreign 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, local and foreign 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).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether intentional
or unintentional, of any Hazardous Material.
(iv) "Environmental Permits" shall mean all environmental permits,
licenses, certificates of compliance, approvals and other authorizations
necessary to conduct MI's business.
(b) MI and the MI Real Property are in material compliance with all
applicable Environmental Laws.
(c) MI has obtained, and maintained in full force and effect, all
environmental permits, licenses, certificates of compliance, approvals and other
authorizations necessary to conduct its business and own or operate the MI Real
Property (collectively, the "Environmental Permits"). MI has conducted its
business in compliance with all terms and conditions of the Environmental
Permits. MI has filed all reports and notifications required to be filed under
and pursuant to all applicable Environmental Laws.
(d) Except as set forth in SCHEDULE 4.22 hereto, MI has not received notice
alleging in any manner that MI is, or might be potentially responsible for any
Release of Hazardous Materials, or any costs arising under or violation of
Environmental Laws.
(e) No expenditure will be required in order for MI, Merger Sub or the
Surviving Company to comply with any Environmental Laws in effect at the time of
the Closing in connection with the operation or continued operation of the
business of MI or the MI Real Property in a manner consistent with the current
operation thereof by MI.
(f) MI and the MI Real Property are not and have not been listed on the
United States Environmental Protection Agency National Priorities List of
Hazardous Waste Sites, or any other list, schedule, law, inventory or record of
hazardous or solid waste sites maintained by any federal, state or local agency.
(g) No lien has been attached or filed against MI or the MI Real Property
in favor of any governmental or private entity for (i) any liability or
imposition of costs under or violation of any applicable Environmental Law; or
(ii) any Release of Hazardous Materials.
4.23 DISCLOSURE. The representations and warranties of MI contained in
this Agreement are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to MI which has not been
disclosed to AIQ pursuant to this Agreement, the Schedules hereto and the MI
10-K Reports, the MI 10-Q Reports, the MI 8-K Reports and the Proxy Statement
dated December 8, 1998, all taken together as a whole, which has had or could
reasonably be expected to have a Material Adverse Effect on MI or any MI
Subsidiary or materially adversely affect the ability of MI or Merger Sub to
consummate in a timely manner the transactions contemplated hereby.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 CONDUCT OF BUSINESS BY MI. Except as set forth on SCHEDULE 5.1, from
the date of this Agreement to the Effective Date, unless AIQ shall otherwise
agree in writing or as otherwise expressly contemplated or permitted by other
provisions of this Agreement, including but not limited to, this SECTION 5.1, MI
shall not, directly or indirectly, (a) amend or propose to amend its Articles or
Bylaws except for the New Articles, (b) issue or sell any additional shares of,
or options, warrants, conversions, privileges or rights of any kind to acquire
any shares of, any of its capital stock, except as otherwise set forth in
SCHEDULE 5.1 hereto, (c) reclassify, subdivide or otherwise change outstanding
shares of capital stock of MI whether by stock dividend, reverse stock split,
distribution of securities convertible into MI capital stock or otherwise, (d)
acquire (by merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or other business
organization or division or assets thereof, (e) default in its obligations under
any material debt, contract or commitment which default results in the
acceleration of obligations due thereunder, except for such defaults arising out
of this Agreement for which consents, waivers or modifications are required to
be obtained as set forth on SCHEDULE 4.2, (f) enter into or propose to enter
into, or modify or propose to modify, any agreement, arrangement, or
understanding with respect to any of the foregoing matters; or (g) conduct its
business other than in the ordinary course on an arm's length basis and in
accordance in all material respects with all applicable laws, rules and
regulations and MI's past custom and practice; provided, however, that nothing
in this SECTION 5.1 shall preclude MI from selling its operating subsidiaries,
or the assets owned by such subsidiaries, as contemplated by SECTION 7.3(A)
hereof.
5.2 CONDUCT OF BUSINESS BY AIQ. From the date of this Agreement to the
Effective Date, unless MI shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by other provisions of this Agreement,
including but not limited to, this SECTION 5.2, AIQ shall not, directly or
indirectly, (a) amend its Articles or Bylaws, (b) split, combine or reclassify
any outstanding shares of capital stock of AIQ, (c) declare, set aside, make or
pay any dividend or distribution in cash, stock, property or otherwise with
respect to the capital stock of AIQ, (d) default in its obligations under any
material debt, contract or commitment which default results in the acceleration
of obligations due thereunder, except for such defaults arising out of this
Agreement for which consents, waivers or modifications are required to be
obtained as set forth on SCHEDULE 3.2, (e) conduct its business other than in
the ordinary course on an arms length basis and in accordance in all material
respects with all applicable laws, rules and regulations and AIQ's past custom
and practice, (f) issue or sell any additional shares of, or options, warrants,
conversions, privileges or rights of any kind to acquire any shares of, any of
its capital stock, except as otherwise set forth in SCHEDULE 5.2 hereto, or (g)
except for AIQ's proposed acquisition of Edge Technologies, Inc., 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. Additionally, AIQ shall use its best
efforts to prevent its shareholders from transferring any of their shares of AIQ
Common Stock to any person who is not an "accredited investor," as that term is
defined by Rule 501(a) promulgated under the Securities Act.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 GOVERNMENTAL FILINGS. Each party will use all reasonable efforts and
will cooperate with the other party in the preparation and filing, as soon as
practicable, of all filings, applications or other documents required under
applicable laws, including, but not limited to, the Exchange Act, to consummate
the transactions contemplated by this Agreement. Prior to submitting each
filing, application, registration statement or other document with the
applicable regulatory authority, each party will, to the extent practicable,
provide the other party with an opportunity to review and comment on each such
application, registration statement or other document to the extent permitted by
applicable law. Each party will use all reasonable efforts and will cooperate
with the other party in taking any other actions necessary to obtain such
regulatory or other approvals and consents at the earliest practicable time,
including participating in any
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required hearings or proceedings. Subject to the terms and conditions herein
provided, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
6.2 EXPENSES. Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses; provided, however, that AIQ shall be solely responsible for all
expenses incurred in connection with the tax opinion to be obtain as
contemplated by SECTION 6.12 and AIQ and MI shall share in all costs and
expenses relating to the printing and mailing of the Proxy Statement equally.
6.3 DUE DILIGENCE; ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Between the date hereof and the date of filing the Definitive Proxy
Statement referred to in SECTION 6.4 with the SEC, AIQ and MI shall afford to
the other party and their authorized representatives the opportunity to conduct
and complete a due diligence investigation of the other party as described
herein in order to verify the representations and warranties of the respective
parties. In light of the foregoing, each party shall permit the other party full
access on reasonable notice and at reasonable hours to its properties and shall
disclose and make available (together with the right to copy) to the other party
and its officers, employees, attorneys, accountants and other representatives,
all books, papers and records relating to the assets, stock, properties,
operations, obligations and liabilities of such party and its subsidiaries,
including, without limitation, all books of account (including, without
limitation, the general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, bylaws, contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files (including, without limitation, legal research memoranda),
attorney's audit response letters, documents relating to assets and title
thereto (including, without limitation, abstracts, title insurance policies,
surveys, environmental reports, opinions of title and other information relating
to the real and personal property), plans affecting employees, securities
transfer records and shareholder lists, and any books, papers and records
relating to other assets or business activities in which such party may have a
reasonable interest, and otherwise provide such assistance as is reasonably
requested in order that each party may have a full opportunity to make such
investigation and evaluation as it shall reasonably desire to make of the
business and affairs of the other party; provided, however, that the foregoing
rights granted to each party shall, whether or not and regardless of the extent
to which the same are exercised, in no way affect the nature or scope of the
representations, warranties and covenants of the respective party set forth
herein. In addition, each party and its officers and directors shall cooperate
fully (including providing introductions, where necessary) with such other party
to enable the party to contact third parties, including customers, prospective
customers, specifying agencies or others as the party deems reasonably necessary
to complete its due diligence; provided that such party agrees not to initiate
such contacts without the prior approval of the other party, which approval will
not be unreasonably withheld.
(b) Prior to Closing and if, for any reason, the transactions contemplated
by this Agreement are not consummated, neither MI nor AIQ nor any of their
officers, employees, attorneys, accountants and other representatives, shall
disclose to third parties or otherwise use any confidential information received
from the other party in the course of investigating, negotiating, and performing
the transactions contemplated by this Agreement; provided, however, that nothing
shall be deemed to be confidential information which:
(i) is known to the party receiving the information at the time of
disclosure;
(ii) becomes publicly known or available without the disclosure
thereof by the party receiving the information in violation of this
Agreement; or
(iii) is rightfully received by the party receiving the information
from a third party.
This provision shall not prohibit the disclosure of information required to be
made under federal or state securities laws. If any disclosure 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.
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6.4 PROXY STATEMENT.
(a) For the purpose of holding a meeting of the shareholders of MI to
approve the Merger and the Reincorporation Merger, the parties hereto shall
cooperate in the preparation of an appropriate Proxy Statement, which shall
satisfy all applicable requirements of the Exchange Act and the rules and
regulations thereunder (such proxy statement, together with any and all
amendments or supplements thereto, being herein referred to as the "Proxy
Statement").
(b) AIQ shall furnish such information concerning AIQ as is necessary in
order to cause the Proxy Statement, insofar as it relates to AIQ and AIQ
securities, to be prepared in accordance with SECTION 6.4(a). AIQ agrees
promptly to advise MI if at any time prior to the MI shareholders' meeting any
information provided by AIQ in the Proxy Statement becomes incorrect or
incomplete in any material respect, and to provide MI the information needed to
correct such inaccuracy or omission.
(c) MI shall use all reasonable efforts to promptly prepare and submit the
Proxy Statement with the SEC and the NASD. MI shall use reasonable efforts to
file the definitive Proxy Statement at the earliest practicable date. MI agrees
to provide AIQ and its counsel with reasonable opportunity to review and comment
on the Proxy Statement and any amendment thereto before filing with the SEC or
any other governmental entity and agrees not to make such filing if AIQ and its
counsel reasonably object to the completeness or accuracy of any information
contained therein. AIQ authorizes MI to utilize in the Proxy Statement the
information concerning AIQ and AIQ securities provided to MI for the purpose of
inclusion in the Proxy Statement. MI shall advise AIQ promptly when the
definitive Proxy Statement has been filed and shall furnish AIQ with copies of
all such documents.
(d) MI and AIQ shall bear all printing and mailing costs equally in
connection with the preparation and mailing of the Proxy Statement to MI
shareholders. AIQ and MI shall each bear their own legal and accounting expenses
in connection with the Proxy Statement.
6.5 TAX TREATMENT. Neither MI nor AIQ, nor Surviving Company after the
Effective Date, shall knowingly take any action which would disqualify the
Merger as a "reorganization" that would be tax free to the shareholders of MI
and AIQ pursuant to Section 368(a) of the Code.
6.6 PRESS RELEASES. AIQ and MI shall agree with each other as to the form
and substance of any press release or public announcement related to this
Agreement or the transactions contemplated hereby; provided, however, that
nothing contained herein shall prohibit either party, following notification to
the other party, from making any disclosure which is required by law or
regulation. 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.
6.7 SECURITIES REPORTS. MI agrees to provide to AIQ copies of all reports
and other documents filed under the Securities Act or Exchange Act with the SEC
by it between the date hereof and the Effective Date within two (2) days after
the date such reports or other documents are filed with the SEC.
6.8 NASDAQ LISTING. MI and AIQ shall use all reasonable efforts to (a)
obtain approval for listing of, or to maintain the listing of, the shares of the
New MI Common Stock on the NASDAQ Small Cap Market System, (b) list the shares
of New MI Common Stock to be issued in connection with the Merger on the NASDAQ
Small Cap Market System, and (c) to change its current trading symbol for MI
Common Stock to a symbol approved by AIQ.
6.9 SHAREHOLDER APPROVALS. Each of AIQ and MI shall call a meeting of its
shareholders for the purpose of voting upon this Agreement and the Merger, and,
in the case of MI, the sale of substantially of its assets (as contemplated by
SECTION 7.3(a)) and the Reincorporation Merger, and shall hold such meeting on
such dates as mutually agreed by MI and AIQ. The Board of Directors of MI and
AIQ shall recommend approval of this Agreement, the Merger and, in the case of
MI, the sale of substantially all of its assets and the Reincorporation Merger,
and use all reasonable efforts (including, without limitation, soliciting
proxies for such approvals) to obtain approvals thereof from its shareholders;
provided, however, the Board of Directors
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may fail to make such recommendation, and/or to seek to obtain the shareholder
approval referred to in this sentence, 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 its recommendation, may constitute a breach of the fiduciary or legal
obligations of such Board of Directors.
6.10 NO SOLICITATION.
(a) Unless and until this Agreement shall have been terminated pursuant to
SECTION 8.1, neither MI 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 MI may engage in such discussion in response to an
unsolicited proposal from an unrelated party if the Board of Directors of MI
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 MI. MI will promptly advise AIQ if it
receives a proposal or inquiry with respect to the matters described above.
(b) Unless and until this Agreement shall have been terminated pursuant to
SECTION 8.1, neither AIQ 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, except for any such transaction pursuant to which (i) AIQ is the
Surviving Company in such transaction, and (ii) the shareholders of AIQ
immediately preceding such transaction will own at least fifty-one percent (51%)
of the outstanding shares of AIQ after giving effect to such transaction;
provided that AIQ may engage in such discussion in response to an unsolicited
proposal from an unrelated party if the Board of Directors of AIQ 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 AIQ. AIQ will promptly advise MI if it receives a proposal
or inquiry with respect to the matters described above.
6.11 FAILURE TO FULFILL CONDITIONS. In the event that either of the
parties hereto determines that a condition to its respective obligations to
consummate the transactions contemplated hereby cannot be fulfilled on or prior
to the termination of this Agreement, it will promptly notify the other party.
6.12 TAX OPINION. AIQ and MI shall reasonably cooperate with each other
in obtaining, at AIQ's expense, a federal tax opinion as contemplated by SECTION
7.1(d).
6.13 RESIGNATIONS AND ELECTION OF DIRECTORS. At the Effective Time, MI
shall deliver the voluntary resignations of each officer of MI and each director
of MI who is not designated to be a director of MI in accordance with SECTION
2.1(a) and the continuing MI directors shall appoint the other persons who shall
be directors of MI in accordance with SECTION 2.1(a) to be directors of MI upon
the consummation of the Merger.
6.14 NOTIFICATION OF CERTAIN MATTERS. On or prior to the Effective Date,
each party shall give prompt notice to the other party of (i) the occurrence or
failure to occur of any event or the discovery of any information, which
occurrence, failure or discovery would be likely to cause any representation or
warranty on its part contained in this Agreement to be untrue, inaccurate or
incomplete after the date hereof in any material respect or, in the case of any
representation or warranty given as of a specific date, would be likely to cause
any such representation or warranty on its part contained in this Agreement to
be untrue, inaccurate or incomplete in any material respect as of such specific
date, and (ii) any material failure of such party to comply with or satisfy any
covenant or agreement to be complied with or satisfied by it hereunder.
6.15 COVENANT NOT TO REGISTER. Other than a registration statement(s)
covering the shares issuable upon exercise of outstanding warrants and options
of the Surviving Company, the Surviving Company shall not undertake to register
with the SEC any shares of its common stock received in the Merger for a period
of
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one year from the Closing, unless Capco Energy, Inc. and Edward J. Names have
both consented thereto in writing.
6.16 CONTINUING LIABILITY. In addition to all other indemnities contained
herein, AIQ, the Surviving Company, and New MI agree that after the Closing Date
they will not alter the rights of any person who has a right to indemnification
(the "Indemnitees") from MI pursuant to the Articles of Incorporation and/or
Bylaws of MI in effect on the date of this Agreement and on the Closing Date.
AIQ, the Surviving Company, and New MI shall assume the obligations of MI to
provide indemnification to the Indemnitees of MI as if such persons were
directors of AIQ, the Surviving Company, and New MI. AIQ, the Surviving Company,
and New MI covenant that they will not take or permit any action that would
impair in any material respect the ability or obligation of AIQ, the Surviving
Company, and New MI to comply with SECTION 6.16. AIQ, the Surviving Company, and
New MI shall obtain coverage for such Indemnitees under their directors and
officers insurance policy or policies and/or maintain all current policies of
MI. In the event AIQ, the Surviving Company, and New MI, or any one of them, is
disposed of, sold, or reorganized (regardless of the method or structure of such
disposition, sale or reorganization), as a condition precedent to such
disposition, sale or reorganization, AIQ, the Surviving Company, and New MI (or
any parent company, if applicable) shall either (i) continue to provide
substantially the same coverage for the Indemnitees as required hereby; or (ii)
require the acquiring entity with which it is dealing to assume and continue its
obligations under SECTION 6.16. If the scope of indemnity to which the
Indemnitees are entitled under the Articles of Incorporation and/or Bylaws of MI
is more beneficial than the right of indemnification provided by AIQ, the
Surviving Company, and New MI, the indemnification obligation of AIQ, the
Surviving Company, and New MI hereunder shall be automatically expanded to
provide the Indemnitees with the maximum indemnification rights provided by the
Articles of Incorporation and/or Bylaws of MI.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each party to effect the transactions contemplated hereby shall be subject to
the fulfillment or waiver at or prior to the Effective Date of the following
conditions:
(a) Dissenting Shares. The number of AIQ Dissenting Shares shall not
exceed three (3) percent of the total number of shares of AIQ Common Stock
outstanding at the record date relating to the meeting of AIQ shareholders
contemplated by SECTION 6.9. The number of MI Dissenting Shares shall not exceed
three (3) percent of the total number of shares of MI Common Stock outstanding
at the record date relating to the meeting of MI shareholders contemplated by
SECTION 6.9.
(b) No Injunction. No injunction or other order entered by a state or
federal court of competent jurisdiction shall have been issued and remain in
effect which would prohibit or make illegal the consummation of the transactions
contemplated hereby.
(c) No Prohibitive Change of Law. There shall have been no law, statute,
rule or regulation, domestic or foreign, enacted or promulgated which would
prohibit or make illegal the consummation of the transactions contemplated
hereby.
(d) Federal Tax Opinion. The parties shall have received a tax opinion
addressed to AIQ and MI by counsel or independent certified accountants
acceptable to AIQ based on customary reliance and subject to customary
qualifications, to the effect that for federal income tax purposes:
(i) The formation of Merger Sub and the merger of Merger Sub into AIQ
will be disregarded for federal income tax purposes, and the transaction
will be treated as an acquisition by New MI of the AIQ Common Stock in
exchange solely for the shares of the Surviving Company Common Stock.
(ii) The Merger will qualify as a reorganization under Section 368(a)
of the Code. New MI and AIQ will each be a party to the reorganization
within the meaning of Section 368(b) of the Code.
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(iii) No gain or loss will be recognized by shareholders of AIQ and MI
upon the receipt of the Surviving Company Common Stock pursuant to Section
356(a)(1)(B) of the Code.
(e) NASDAQ Listing. NASDAQ shall not have provided any notice or other
communication to MI to the effect that, following the Merger, MI's (or New MI's)
continued listing on the NASDAQ Small Cap Market will be in jeopardy. If,
however, NASDAQ shall have given notice to MI that, as a result of the Merger,
MI, New MI or the Surviving Company are required to re-apply for listing on the
NASDAQ SmallCap Market, then such application shall have been submitted and
approved by NASDAQ prior to the Closing Date.
(f) Consents and Approvals. All consents and approvals necessary to
consummate the transactions contemplated by this Agreement shall have been
obtained, including, but not limited to, those set forth on SCHEDULES 3.2 AND
4.2 as well as any and all approvals required from the NASD 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 AIQ's assets pursuant to the provisions of, any agreement
arrangement or undertaking of or affecting AIQ or any Subsidiary of AIQ or any
license, franchise or permit of or affecting AIQ or any Subsidiary of AIQ.
(g) Adverse Proceedings. There shall not be threatened, instituted or
pending any action or proceeding before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby or seeking to obtain
material damages in connection with the transactions contemplated hereby, (ii)
seeking to prohibit direct or indirect ownership or operation by MI or Merger
Sub of all or a material portion of the business and assets of AIQ or to MI or
Merger Sub or to AIQ to dispose of or to hold separately all or a material
portion of the business or assets of MI, Merger Sub or AIQ, as a result of the
transactions contemplated hereby, (iii) seeking to invalidate or render
unenforceable any material provision of this Agreement, the Articles of Merger
or any of the other agreements attached as exhibits hereto, or (iv) otherwise
relating to and materially adversely affecting the transactions contemplated
hereby.
(h) Governmental Action. There shall not be any action taken, or any
statute, rule, regulation, judgment, order or injunction proposed, enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or other court, government or
governmental authority or agency, which could reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in SECTION
7.1(b).
(i) Investment Letter. Each of the AIQ shareholders shall have executed
and delivered to MI the Investment Letter in the form attached hereto as EXHIBIT
G.
(j) Market Condition. There shall not have occurred any general suspension
of trading on the New York Stock Exchange or NASDAQ National Market System or
NASDAQ Small Cap Market System, or any suspension of trading in MI Common Stock,
or any general bank moratorium or closing or any war, national emergency or
other event affecting the economy or securities trading markets generally that
would make completion of the Merger impossible.
(k) Exempt Offering Status. The offering of shares of New MI Common Stock
to the shareholders of AIQ, as contemplated in this Agreement, shall be exempt
from the registration requirements of the Securities Act.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF MI. The obligation of MI to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement is also subject to the fulfillment or waiver of the following
conditions:
(a) Outstanding AIQ Common Stock. Immediately prior to the Effective Time
of the Merger, there shall be no more than 4,555,000 shares of AIQ Common Stock
issued and outstanding and no more than 1,500,000 shares of AIQ Common Stock
reserved for issuance upon the exercise of all options and warrants.
(b) Lock-Up Agreements. The directors and officers of AIQ immediately
preceding the Effective Time shall each have entered into lock-up agreements in
substantially the form attached hereto as EXHIBIT H.
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(c) Fairness Opinion. MI has received, in its sole discretion, a written
opinion addressed to it for inclusion in the Proxy Statement and at the closing
of the Merger and the sale of MI's assets, that the consideration to be received
in both the Merger and in the sale of MI's assets (as contemplated by Section
7.1(a)) by the MI's shareholders is fair to MI's shareholders from a financial
point of view.
(d) Representations and Compliance. The representations and warranties of
AIQ set forth in ARTICLE III shall have been true and correct as of the date
hereof, and, except to the extent such representations and warranties are made
as of a specified date, shall be true and correct as of the Effective Date as if
made at and as of the Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a Material
Adverse Effect on AIQ. AIQ shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Date.
(e) Officers' Certificate. AIQ shall have furnished to MI a certificate of
the Chief Executive Officer and the Chief Financial Officer of AIQ, dated as of
the Effective Date, in which such officers shall certify that, to their best
knowledge, the conditions set forth in SECTION 7.2(D) have been fulfilled.
(f) Secretary's Certificate. AIQ shall have furnished to MI (i) copies of
the text of the resolutions by which the corporate action on the part of AIQ
necessary to approve this Agreement, the Articles of Merger and the transactions
contemplated hereby and thereby were taken, (ii) a certificate dated as of the
Effective Date executed on behalf of AIQ by its corporate secretary or one of
its assistant corporate secretaries certifying to MI that such copies are true,
correct and complete copies of such resolutions and that such resolutions were
duly adopted and have not been amended or rescinded, (iii) an incumbency
certificate dated as of the Effective Date executed on behalf of AIQ by its
corporate secretary or one of its assistant corporate secretaries certifying the
signature and office of each officer of AIQ executing this Agreement, the
Articles of Merger or any other agreement, certificate or other instrument
executed pursuant hereto by AIQ, and (iv) a copy of the Articles of AIQ,
certified by the Secretary of State of Minnesota, and certificates of good
standing from the Secretary of State of Minnesota evidencing the good standing
of AIQ in such jurisdiction.
(g) Shareholder Approval. This Agreement, the Merger, the Reincorporation
Merger and the sale of all or substantially all of MI's assets (as contemplated
in SECTION 7.3(A)) shall have been approved by the Requisite MI Shareholder
Vote.
(h) Edge Transaction. AIQ (or a wholly-owned subsidiary of AIQ) shall have
consummated its acquisition of Edge Technologies, Inc., a Nevada corporation.
7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF AIQ. The obligation of AIQ to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement is also subject to the fulfillment or waiver of the following
conditions:
(a) Sale of MI Subsidiaries. MI shall have sold or otherwise disposed of
all, or substantially all, of its assets (excluding any shares of AIQ Common
Stock), including without limitation, all outstanding shares of capital stock
that it holds in all of the MI Subsidiaries. In connection with the sale of such
outstanding shares of capital stock of the MI Subsidiaries:
(i) each MI Subsidiary and each purchaser of the outstanding shares of
such subsidiary held by MI shall release MI (including its successors,
predecessors, assigns, subsidiaries, affiliates, officers, directors,
agents and representatives) from any and all claims (including claims
arising under any Environmental Law), whether such claims arose from acts
or omissions occurring prior to or after the sale of such shares; and
(ii) in the purchase agreements relating to the sale by MI of the
outstanding shares of capital stock of the MI Subsidiaries, the
purchaser(s) of such shares and each MI Subsidiary shall agree to
indemnify, defend and hold harmless MI and New MI for any and all claims
arising from the ownership of such shares of any MI Subsidiary and the
operation of any MI Subsidiary (including without limitation any claims
arising under any Environmental Law), whether such claim arose prior to or
after the closing of
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the sale of such shares; provided, that the terms and conditions of such
indemnification shall be subject to the approval of AIQ, which approval
shall not be unreasonably withheld.
(b) Working Capital. MI shall have no debt, payables (including, without
limitation, any accrued income or other taxes relating to MI's sale of the MI
Subsidiaries, as contemplated in SECTION 7.3(a)) or contingent liabilities and
shall have a minimum of $4,500,000 of cash or cash equivalents available to the
Surviving Company (the "Available Cash"); provided, that if MI raises at least
$1,700,000 of gross proceeds in the MI Private Placement, then the collective
number of shares received by AIQ shareholders in the Merger shall be adjusted as
follows: if the Available Cash is less than $4,850,000, then the collective
number of shares of New MI Common Stock issued to the shareholders of AIQ shall
be increased by one (1) share of New MI Common Stock for each dollar of
Available Cash below $4,850,000; provided further, that if the Available Cash is
greater than $5,150,000, then the collective number of shares of New MI Common
Stock issued to the shareholders of AIQ shall be decreased by one (1) share of
New MI Common Stock for each dollar of Available Cash in excess of $5,150,000.
Any adjustment to the total number of shares of New MI Common Stock to be issued
to the shareholders of AIQ as provided by this SECTION 7.3(b) shall be
apportioned on a pro rata basis among such shareholders.
(c) Outstanding MI Common Stock. Immediately prior to the Effective Time
of the Merger, there shall be no more than 10,200,000 shares of MI Common Stock
outstanding on a fully diluted basis.
(d) Amendment of MI Options and Warrants. All options and warrants to
purchase shares of MI Common Stock outstanding immediately prior to the
Effective Time and held by the officers and directors of MI immediately prior to
the Effective Time shall be amended to provide that such options and warrants
expire three (3) years from the Closing Date.
(e) Lock-Up Agreements. Capco Energy, Inc. and Edward J. Names each shall
have entered into a lock-up agreement in substantially the form attached hereto
as EXHIBIT I. The officers and directors of MI immediately preceding the
Effective Time shall have entered into lock-up agreements in substantially the
form attached hereto as EXHIBIT J.
(f) Environmental Liability Opinion. AIQ shall have received a written
opinion from Perkins Coie, LLP addressing liability to New MI or the Surviving
Company under the Environmental Laws in the form attached hereto as EXHIBIT K.
(g) Representations And Compliance. The representations and warranties of
MI set forth in ARTICLE IV shall have been true and correct as of the date
hereof, and, except to the extent such representations and warranties are made
as of a specified date, shall be true and correct as of the Effective Date as if
made at and as of the Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a Material
Adverse Effect on MI. MI shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Date.
(h) Officers' Certificate. MI shall have furnished to AIQ a certificate of
the Chief Executive Officer and the Chief Financial Officer of MI, dated as of
the Effective Date, in which such officers shall certify that, to their best
knowledge, the conditions set forth in SECTION 7.3(g) have been fulfilled.
(i) Secretary's Certificate. MI shall have furnished to AIQ (i) copies of
the text of the resolutions by which the corporate action on the part of MI
necessary to approve this Agreement, the Articles of Merger, and the New
Articles, the election of the directors of the Surviving Company and the
transactions contemplated hereby and thereby were taken, (ii) Articles dated as
of the Effective Date executed on behalf of MI by its corporate secretary or one
of its assistant corporate secretaries certifying to AIQ that such copies are
true, correct and complete copies of such resolutions and that such resolutions
were duly adopted and have not been amended or rescinded, (iii) an incumbency
certificate dated as of the Effective Date executed on behalf of MI by its
corporate secretary or one of its assistant corporate secretaries certifying the
signature and office of each officer of MI executing this Agreement, the
Articles of Merger, the New Articles, or any other agreement, certificate or
other instrument executed pursuant hereto, and (iv) a copy of the New Articles
of MI, certified
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by the Secretary of State of Minnesota, and certificates of good standing from
the Secretary of State of Minnesota evidencing the good standing of MI in such
jurisdiction.
(j) Shareholder Approval. This Agreement and the Merger shall have been
approved by the Requisite AIQ Shareholder Vote.
(k) Other Agreements And Resignations. Each of the officers and
non-continuing directors of MI immediately prior to the Effective Time shall
deliver duly executed resignations from their positions with MI effective
immediately after the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1. TERMINATION. This Agreement may be terminated prior to the Effective
Date:
(a) by mutual consent of AIQ and MI, if the Board of Directors of each so
determines by vote of a majority of the members of its entire board;
(b) by either AIQ or MI, 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, or if any
of the conditions to such party's obligation to consummate the transactions
contemplated in this Agreement shall have become impossible to satisfy as a
result of no negligent or willful action by such party;
(c) by either AIQ or MI, if (i) the Merger and this Agreement is not duly
approved by the shareholders of each of AIQ or MI, including if a shareholder
meeting is not held as contemplated by the first sentence of SECTION 6.9, or
(ii) the Reincorporation Merger is not approved by the shareholders of MI,
including if a shareholder meeting is not held as contemplated by the first
sentence of SECTION 6.9;
(d) by either AIQ or MI if the number of Dissenting Shares of either
company is equal to three (3) percent or more of the total number of shares of
AIQ Common Stock or MI Common Stock, respectively, issued and outstanding at the
time of the respective meetings of shareholders of AIQ and MI contemplated by
SECTION 6.9;
(e) by MI, if the number of Dissenting Shares in the sale of assets of MI
is equal to three (3) percent or more of the total number of shares of MI Common
Stock issued and outstanding at the time of the meeting of shareholders of MI
contemplated by SECTION 7.1(a).
(f) by either AIQ or MI if the Effective Date is not on or before April 16,
2001, or such later date as AIQ and MI may mutually agree (unless the failure to
consummate the Merger by such date shall be due to the action or failure to act
of the party seeking to terminate this Agreement in breach of such party's
obligations under this Agreement); or
(g) by MI or AIQ if, after the date hereof, there shall have been a
material adverse change in the financial condition or business of the other
party or if an event shall have occurred which, so far as reasonably can be
foreseen, would result in any such change, except to the extent such change is
directly caused by the party so terminating.
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
paragraph (b) of this SECTION 8.1.
8.2 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
approved by the parties to this Agreement and signed on behalf of each of the
parties hereto.
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8.3 WAIVER.
At any time prior to the Effective Date, any party hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
other party hereto or (b) waive compliance with any of the agreements of the
other party or with any conditions to its own obligations, in each case only to
the extent such obligations, agreements and conditions are intended for its
benefit. Any such extension or waiver shall only be effective if made in writing
and duly executed by the party giving such extension or waiver.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by fax, by
telecopier, by overnight delivery service, or by registered or certified mail
(postage prepaid and return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by it by
like notice):
If to AIQ: activeIQ Technologies, Inc.
601 Carlson Parkway Suite 1500
Minnetonka, Minnesota 55305
Attn: Chairman and Chief Executive Officer
with copies to: Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: William M. Mower, Esq.
If to MI or Merger Sub: Meteor Industries, Inc.
1401 Blake Street Suite 200
Denver, Colorado 80202
Attention: President and Chief Executive
Officer
with copies to: Perkins Coie LLP
1899 Wynkoop, Suite 700
Denver, Colorado 80202
Attention: Donald Salcito and Christopher J.
Sutton
All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered, when
received; if delivered by registered or certified mail (postage prepaid and
return receipt requested), when receipt acknowledged; if faxed or telecopied,
when received, and the next day delivery after being timely delivered to a
recognized overnight delivery service.
9.2 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
Sections and Articles of this Agreement unless otherwise stated. Words such as
"herein," "hereinafter," "hereof," "hereto," "hereby" and "hereunder," and words
of like import, unless the context requires otherwise, refer to this Agreement
(including the Exhibits and Schedules hereto). As used in this Agreement, the
masculine, feminine and neuter genders shall be deemed to include the others if
the context requires.
9.3 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
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9.4 MISCELLANEOUS. This Agreement (together with all other documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; (b) shall be
governed in all respects, including validity, interpretation and effect, by the
internal laws of the State of Minnesota, without giving effect to the principles
of conflict of laws thereof; and (c) shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, but
shall not be assignable by either party hereto without the prior written consent
of the other party hereto.
9.5 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the parties set forth herein shall not survive
the consummation of the Merger, but covenants that specifically relate to
periods, activities or obligations subsequent to the Merger shall survive the
Merger. In addition, if this Agreement is terminated pursuant to SECTION 8.1,
the covenants contained in SECTION 6.3(c) shall survive such termination.
9.6 SCHEDULES. At least five (5) days prior to the Closing Date, the
parties hereto shall deliver to all other parties hereto a list of any and all
amendments to the Schedules necessary to update the Schedules from and after the
date hereof.
9.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
9.8 THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
[Remainder of Page Left Intentionally Blank - Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first written above by their respective officers.
ACTIVEIQ TECHNOLOGIES, INC.
By: /s/ KENNETH W. BRIMMER
----------------------------------
Kenneth W. Brimmer
Chairman and Chief Executive
Officer
METEOR INDUSTRIES, INC.
By: /s/ EDWARD J. NAMES
----------------------------------
Edward J. Names
President and Chief Executive
Officer
MI MERGER, INC.
By: /s/ EDWARD J. NAMES
----------------------------------
Edward J. Names
President and Chief Executive
Officer
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APPENDIX D
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Plan") is adopted as of
, 2001, by and between Active IQ Technologies, Inc., a Minnesota
corporation ("AIQ"), and Meteor Industries, Inc., a Minnesota corporation
("METEOR").
WHEREAS, AIQ is a corporation duly organized and existing under the laws of
the State of Minnesota;
WHEREAS, METEOR is a corporation duly organized and existing under the laws
of the State of Colorado;
WHEREAS, on the date hereof, AIQ has authority to issue 100,000,000 shares
of undesignated capital stock, of which 1,000 shares of Common Stock, par value
$.01 per share (the "Minnesota Common Stock") are issued and outstanding and are
owned by METEOR;
WHEREAS, on the date hereof, AIQ also has authority to issue 365,000 shares
of Series B Convertible Preferred Stock, par value $1.00 per share (the
"Minnesota Preferred Stock"), none of which has been issued or is outstanding;
WHEREAS, on the date hereof, METEOR has authority to issue 10,000,000
shares of Common Stock, par value $.001 per share (the "Colorado Common Stock"),
of which shares are issued and outstanding;
WHEREAS, on the date hereof, METEOR has authority to issue 365,000 shares
of Series B Convertible Preferred Stock, par value $1.00 per share (the
"Colorado Preferred Stock"), of which 365,000 shares are issued and outstanding;
WHEREAS, the respective boards of directors of AIQ and METEOR have
determined that, for the purpose of effecting the reincorporation of METEOR in
the State of Minnesota, it is advisable and in the best interests of such
corporations and their respective shareholders that METEOR merge with and into
AIQ upon the terms and conditions herein provided; and
WHEREAS, the respective boards of directors of AIQ and METEOR have
unanimously approved this Plan and have directed that this Plan be submitted to
a vote of their respective shareholders.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, METEOR and AIQ hereby agree to merge as follows:
1. Merger. Subject to the terms and conditions hereinafter set forth,
METEOR shall be merged with and into AIQ, which shall be the surviving
corporation in the merger (the "Merger"). The Merger shall be effective on the
date and at the time properly executed articles of merger consistent with the
terms of this Merger Agreement and Section 302A.615 of the Minnesota Business
Corporations Act (the "MBCA") is filed with the Secretary of State of the State
of Minnesota and a certificate of merger is also filed with the Secretary of the
State of Colorado as required by Section of the Colorado Business
Corporations Act (the "Effective Time").
2. Principal Office of AIQ. The principal office of AIQ is 601 Carlson
Parkway, Suite 1500, Minnetonka, Minnesota 55305.
3. Corporate Documents. The Articles of Incorporation AIQ, as in effect
immediately prior to the Effective Time, shall continue to be the Articles of
Incorporation of AIQ as the surviving corporation without change or amendment
until further amended in accordance with the provisions thereof and applicable
law. The Bylaws of AIQ, as in effect immediately prior to the Effective Time,
shall continue to be the Bylaws of AIQ as the Surviving corporation without
change or amendment until further amended in accordance with the provisions
thereof and applicable law.
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4. Directors and Officers. The directors and officers of METEOR at the
Effective Time shall be and become directors and officers, holding the same
titles and positions, of AIQ at the Effective Time, and after the Effective Time
shall serve in accordance with the Bylaws of AIQ.
5. Succession. At the Effective Time, AIQ shall succeed to METEOR in the
manner of and as more fully set forth in Section 302A.641, Subdivisions 2 and 3
of the MBCA.
6. Further Assurances. From time to time, as and when required by AIQ or
by its successors and assigns, there shall be executed and delivered on behalf
of METEOR such deeds and other instruments, and there shall be taken or caused
to be taken by it such further and other action, as shall be appropriate or
necessary in order to vest or perfect in or to confer of record or otherwise in
METEOR the title to and possession of all the interests, assets, rights,
privileges, immunities, powers, franchises and authority of METEOR, and
otherwise to carry out the purposes and intent of this Merger Agreement, and the
officers and directors of AIQ are fully authorized in the name and on behalf of
METEOR or otherwise to take any and all such actions and to execute and deliver
any and all such deeds and other instruments.
7. Common Stock of METEOR. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, each share of Colorado
Common Stock outstanding immediately prior thereto shall be changed and
converted automatically into one fully paid and nonassessable share of Minnesota
Common Stock.
8. Preferred Stock of METEOR. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
Colorado Preferred Stock outstanding immediately prior thereto shall be changed
and converted automatically into one fully paid and nonassessable share of
Minnesota Preferred Stock.
9. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which prior to that time represented shares of Colorado
Common Stock shall be deemed for all purposes to evidence ownership of and to
represent shares of Minnesota Common Stock into which the shares of the Colorado
Common Stock represented by such certificates have been converted as herein
provided. All of the outstanding certificates which prior to the Effective Time
represented shares of Colorado Preferred Stock shall be deemed for all purposes
to evidence ownership of and to represent shares of Minnesota Preferred Stock
into which the shares of Colorado Preferred Stock have been converted as herein
provided. The registered owner on the books and records of METEOR or its
transfer agent of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to AIQ or its transfer agent, have and be entitled to exercise any voting and
other rights with respect to and to receive any dividend and other distributions
upon the shares of Minnesota Common Stock or Minnesota Preferred Stock evidenced
by such outstanding certificate as above provided.
10. Options. Each option to purchase shares of Colorado Common Stock
granted under METEOR's 1994 Stock Option Plan of METEOR (the "Option Plan") or
its 1998 Incentive Equity Plan (the "Equity Plan"), which are outstanding at the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become an option to purchase the
same number of shares of Minnesota Common Stock at the same option price per
share, and upon the same terms and subject to the same conditions as set forth
in the Plan, as in effect immediately prior to the Effective Time. The same
number of shares of Minnesota Common Stock shall be reserved for purposes of the
Plan as is equal to the number of shares of Colorado Common Stock so reserved as
of the Effective Time. As of the Effective Time, AIQ hereby assumes both the
Option Plan and the Equity Plan and all obligations of METEOR under such plans,
including all outstanding options, stock appreciation rights and other awards or
portions thereof granted pursuant to such plans.
11. Warrants of METEOR. Each warrant to purchase shares of Colorado Common
Stock that are outstanding at the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into and
become an option to purchase the same number of shares of Minnesota Common Stock
at the same exercise price per share, and upon the same terms and subject to the
same conditions as set forth in each such warrant. The same number of shares of
Minnesota Common Stock shall be
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reserved for issuance as is equal to the total number of shares of Colorado
Common Stock issuable upon exercise of all of the warrants to purchase Colorado
Common Stock outstanding at the Effective Time. At the Effective Time, AIQ
assumes all of the obligations of METEOR under all such outstanding warrants to
purchase Colorado Common Stock.
12. Common Stock of AIQ. At the Effective Time, the previously outstanding
1,000 shares of Common Stock of AIQ registered in the name of METEOR and which
shall, by reason of the Merger, be reacquired by AIQ, shall be retired and shall
resume the status of authorized and unissued shares of Common Stock of AIQ, and
no shares of Minnesota Common Stock or other securities of AIQ shall be issued
in respect thereof.
13. Amendment. At any time before or after approval by the shareholders of
METEOR, this Plan may be amended in any manner (except that Sections 7 and 8 and
any of the other principal terms may not be amended without the approval of the
shareholders of METEOR) as may be determined in the judgment of the respective
Boards of Directors of AIQ and METEOR to be necessary, desirable or expedient in
order to clarify the intention of the parties hereto or to effect or facilitate
the purposes and intent of this Merger Agreement.
14. Abandonment. This Merger Agreement and the Merger contemplated hereby
are subject to approval by the holders of a majority of the outstanding shares
of Colorado Common Stock and Colorado Preferred Stock; this Agreement shall be
terminated and the Merger shall be abandoned unless they shall have so approved
on or before April 16, 2001. At any time before the Effective Time, this Merger
Agreement may be terminated and the Merger contemplated hereby may be abandoned
by the Board of Directors of either METEOR or AIQ or both, notwithstanding
approval of this Merger Agreement by the sole shareholder of AIQ or the
shareholders of METEOR, or both.
15. Rights and Duties of AIQ. At the Effective Time and for all purposes
the separate existence of METEOR shall cease and shall be merged with and into
AIQ which, as the surviving corporation, shall thereupon and thereafter possess
all the rights, privileges, immunities, licenses and franchises (whether of a
public or private nature) of METEOR; and all property (real, personal and
mixed), all debts due on whatever account, all choses in action, and all and
every other interest of or belonging to or due to METEOR shall continue and be
taken and deemed to be transferred to and vested in AIQ without further act or
deed; and the title to any real estate, or any interest therein, vested in
METEOR shall not revert or be in any way impaired by reason of such Merger; and
AIQ shall thenceforth be responsible and liable for all the liabilities and
obligations of METEOR; and, to the extent permitted by law, any claim existing,
or action or proceeding pending, by or against METEOR may be prosecuted as if
the Merger had not taken place, or AIQ may be substituted in the place of such
corporation. Neither the rights of creditors nor any liens upon the property of
METEOR shall be impaired by the Merger. If at any time AIQ shall consider or be
advised that any further assignment or assurances in law or any other actions
are necessary or desirable to vest the title of any property or rights of METEOR
in AIQ according to the terms hereof, the officers and directors of AIQ are
empowered to execute and make all such proper assignments and assurances and do
any and all other things necessary or proper to vest title to such property or
other rights in AIQ, and otherwise to carry out the purposes of this Merger
Agreement.
16. Consent to Service of Process. AIQ hereby irrevocably appoints the
Secretary of the State of Colorado and the successors of such officer its
attorney in the State of Colorado upon whom may be served any notice, process or
pleading in any action or proceeding against it to enforce against AIQ any
obligation of METEOR or to enforce the rights of a dissenting shareholder of
METEOR.
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IN WITNESS WHEREOF, this Agreement and Plan of Merger, having first been
duly approved by resolution of the Boards of Directors of METEOR and AIQ, has
been executed on behalf of each of said two corporations by their respective
duly authorized officers.
METEOR INDUSTRIES, INC., ACTIVE IQ TECHNOLOGIES, INC.,
a Colorado corporation a Minnesota corporation
By: By:
---------------------------------------- ----------------------------------------
Edward J. Names Edward J. Names
President and CEO Chief Executive Officer
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APPENDIX E
ARTICLES OF INCORPORATION
OF
AIQ ACQUISITION CORP.
The undersigned hereby creates a corporation under Chapter 302A of the
Minnesota Statutes and adopts the following Articles of Incorporation:
ARTICLE 1
NAME
The name of the Corporation is AIQ Acquisition Corp.
ARTICLE 2
REGISTERED OFFICE
The address of the registered office of the Corporation is 90 South Seventh
Street, Suite 3300, Minneapolis, Minnesota 55402.
ARTICLE 3
CAPITAL
A. The Corporation is authorized to issue forty million (40,000,000) shares
of capital stock, having a par value of one cent ($.01) per share in the case of
common stock, and having a par value as determined by the Board of Directors in
the case of preferred stock, to be held, sold and paid for at such times and in
such manner as the Board of Directors may from time to time determine in
accordance with the laws of the State of Minnesota.
B. In addition to any and all powers conferred upon the Board of Directors
by the laws of the State of Minnesota, the Board of Directors shall have the
authority to establish by resolution more than one class or series of shares,
either preferred or common, and to fix the relative rights, restrictions and
preferences of any such different classes or series, and the authority to issue
shares of a class or series to another class or series to effectuate share
dividends, splits or conversion of the Corporation's outstanding shares.
C. The Board of Directors shall also have the authority to issue rights to
convert any of the Corporation's securities into shares of stock of any class or
classes, the authority to issue options to purchase or subscribe for shares of
stock of any class or classes, and the authority to issue share purchase or
subscription warrants or any other evidence of such option rights which set
forth the terms, provisions and conditions thereof, including the price or
prices at which such shares may be subscribed for or purchased. Such options,
warrants and rights, may be transferable or nontransferable and separable or
inseparable from other securities of the Corporation. The Board of Directors is
authorized to fix the terms, provisions and conditions of such options, warrants
and rights, including the conversion basis or bases and the option price or
prices at which shares may be subscribed for or purchased.
D. Three Hundred Sixty-Five Thousand (365,000) shares of the Corporation's
capital stock are hereby designated as "Series B Convertible Preferred Stock,"
par value $1.00 per share. The powers, designations, preferences and relative,
participating, optional or other special rights of the shares of this series of
Convertible
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Preferred Stock and the qualifications, limitations and restrictions of such
preferences and rights shall be as follows:
1. Dividends. No dividends shall be paid on any shares of Series B
Convertible Preferred Stock.
2. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holder
of each share of Series B Convertible Preferred Stock shall be entitled
to receive, out of the assets of the Corporation available for
distribution to its stock holders, before any payment or distribution
shall be made on the Common Stock or any other series of Preferred
Stock, as the case may be, an amount per share equal to $2.00. If the
assets and funds to be distributed among the holders of Series B
Convertible Preferred Stock shall be insufficient to permit the payment
of the full aforesaid preferential amount to such holders, then the
entire assets and funds of the corporation legally available for the
distribution shall be distributed among the holders of the Series B
Convertible Preferred Stock. After payment has been made to the holders
of the Series B Convertible Preferred Stock, the remaining assets of the
Corporation available for distribution to the holders of the Common
Stock shall be distributed, among the holders of the Series B
Convertible Preferred Stock and Common Stock pro rata based on the
number of Shares of Common Stock held by each at the time of such
liquidation (assuming conversion of all such Series B Convertible
Preferred Stock).
(b) For purposes of this subparagraph 2, a merger or consolidation
of the Corporation with or into any other corporation or corporations,
or the merger of any other corporation or corporations into the
Corporation, or the sale or any other corporate reorganization, in which
shareholders of the Corporation receive distributions as a result of
such consolidation, merger, sale of assets or reorganization, shall be
treated as a liquidation, dissolution or winding up of the Corporation,
unless the stockholders of the Corporation hold more than fifty percent
(50%) of the voting equity securities of the successor or surviving
corporation immediately following such consolidation, merger, sale of
assets or reorganization in which event such consolidation, merger, sale
of assets or reorganization shall not be treated as a liquidation,
dissolution or winding up.
3. Conversion. The Series B Convertible Preferred Stock may be
converted into shares of the Corporation's Common Stock on the following
terms and conditions (the "Conversion Rights"):
(a) Option to Convert. Holders of the Series B Convertible
Preferred Stock shall have the right to convert all or a portion of
their shares into units, each unit consisting of one share of Common
Stock and one warrant to purchase Common Stock at any time or from time
to time upon notice to the Corporation on the terms and conditions set
forth herein prior to the date fixed for redemption of such shares.
(b) Conversion Ratio. Each share of Series B Convertible Preferred
Stock may be converted into one (1) unit, each unit consisting of one
(1) fully paid and nonassessable share of Common Stock and one (1)
warrant to purchase one share of Common Stock (subject to adjustment
pursuant to subparagraph 3(d) below). In the event that upon conversion
of shares of Series B Convertible Preferred Stock a holder shall be
entitled to a fraction of a unit, no fractional unit shall be issued and
in lieu thereof the Corporation shall pay to such holder cash equal to
the fair value of such fraction of a unit.
(c) Mechanics of Conversion. Upon the election of a holder of the
Series B Convertible Preferred Stock to convert shares of such Preferred
Stock, the holder of the shares of Series B Convertible Preferred Stock
which are converted shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the corporation or any
authorized transfer agent for such stock and warrants together with a
written statement that such holder elects to convert its preferred stock
to common stock and warrants. The Corporation or its transfer agent
shall promptly issue and deliver at such office to such holder of Series
B Convertible Preferred Stock a certificate or certificate for the
number of shares of Common Stock to which such holder is thereby
entitled and a
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warrant certificate for the same number of warrants. The effective date
of such conversion shall be a date not later than 30 days after the date
upon which the holder provides written notice of his election to convert
to the Corporation or transfer agent.
(d) Adjustment of Conversion Rate and Terms of Warrants. If the
Corporation shall at any time, or from time to time, effect a change in
the number of outstanding shares of Common Stock in the form of a stock
split or reverse stock split and not effect a corresponding change of
the Series B Convertible Preferred Stock, or if the Corporation at any
time or from time to time after the effective date hereof shall make or
issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the
number of units issuable upon conversion of the Series B Convertible
Preferred Stock shall be proportionately increased or decreased as of
the time of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date. Also in
such event, the terms of the warrants issued or issuable as part of the
units shall be proportionately adjusted as to the number of shares to be
issued upon the exercise of such warrants and as to the exercise price
of such warrants.
(e) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Corporation, but will at all times in good faith assist in the
carrying out of all of the provisions of this paragraph 3 and in the
taking of all such actions as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series B
Convertible Preferred Stock against impairment.
(f) Reservation of Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of Series B Convertible Preferred Stock and the exercise of the
warrants issuable upon the conversion of units, such number of its
shares of Common Stock as shall time to time be sufficient to effect the
conversion of all outstanding shares of Series B Convertible Preferred
Stock; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all
outstanding shares of Series B Convertible Preferred Stock, the
Corporation will take such corporate action as is necessary to increase
its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(g) Warrants Issuable Upon Conversion. The warrants to be issued
as part of the units upon conversion of the Series B Convertible
Preferred Stock shall be in a form determined by the Board of Directors
and be exercisable until May 15, 2005, at an exercise price of $2.50 per
share (subject to adjustment pursuant to Section 3(d) above).
4. Status of Converted or Reacquired Stock. In case any shares of
Series B Convertible Preferred Stock shall be converted pursuant to
paragraph 3 hereof, the shares so converted shall cease to be a part of the
authorized capital stock of the Corporation.
5. Voting Rights. Each share of Series B Convertible Preferred Stock
entitles the holder to one (1) vote and with respect to each such vote, a
holder of shares of Series B Convertible Preferred Stock shall have full
voting rights and powers equal to the voting rights and powers of a holder
of shares of Common Stock, share for share, and shall be entitled to notice
of any shareholders' meeting in accordance with the Bylaws of the
Corporation, and shall be entitled to vote with holders of Common Stock
together as a single class.
6. Redemption Provisions. Shares of the Series B Convertible
Preferred Stock are not redeemable.
7. Preferences Generally. The Corporation shall not authorize or
issue any securities having any rights or preferences senior or
preferential to or pari passu with those of the Series B Convertible
Preferred Stock without the vote of the holders of a majority of the Series
B Convertible Preferred Stock, voting separately as a class, in addition to
any other vote required by law.
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8. Notices. Any notice required to be given to holders of shares of
Series B Convertible Preferred Stock shall be deemed given upon deposit in
the United States mail, postage prepaid, addressed to such holder of record
at his address appearing on the books of the corporation, or upon personal
delivery of the aforementioned address.
ARTICLE 4
SHAREHOLDER RIGHTS
A. No shareholder of the Corporation shall have any preemptive rights.
B. No shareholder of the Corporation shall have any cumulative voting
rights.
ARTICLE 5
INCORPORATOR
The name and address of the incorporator, who is a natural person of full
age, is:
WILLIAM M. MOWER
90 SOUTH 7TH STREET, SUITE 3300
MINNEAPOLIS, MN 55402
ARTICLE 6
WRITTEN ACTION BY LESS THAN ALL OF THE DIRECTORS
Any action required or permitted to be taken at a Board meeting, other than
an action requiring shareholder approval, may be taken by written action of the
Board of Directors if signed by the number of directors that would be required
to take the same action at a meeting at which all directors were present.
ARTICLE 7
LIMITED LIABILITY OF DIRECTORS
To the fullest extent permitted by law, a director shall have no personal
liability to the Corporation or its shareholders for breach of fiduciary duty as
a director. Any amendment to or repeal of this Article 7 shall not adversely
affect any right or protection of a director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
ARTICLE 8
BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS
Pursuant to Sections 302A.671, Subd. 1(a) and 302A.673, Subd. 3 (b)(1) of
the Minnesota Business Corporation Act, the Corporation elects not to be subject
to the provisions of Sections 302A.671 and 302A.673 of the Act.
IN WITNESS WHEREOF, I have signed my name this 31st day of January, 2001.
/s/ William M. Mower
------------------------------------
William M. Mower, Incorporator
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APPENDIX F
COLORADO BUSINESS CORPORATIONS ACT
TITLE 7, ARTICLE 113
DISSENTERS' RIGHTS
7-113-101. DEFINITIONS.
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held
in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or
foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at
the time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent
that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares that are registered in the name of a nominee to the extent such
owner is recognized by the corporation as the shareholder as provided in
section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
Source: L. 93: Entire article added, p. 813, sec. 1, effective July 1, 1994.
7-113-102. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to section
7-112-102 (2).
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(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended, or
on the national market system of the national association of securities dealers
automated quotation system, or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action;
or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan
of merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act
of 1934", as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will be
held of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
(2) (Deleted by amendment, L. 96, p. 1321, sec. 30, effective June 1,
1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
Source: L. 93: Entire article added, p. 814, sec. 1, effective July 1, 1994. L.
96: Entire section amended, p. 1321, sec. 30, effective June 1.
7-113-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
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(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
Source: L. 93: Entire article added, p. 815, sec. 1, effective July 1, 1994.
7-113-201. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (2).
Source: L. 93: Entire article added, p. 816, sec. 1, effective July 1, 1994. L.
96: Entire section amended, p. 1323, sec. 31, effective June 1.
7-113-202. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
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140
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201 (2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
Source: L. 93: Entire article added, p. 816, sec. 1, effective July 1, 1994. L.
96: IP(1) and (2) amended, p. 1323, sec. 32, effective June 1.
7-113-203. DISSENTERS' NOTICE.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated
shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1)
of this section is given;
(f) State the requirement contemplated in section 7-113-103 (3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
Source: L. 93: Entire article added, p. 817, sec. 1, effective July 1, 1994.
7-113-204. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203 (2) (d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the
demand for payment and deposit of certificates are irrevocable.
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141
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
Source: L. 93: Entire article added, p. 817, sec. 1, effective July 1, 1994.
7-113-205. UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
Source: L. 93: Entire article added, p. 818, sec. 1, effective July 1, 1994.
7-113-206. PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available financial
statements, if any, for the interim or full-year period, which financial
statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
Source: L. 93: Entire article added, p. 818, sec. 1, effective July 1, 1994.
7-113-207. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment
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demand as provided in section 7-113-203, then the corporation shall send a new
dissenters' notice, as provided in section 7-113-203, and the provisions of
sections 7-113-204 to 7-113-209 shall again be applicable.
Source: L. 93: Entire article added, p. 819, sec. 1, effective July 1, 1994.
7-113-208. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT OF
PROPOSED CORPORATE ACTION.
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206 (2).
Source: L. 93: Entire article added, p. 819, sec. 1, effective July 1, 1994.
7-113-209. PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of
the shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
Source: L. 93: Entire article added, p. 820, sec. 1, effective July 1, 1994.
7-113-301. COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which its
registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
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(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
Source: L. 93: Entire article added, p. 820, sec. 1, effective July 1, 1994. L.
96: (2) amended, p. 1324, sec. 33, effective June 1.
7-113-302. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.
Source: L. 93: Entire article added, p. 821, sec. 1, effective July 1, 1994.
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METEOR INDUSTRIES, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
_______________, 2001
______ __.M.
____________________________________
DENVER, COLORADO 80202
METEOR INDUSTRIES, INC.
1401 Blake Street, Suite 200
Denver, Colorado 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
SPECIAL MEETING ON ____________, ____________, 2001.
It will be voted in the matters set forth on the reverse side of this form as
directed by the shareholder, but if no direction is made in the space provided,
it will be voted FOR each of the proposals.
(Continued, and TO BE DATED AND SIGNED on the reverse side)
--------------------------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR COMPANY #
SHARES IN THE SAME MANNER AS IF YOU HAD MARKED, SIGNED AND RETURNED YOUR
PROXY CARD. CONTROL #
--------------------------------------
VOTE BY PHONE - TOLL FREE - (800) 240-6326 --- QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number, both of which are located above.
o Follow the simple instructions the Voice provides you.
VOTE BY INTERNET --- www.eproxy.com/popm --- QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number, both of which are located above, in order to obtain your
records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to Meteor Industries, Inc., _____________________________
___________________________________________________________________________.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
Please detach here
145
The undersigned, a shareholder of the Company, hereby appoints Edward J. Names
and Richard Kisser, and each of them as proxies, with full power of
substitution, to vote on behalf of the undersigned the number of shares which
the undersigned is then entitled to vote, at the Special Meeting of the
Shareholders of the Company to be held at ___________________________, Denver,
Colorado ______, on _____________, 2001, at 10:00 a.m. (Denver time), and any
adjournments or postponements thereof, upon matter set forth below, with all the
powers which the undersigned would possess if personally present:
1. APPROVE THE SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY PURSUANT
TO THE TERMS OF THAT CERTAIN STOCK PURCHASE AGREEMENT DATED JANUARY 30,
2001, BY AND BETWEEN THE COMPANY AND CAPCO ENERGY, INC.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. APPROVE AND ADOPT A PROPOSAL TO REINCORPORATE THE COMPANY UNDER THE LAWS OF
THE STATE OF MINNESOTA BY MERGING THE COMPANY WITH AND INTO AIQ
ACQUISITION, INC., A NEWLY FORMED AND WHOLLY OWNED SUBSIDIARY OF THE
COMPANY ORGANIZED UNDER MINNESOTA LAW.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVE AND ADOPT THAT CERTAIN AGREEMENT AND PLAN OF MERGER DATED JANUARY
11, 2001, BY AND AMONG ACTIVEIQ TECHNOLOGIES, INC., A MINNESOTA
CORPORATION, THE COMPANY AND MI MERGER, INC., A MINNESOTA CORPORATION AND A
WHOLLY OWNED SUBSIDIARY OF THE COMPANY.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED IN FAVOR OF THE ABOVE PROPOSAL TO AMEND THE
COMPANY'S ARTICLES OF INCORPORATION. The undersigned hereby revokes all previous
proxies relating to the shares covered hereby and acknowledges receipt of the
Notice and Proxy Statement relating to the Special Meeting.
Dated ____________________________, 2001
_____________________________________
_____________________________________
(SHAREHOLDER MUST SIGN EXACTLY AS THE
NAME APPEARS AT LEFT. WHEN SIGNED AS A
CORPORATE OFFICER, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC.,
PLEASE GIVE FULL TITLE AS SUCH. BOTH
JOINT TENANTS MUST SIGN.)