<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1995
APERTUS TECHNOLOGIES INCORPORATED
---------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-12378 41-1349953
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number identification No.)
7275 Flying Cloud Drive, Eden Prairie, Minnesota 55344
-------------------------------------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (612) 828-0300
-----------------------
Not Applicable
-----------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On June 30, 1995, Apertus Technologies Incorporated ("Apertus" or the
"Company") acquired BlueLine Software, Inc., a Minnesota corporation
("BlueLine"), pursuant to an Acquisition Agreement (the "Agreement") dated June
26, 1995, among the Company, BlueLine and BlueLine Acquisition Co., a Minnesota
corporation and wholly owned subsidiary of the Company ("Acquisition Co.").
Pursuant to the terms of the Agreement, Acquisition Co. offered (the "Offer") to
purchase Capital Stock, $.01 par value, of BlueLine ("BlueLine Capital Stock"),
in exchange for $0.56260 cash and .076943 shares of Common Stock, $.05 par
value, of Apertus ("Apertus Common Stock"), for each share of each class and
series of BlueLine Capital Stock (the "Merger Consideration"). Pursuant to the
Offer, Acquisition Co. received Purchase Agreements signed by a sufficient
number of BlueLine shareholders such that Acquisition Co., by virtue of its
holdings or conversion of a portion of such BlueLine Capital Stock into BlueLine
Common Stock, held over 90% of BlueLine Capital Stock of each class and series,
and on June 30, 1995, Acquisition Co. consummated the purchases provided by the
Purchase Agreements. Acquisition Co. then caused the merger of itself into
BlueLine (the "Merger") by a short-form merger, as permitted by Minnesota law,
pursuant to which holders of BlueLine Capital Stock other than Acquisition Co.
received the Merger Consideration, and BlueLine became a wholly owned subsidiary
of the Company.
The total amount paid in respect of the Merger was $8.75 million,
which included legal and accounting fees of BlueLine, payments to cash out
warrants and options, payments that became due because of the Merger and the
consideration payable to holders of BlueLine Capital Stock. Of that amount,
approximately $4,375,000 was payable in cash and approximately $4,375,000 was
payable in Apertus Common Stock, based on the average of the closing price on
the five business days ending on June 21, 1995, on which day the proposed
transaction was announced to the public (approximately 505,000 shares). Apertus
paid the cash portion of the purchase price from existing cash.
The transaction will be treated as a purchase for accounting purposes.
Apertus will reflect a writedown of a substantial portion of the purchase price
allocated to purchased research and development in the quarter ended July 2,
1995. The tangible assets acquired by Apertus in the Merger consist primarily
of office furniture which are immaterial.
BlueLine is a developer of software solutions for enterprise-wide
management of client/server computing.
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<PAGE>
Item 7. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements of Businesses Acquired
Condensed Consolidated Balance Sheet (Unaudited), March 31, 1995
Condensed Consolidated Statements of Operations (Unaudited),
Three Months Ended March 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended March 31, 1995 and 1994
Notes to Condensed Consolidated Financial Statements (Unaudited),
Three Months Ended March 31, 1995 and 1994
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Operations, Years Ended
December 31, 1994, 1993, and 1992
Consolidated Statements of Stockholders' Deficit, Years Ended
December 31, 1994, 1993, and 1992
Consolidated Statements of Cash Flows, Years Ended
December 31, 1994, 1993, and 1992
Notes to Consolidated Financial Statements, Years Ended
December 31, 1994, 1993, and 1992
(b) Pro Forma Financial Information
Pro Forma Condensed Balance Sheet as of April 2, 1995 (Unaudited)
Pro Forma Condensed Statement of Operations for the Year
Ended April 2, 1995 (Unaudited)
Notes to Pro Forma Condensed Financial Information
(c) Exhibits
Exhibit No. Description
----------- -----------
2 Acquisition Agreement dated June 26, 1995, among
Apertus Technologies Incorporated, BlueLine
Acquisition Co. and BlueLine Software, Inc.,
including exhibits thereto.
23.2 Consent of Deloitte & Touche LLP.
-3-
<PAGE>
BLUELINE FINANCIAL STATEMENTS
The consolidated financial statements of Blueline as of December 31, 1994
and 1993 and for each of the three years in the period ended December 31, 1994,
included herein, have been audited by Deloitte & Touche LLP, independent
certified public accountants, as indicated in their report (which contains an
explanatory paragraph concerning BlueLine's ability to continue as a going
concern) dated April 6, 1995, except for the third paragraph of Note 3, Notes 4
and 13, as to which the date is June 22, 1995.
The condensed consolidated financial statements of BlueLine as of March 31,
1995 and for the three months ended March 31, 1995 and 1994, included herein,
have not been audited but in the opinion of BlueLine's management contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1995
- ------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,028
Accounts receivable, net 1,490,470
Current portion of installment receivables 1,489,550
Prepaid expenses and other 89,320
-----------
Total current assets 3,071,368
INSTALLMENT RECEIVABLES 1,281,288
PROPERTY, net 151,301
OTHER ASSETS - purchased and capitalized software, net 2,872,852
-----------
$ 7,376,809
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable $ 1,272,066
Accounts payable 236,759
Accrued expenses 767,496
Deferred maintenance revenue 1,382,974
-----------
Total current liabilities 3,659,295
CONVERTIBLE, REDEEMABLE PREFERRED
SHARES, Series I 4,063,352
CONVERTIBLE, REDEEMABLE PREFERRED
SHARES, Series II 2,416,311
STOCKHOLDERS' DEFICIT:
Capital stock 6,624
Additional paid-in capital 194,169
Accumulated deficit (2,869,955)
Accumulated foreign currency translation (60,496)
-----------
(2,729,658)
Notes receivable for purchase of stock (32,491)
-----------
Total stockholders' deficit (2,762,149)
-----------
$ 7,376,809
===========
See notes to condensed consolidated financial statements.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
1995 1994
REVENUES AND OTHER INCOME:
Software products $ 880,000 $ 843,000
Software maintenance 893,000 827,000
Interest income and other 45,000 54,000
---------- ----------
Total revenues and other income 1,818,000 1,724,000
OPERATING EXPENSES:
Sales and marketing 488,000 547,000
Development and technical support 563,000 608,000
International 341,000 300,000
General and administrative 254,000 237,000
---------- ----------
Total operating expenses 1,646,000 1,692,000
---------- ----------
NET INCOME $ 172,000 $ 32,000
========== ==========
NET INCOME APPLICABLE TO
COMMON STOCKHOLDERS $ 15,000 $ 32,000
========== ==========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE (Note 3) $ .02 $ .01
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING (Note 3) $ 960,107 $6,856,310
========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 172,000 $ 32,000
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 112,936 110,000
Change in current assets and current liabilities:
(Increase) decrease in:
Accounts receivable 149,193 113,345
Installment receivables (75,345) 18,799
Prepaid expenses and other current assets (13,258) 31,126
Increase (decrease) in:
Accounts payable 133,817 (12,042)
Accrued expenses (42,852) (135,428)
Deferred maintenance revenue (159,000) (73,235)
--------- ---------
Net cash provided by operating activities 277,491 84,565
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (27,155)
Capitalized software costs (308,326) (251,635)
--------- ---------
Net cash used in investing activities (308,326) (278,790)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings under note payable 86,962 100,003
Checks written in excess of book balances (36,794)
Issuance of common stock on exercise of common
stock options 320
--------- ---------
Net cash provided by financing activities 50,488 100,003
EFFECT OF EXCHANGE RATE CHANGES ON CASH (46,616) (34,540)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (26,963) (128,762)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,991 146,493
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,028 $ 17,731
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
-7-
<PAGE>
BLUELINE SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
- --------------------------------------------------------------------------------
1. INTERIM FINANCIAL INFORMATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all necessary adjustments, which
are of a normal recurring nature, to present fairly the financial position of
BlueLine Software, Inc. (the Company) as of March 31, 1995 and the results of
its operations and its cash flows for the three months ended March 31, 1995
and 1994, in conformity with generally accepted accounting principles. The
results of operations of any interim period are not necessarily indicative of
the results for the year. These unaudited condensed consolidated financial
statements have not been audited, reviewed, or compiled by the Company's
independent auditors, and they assume no responsibility for such condensed
consolidated financial statements.
These consolidated financial statements should be read in conjunction with
the Company's consolidated financial statements and related notes as of and
for the year ended December 31, 1994.
2. BASIS OF PRESENTATION
As reflected in the condensed consolidated financial statements, the
Company has incurred negative cash flows of $26,963 and $128,762 for the
three months ended March 31, 1995 and 1994, respectively, and at March 31,
1995, had negative working capital of $587,927 and a stockholders' deficit of
$2,762,149. In addition, the Company was in violation of its line of credit
with a bank and an additional debt agreement as of March 31, 1995. These
factors, among others, raise substantial doubt about the Company's ability to
continue as a going concern.
The condensed consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might
result if the Company is unable to continue as a going concern.
Subsequent to March 31, 1995, management of the Company signed an agreement
to merge the Company with an unrelated third party (see Note 4). Management
believes, if the merger is approved, that the acquiror will provide the
funding necessary to allow the Company to continue as a going concern.
However, there is no assurance that the merger will be consummated.
3. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share was computed by dividing
net income by the weighted average number of common and common equivalent
shares outstanding during each period. This amount includes common stock
equivalents of 297,707 and 521,278 in the first quarter of fiscal 1995 and
1994, respectively, assumed for the exercise
-8-
<PAGE>
of outstanding warrants and options using the treasury stock method. In
addition, the convertible, redeemable preferred shares, Series I and II are
considered common stock equivalents for the first quarter of fiscal 1994.
Such preferred shares have been excluded for 1995 as their impact is
antidilutive.
4. SUBSEQUENT EVENTS
Additional borrowing - During June 1995, the Company borrowed $75,000 under
a promissory note payable to a holder of preferred shares of the Company.
Borrowings under the note bear interest at 10%, are due on demand, and are
collateralized by all assets of the Company. Repayment of the note payable
is subordinate to borrowings under the bank line of credit and other debt
outstanding at March 31, 1995.
Merger - On June 22, 1995, the Board of Directors approved an agreement to
merge the Company with an independent third party. Under the terms of the
agreement, upon approval by the holders of the Company's common and preferred
shares, the Company will become a subsidiary of the third party. After
settlement of outstanding options and warrants to purchase shares of the
Company's common stock and certain change of control obligations, holders of
the Company's common and preferred stock would receive approximately $1.23
per share. The consideration will consist of $.45 per share of cash at
closing, $.11 per share of cash held in escrow for indemnification of the
acquiror, and $.67 per share in the form of the acquiror's common stock.
-9-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
BlueLine Software, Inc.
We have audited the accompanying consolidated balance sheets of BlueLine
Software, Inc. and subsidiary (the Company) as of December 31, 1994 and 1993 and
the related consolidated statements of operations, stockholders' deficit, and
cash flows for each of the three years in the period ended December 31, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of BlueLine Software,
Inc. and subsidiary at December 31, 1994 and 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company is in default of the restrictive
provisions of its line of credit with a bank and an additional debt agreement.
These matters, in addition to the negative cash flows generated by the Company
for the years ended 1994, 1993, and 1992 and the negative working capital and
stockholders' deficit of the Company as of December 31, 1994, raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans concerning these matters are described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As discussed in Note 8 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 6, 1995, except for the third paragraph
of Note 3, Notes 4 and 13, as to which the
date is June 22, 1995
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<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
1994 1993
ASSETS (NOTE 3)
CURRENT ASSETS:
Cash and cash equivalents $ 28,991 $ 146,493
Accounts receivable - trade, net of allowance for doubtful
accounts of $42,767 and $106,415, respectively (Note 6) 1,639,663 2,236,938
Current portion of installment receivables (Note 6) 1,468,098 1,232,615
Prepaid expenses and other 76,062 79,894
---------- ----------
Total current assets 3,212,814 3,695,940
INSTALLMENT RECEIVABLES (Note 6) 1,227,395 1,399,745
PROPERTY:
Office fixtures and equipment 327,888 341,336
Computer equipment 381,491 340,254
---------- ----------
709,379 681,590
Less accumulated depreciation 555,142 536,066
---------- ----------
Property - net 154,237 145,524
OTHER ASSETS:
Purchased software, net of accumulated amortization of
$1,133,520 and $1,020,700, respectively (Note 9) 191,278 304,098
Capitalized software development, net of accumulated
amortization of $476,097 and $149,322, respectively 2,477,510 1,615,473
Other intangible assets, net of accumulated amortization
of $63,118 and $42,374, respectively 5,738 20,580
---------- ----------
Total other assets 2,674,526 1,940,151
---------- ----------
$7,268,972 $7,181,360
========== ==========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
BLUELINE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Checks written in excess of bank balances $ 36,794
Notes payable (Note 3) 1,185,104 $ 749,428
Accounts payable 102,942 121,982
Accrued expenses 810,348 955,803
Deferred maintenance revenue 1,541,974 1,505,813
----------- ----------
Total current liabilities 3,677,162 3,333,026
CONVERTIBLE, REDEEMABLE PREFERRED SHARES (Note 4) -
authorized 4,663,352 shares designated as Series I voting
convertible preferred stock of $.01 par value; issued and
outstanding 4,063,352 shares (redeemable at and aggregate
liquidation preference of $4,063,352 at December 31, 1994) 4,063,352 4,063,352
CONVERTIBLE, REDEEMABLE PREFERRED SHARES
(Note 4) - authorized 1,950,000 shares designated as Series II
voting convertible preferred stock of $.01 par value; issued and
outstanding 1,610,874 shares (redeemable at and aggregate
liquidation preference of $2,416,311 at December 31, 1994) 2,416,311 2,416,311
STOCKHOLDERS' DEFICIT (Note 5):
Capital stock - authorized 8,386,648 shares designated as voting
common stock of $.01 par value; issued and outstanding
662,106 shares and 660,806 shares, respectively 6,621 6,608
Additional paid-in capital 193,852 192,565
Accumulated deficit (3,041,955) (2,825,799)
Accumulated foreign currency translation (13,880) 27,788
----------- -----------
(2,855,362) (2,598,838)
Notes receivable for purchase of stock (Note 5) (32,491) (32,491)
----------- -----------
Total stockholders' deficit (2,887,853) (2,631,329)
----------- -----------
$ 7,268,972 $ 7,181,360
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-12-
<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 1993 1992
REVENUES AND OTHER INCOME (Note 6):
Software products $3,284,968 $4,408,902 $3,678,435
Software maintenance 3,320,434 3,568,598 3,205,169
Interest income 227,134 236,541 274,692
Royalty and other 45,067 202,139 83,219
---------- ---------- ----------
Total revenues and other income 6,877,603 8,416,180 7,241,515
OPERATING EXPENSES:
Sales and marketing 2,086,886 2,416,319 2,304,624
Development and technical support 2,239,193 1,986,331 2,091,521
International 1,759,915 2,047,483 1,806,747
General and administrative 1,007,765 1,167,748 908,057
---------- ---------- ----------
Total operating expenses 7,093,759 7,617,881 7,110,949
---------- ---------- ----------
NET (LOSS) INCOME $ (216,156) $ 798,299 $ 130,566
========== ========== ==========
NET (LOSS) INCOME APPLICABLE TO
COMMON STOCKHOLDERS (Note 1) $ (216,156) $ 798,299 $ (254,925)
========== ========== ==========
NET (LOSS) INCOME PER COMMON
AND COMMON EQUIVALENT SHARE (Note 1) $ (.33) $ .12 $ (.48)
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING (Note 1) 662,006 6,850,447 530,317
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
- --------------------------------------------------------------------------------
COMMON STOCK
------------------ ACCUMULATED
NUMBER ADDITIONAL FOREIGN
OF PAID-IN ACCUMULATED CURRENCY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 511,005 $ 5,110 $ 7,087 $(3,287,906) $ (12,753)
Issuance of common stock:
Acquisition of Phaser Systems (Note 9) 100,000 1,000 149,000
For cash on exercise of warrants 32,000 320 15,680
For cash on exercise of stock options 6,076 61 6,015
Net income 130,566
Change in foreign currency
translation 16,063
Issuance of preferred stock Series II
as a stock dividend on preferred
stock Series I and II (466,758)
------- -------- -------- ----------- -----------
BALANCE AT DECEMBER 31, 1992 649,081 6,491 177,782 (3,624,098) 3,310
Issuance of common stock for cash:
On exercise of warrants 4,951 50 7,377
On exercise of stock options 6,774 67 7,406
Net income 798,299
Change in foreign currency
translation 24,478
------- -------- -------- ----------- -----------
BALANCE AT DECEMBER 31, 1993 660,806 6,608 192,565 (2,825,799) 27,788
Repurchase of common stock (1,400) (14) (1,386)
Issuance of cash stock for cash on
exercise of stock options 2,700 27 2,673
Net loss (216,156)
Change in foreign currency
translation (41,668)
------- -------- -------- ----------- -----------
BALANCE AT DECEMBER 31, 1994 662,106 $ 6,621 $193,852 $(3,041,955) $ (13,880)
======= ======== ======== =========== ===========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BLUELINE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
- --------------------------------------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (216,156) $ 798,299 $ 130,566
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 525,637 443,975 425,128
Change in current assets and current liabilities
net of effects from acquisition:
(Increase) decrease in:
Accounts receivable 597,275 (187,206) (548,261)
Installment receivables (63,133) (873,358) (383,275)
Prepaid expenses and other current assets 3,832 50,950 (68,044)
Increase (decrease) in:
Accounts payable (19,040) 26,333 (12,353)
Accrued expenses (145,455) (18,588) 195,356
Deferred maintenance revenue 36,161 45,323 79,436
----------- ----------- -----------
Net cash provided by (used in)
operating activities 719,121 285,728 (181,447)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (79,913) (80,788) (54,798)
Capitalized software costs (1,188,812) (1,145,365) (593,786)
Decrease (increase) in restricted cash 500,000 (500,000)
----------- ----------- -----------
Net cash used in investing activities (1,268,725) (726,153) (1,148,584)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank line of credit and other debt 435,676 346,928 197,598
Repayment of notes payable (150,000) (150,000)
Acquisition costs of Phaser Systems, Inc. (17,550)
Issuance of common stock on exercise of common stock
options and warrants 2,700 14,900 22,076
Repurchase of common stock (1,400)
Checks written in excess of bank balances 36,794
----------- ----------- -----------
Net cash provided by financing activities 473,770 211,828 52,124
EFFECT OF EXCHANGE RATE CHANGES ON CASH (41,668) 26,435 15,600
----------- ----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (117,502) (202,162) (1,262,307)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 146,493 348,655 1,610,962
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,991 $ 146,493 $ 348,655
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-15-
<PAGE>
BLUELINE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
As reflected in the consolidated financial statements, BlueLine Software,
Inc. (the Company) has incurred negative cash flows of $117,502, $202,162,
and $1,262,307 for the years ended December 31, 1994, 1993, and 1992,
respectively, and at December 31, 1994, had negative working capital of
$464,348 and a stockholders' deficit of $2,887,853. In addition, the Company
was in violation of the restrictive provisions of its line of credit with a
bank and an additional debt agreement as of December 31, 1994 (see Note 3).
These factors, among others, raise substantial doubt about the Company's
ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might result if the Company is unable
to continue as a going concern.
Subsequent to December 31, 1994, management of the Company signed an
agreement to merge the Company with an unrelated third party (see Note 13).
Management believes, if the merger is approved, that the acquiror will
provide the funding necessary to allow the Company to continue as a going
concern. However, there is no assurance that the merger will be consummated.
2. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - The Company is engaged in the development and sale of software for
proactive solutions for enterprise-wide management of client/server
computing.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly owned foreign subsidiary. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition:
Software Product Sales - Revenues from software product sales are recorded on
acceptance of the product as evidenced by the customer signing the license
agreement.
Software Maintenance - Revenues from maintenance contracts are recognized in
connection with the signing of the maintenance contract to the extent of
commission expense with the balance deferred and amortized to revenue using
the straight-line method over the maintenance period.
The Company's revenue recognition policies are consistent with Statement of
Position 91-1, Software Revenue Recognition.
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<PAGE>
Property and Depreciation - Property is stated at cost and is depreciated
over the estimated useful lives (three to seven years) of the assets.
Capitalized Software Development - The Company capitalizes software
development costs in accordance with Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. Software development costs incurred are
capitalized after technological feasibility is established, which is the time
a detailed program design is completed.
The establishment of technological feasibility and the on-going assessment of
the recovery of capitalized software costs requires considerable judgment by
management with respect to certain external factors including, but not
limited to, technological feasibility, anticipated future gross revenues,
estimated economic life and changes in software and hardware technologies.
Capitalization ceases when the software is available for general release to
customers at which time amortization of the costs begin. These costs are
being amortized using the greater of the straight-line method or the ratio of
current gross revenues from a product to the total of current and anticipated
future gross revenues from the product. Generally, an original estimated
useful life of four years is assigned to capitalized software development
costs.
Amortization of capitalized software costs included in operating expenses
aggregated $326,775, $77,379, and $34,268 for the years ended December 31,
1994, 1993, and 1992, respectively.
Purchased Software - Purchased software is amortized using the greater of the
straight-line method over a four-year life or over a period based on current
and anticipated revenues of the product.
Other Intangible Assets - Other intangible assets are amortized using the
straight-line method over four years.
Impairment of Long-Lived Assets - Management of the Company periodically
reviews the carrying value of capitalized software development, purchased
software, and other intangible assets for potential impairment by comparing
the carrying value of these assets with their related, expected future net
cash flows. Should the sum of the related, expected future net cash flows be
less than the carrying value, management would determine whether an
impairment loss should be recognized. An impairment loss would be measured by
the amount by which the carrying value of the asset exceeds the fair value of
the asset. To date, management has determined that no impairment of these
assets exists.
Research and Development Costs - Research and development costs are charged
to expense as incurred. Research and development costs expensed for the years
ended December 31, 1994, 1993, and 1992 were approximately $1,415,000,
$1,360,000, and $1,437,000, respectively.
Net (Loss) Income Per Common and Common Equivalent Share - Net (loss) income
per common and common equivalent share is based on the weighted average
number of common and common equivalent shares outstanding during each period.
Dividends earned on convertible preferred shares of $385,491 in 1992 are
deducted from net income in calculating the net loss applicable to common
stockholders. Common stock equivalents include the Company's
-17-
<PAGE>
Redeemable, Convertible Preferred Shares, Series I and Series II; common
stock options and common stock warrants. In 1994 and 1992, the effect of
common stock equivalents is antidilutive and, therefore, are excluded from
the calculation of the weighted average number of common and common
equivalent shares outstanding. In 1993, the outstanding Redeemable,
Convertible Preferred Shares Series I and Series II are considered common
stock equivalents. In 1993, common stock equivalents include 521,278 shares
from the assumed issuance upon the exercise of dilutive common stock options
and common stock warrants.
Cash Equivalents - The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
Reclassifications - Certain 1993 and 1992 amounts have been reclassified to
conform to 1994 presentations. The reclassifications had no effect on
revenues or net income as previously reported.
3. NOTES PAYABLE
Note Payable - Bank - The Company has a line of credit with a bank, which
expires on May 1, 1995. Under the line of credit agreement, the Company's
borrowings are limited to the lesser of its eligible borrowing base, as
defined, or $1,000,000. Borrowings under the line of credit totaled $999,429
and $749,428 as of December 31, 1994 and 1993, respectively. The eligible
borrowing base exceeded $1,000,000 at December 31, 1994. The agreement
provides for interest at 10% (the bank's base rate plus 1%) at December 31,
1994 and gives the bank a first security interest in virtually all assets of
the Company.
The agreement, as amended in 1994, contains various covenants which, among
other matters, require consent of the bank prior to the payment of cash
dividends or redemption by the Company of its capital stock, and restricts
additional borrowings in excess of $300,000. Under the agreement, certain
existing holders of the convertible, redeemable preferred shares, as defined,
must maintain ownership of at least 51% of the outstanding capital stock of
the Company. The Company is required to maintain a tangible net worth,
including the carrying value of the Series I and II convertible, redeemable
preferred shares, of at least $1,350,000, maintain a net worth, including the
carrying value of the Series I and II convertible, redeemable preferred
shares, of at least $3,600,000, maintain working capital, as defined, of at
least $1,250,000, and cannot have a net loss during any calendar year or
quarter of more than $100,000. The Company was in violation of certain of
these covenants and, therefore, in default with the provisions of the line of
credit agreement as of and during the year ended December 31, 1994.
Borrowings under the line of credit may be called by the lender for repayment
at any time such default exists.
At the date of issuance of these consolidated financial statements,
borrowings on the line of credit are past due as the credit agreement expired
on May 1, 1995. The bank has been notified of the proposed merger (see Note
13). Management believes, based on discussions with the lending officer, that
the bank will not pursue collection as long as the merger is proceeding.
As of December 31, 1994, the Company had outstanding borrowings of $185,675
under a line of credit with a venture capital concern which is also a holder
of common and convertible, redeemable preferred shares of the Company. The
borrowings bear interest at 12% and are
-18-
<PAGE>
due June 30, 1995. The borrowings are secured by certain of the Company's
trade accounts and installment receivables. At December 31, 1994, the
Company was in violation under the line of credit agreement due to cross-
default provisions related to the Company's default under its bank line of
credit agreement. In addition, subsequent to December 31, 1994, the Company
defaulted on the payments due under this line of credit. Management
believes, based on discussions with the lender, that the lender will not
pursue collection as long as the merger is proceeding.
Information regarding short-term borrowings for the years ended December 31,
1994, 1993, and 1992 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Maximum amount outstanding
during the year $1,185,104 $749,428 $470,000
Average amount outstanding
during the year 1,025,000 575,000 400,000
Weighted average interest rate
during the year 9.6% 7.3% 7.3%
</TABLE>
During 1992, the Company deposited $500,000 in a collateral account under
its previous line of credit agreement. Such collateral is not required under
the Company's present line of credit agreement.
4. CONVERTIBLE, REDEEMABLE PREFERRED SHARES
Convertible, Redeemable Preferred Shares, Series I - The Series I shares
began earning dividends of $.08 per share per annum effective January 1,
1991. The dividends are payable quarterly. In lieu of cash dividends, the
holders of the preferred shares agreed to receive stock dividends in Series
II shares. The value of the Series II shares was determined based on the
price received for Series II shares which were sold to independent investors
during 1991. On March 11, 1993, at a special shareholders meeting, the
Company's holders of the preferred shares voted to amend the dividend
requirements such that the Series I holders were not entitled to receive
dividends in any form for the period from January 1, 1993 through December
31, 1994. Also no dividends will accumulate during this period of time. On
April 13, 1995, at a special shareholders meeting, the Company's holders of
the preferred shares voted to amend the dividend requirements such that the
Series I holders shall be entitled to receive stock dividends at the rate of
8% per annum. The stock dividends shall be payable in shares of the
Company's Series II convertible, redeemable preferred stock and the
valuation thereof was deemed to be $1.50 per share for purposes of
determining the number of shares to be issued. The dividends accrue
quarterly and are payable annually. The Series I shares have a liquidation
preference of $1.00 per share. The Series I holders are entitled to voting
rights equal to the number of common shares into which a Series I share is
then convertible.
The Series I shares are redeemable at the option of the Company at $1.00 per
share plus any accrued and unpaid dividends at the redemption date. If the
Company redeems the Series I shares, it is required to sell the holders of
the Series I preferred shares warrants to purchase the number of shares of
common stock into which the Series I shares were convertible at the then
conversion price. On April 13, 1995, the Company's shareholders voted to
amend the
-19-
<PAGE>
agreement so that on December 31, 1996 the Company is required to redeem all
the Series I shares at the redemption price of $1.00 per share plus accrued
unpaid dividends up to the redemption date.
Convertible, Redeemable Preferred Shares, Series II - Each Series II share
is currently convertible into one share of common stock at a conversion rate
of $1.50 per share. The Company was required to accrue dividends of $.12 per
share per annum on the Series II shares commencing September 1, 1992.
Dividends were payable commencing September 30, 1992 and quarterly
thereafter. On March 11, 1993, the Company's holders of the preferred shares
voted to amend the dividend requirements such that the Series II holders are
not entitled to receive dividends in any form for the period from January 1,
1993 through December 31, 1994. Also, no dividends will accumulate during
this period of time. On April 13, 1995, the Company's holders of the
preferred shares voted to amend the dividend requirements such that the
Series II holders shall be entitled to receive stock dividends at a rate of
8% per annum. The stock dividends shall be payable in shares of the
Company's Series II convertible, redeemable preferred stock and the
valuation thereof was deemed to be $1.50 per share for purposes of
determining the number of shares to be issued. Dividends accrue quarterly
and are payable annually. The Series II shares have a liquidation preference
of $1.50 per share. The Series II holders are entitled to voting rights
equal to the number of common shares into which a Series II share is then
convertible.
The Series II shares are redeemable at the option of the Company at $1.50
per share plus any accrued and unpaid dividends at the redemption date. If
the Company redeems the Series II shares, it is required to sell the Series
II holders warrants to purchase the number of shares of common stock into
which the Series II shares were convertible at the then conversion price. On
December 31, 1996, the Company is required to redeem all the Series II
shares at the redemption price of $1.50 per share plus accrued unpaid
dividends up to the redemption date.
During 1992, 311,172 Series II shares were issued as a stock dividend on
preferred Series I and II shares, including dividends earned in 1991 which
were declared and paid in 1992 of 54,178 Series II shares.
Under the terms of both the Series I and Series II stock purchase
agreements, dividends on common shares are restricted. In addition, the
Company is subject to various restrictive covenants including, but not
limited to, maintaining a current ratio of at least 1.0 and net worth, as
defined which includes the carrying value of the preferred shares, of at
least $1,500,000. As of December 31, 1994 the Company was not in compliance
with certain of these restrictive covenants and therefore in default under
terms of the Series I and Series II stock purchase agreements. The Company
has obtained a waiver of the covenant violations from the Series I and
Series II shareholders.
Aggregate Redemption Requirements - The aggregate annual redemption
requirements for the redeemable, convertible preferred shares, Series I and
Series II, outstanding as of December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1996 $ 6,479,663
-----------
</TABLE>
-20-
<PAGE>
5. STOCKHOLDERS' EQUITY
Common Stock Options - The Company has stock option plans for directors,
officers, and key employees. In 1992, the Company established the 1992
stock option plan for which options may be granted for the purchase of up
to 600,000 shares of common stock. The Company's president has the
authority to grant options for the purchase of 100,000 shares of common
stock under this plan. The Company also established a 1990 stock option
plan for which options may be granted for the purchase of up to 400,000
shares of common stock. Under the Company's 1986 stock option plan, options
may be granted for the purchase of up to 750,000 shares of common stock.
Under the plans, options for the purchase of the shares of common stock
must be granted at an exercise price that is at least equal to the fair
market value of the common stock at the date of grant. Options are
generally exercisable up to 25% per year, commencing one year from the date
of grant. The following summarizes stock option activity:
<TABLE>
<CAPTION>
Number Price Aggregate
of per Exercise
Shares Share Price
<S> <C> <C> <C>
Balance at December 31, 1991 1,145,560 $ .50-1.15 $1,113,060
Options granted 303,500 1.00 303,500
Options exercised (6,076) 1.00 (6,076)
Options canceled (302,650) .50-1.00 (293,450)
--------- ----------
Balance at December 31, 1992 1,140,334 .50-1.15 1,117,034
Options granted 200,400 1.00-1.50 262,099
Options exercised (6,774) 1.00-1.50 (7,473)
Options canceled (175,725) .50-1.00 (175,725)
--------- ----------
Balance at December 31, 1993 1,158,235 .50-1.50 1,195,935
Options granted 409,500 .50-1.50 483,250
Options exercised (2,700) 1.00-1.50 (2,700)
Options canceled (274,800) .50-1.50 (264,450)
--------- ----------
Balance at December 31, 1994 1,290,235 $ .50-1.50 $1,412,035
========= ==========
</TABLE>
At December 31, 1994, options to purchase 790,885 shares of common stock
were exercisable at $1.00 per share, options to purchase 61,600 shares of
common stock were exercisable at $.50 per share, options to purchase 50,000
shares of common stock were exercisable at $1.15 per share, and options to
purchase 157,450 shares of common stock were exercisable at $1.50 per
share.
-21-
<PAGE>
Stock Warrants - At December 31, 1994, warrants to purchase 536,875 shares
of the Company's common stock at prices of $1.00 to $1.50 per share were
outstanding. These warrants expire as follows:
<TABLE>
<CAPTION>
Warrants for
Shares of
Common Stock Exercise Price Expiration Date
<S> <C> <C>
500,000 $1.00 1995
11,875 1.00 1995
25,000 1.50 1997
</TABLE>
The Company has granted warrants to purchase 500,000 shares of common stock
at $1.00 per share to certain officers of the Company. In addition, the
Company has agreed to pay cash compensation to certain officers of the
Company. The warrants are exercisable and the cash compensation is payable
only if the Company is sold or the Company is involved in a business
combination which results in a distribution of cash or publicly traded
securities to the Company's stockholders. The Board of Directors of the
Company has adopted a resolution to review this management compensation
plan as of December 31, 1995 to determine if the plan will be modified,
terminated, or continued. The cash compensation is based on the valuation
of the Company as determined in such transaction. Compensation expense, in
the amount of the cash compensation and the difference between the then
fair value of the common stock issuable upon the exercise of the warrants
and the aggregate warrant exercise price will be recorded if, and when, a
transaction, as defined, occurs.
Stock Subscription Receivable - The Company has notes receivable from a
former officer of the Company in connection with the sale of 5,000 shares
of Series I preferred stock and 83,308 shares of common stock. The notes
receivable currently bear interest at 7.22% and are due April 15, 1995.
6. FOREIGN OPERATIONS
The Company licenses its products in foreign countries through independent
agents and its own sales office in Amsterdam. Revenues are recorded at the
gross license fee on acceptance of the software product with the related
agent's commission charged to expense. Gross revenues, including
maintenance revenue, and related commission expense were $2,249,981 and
$1,213,225, respectively, for 1994; $2,742,095 and $1,371,524,
respectively, for 1993; and $2,619,038 and $1,499,860, respectively, for
1992. At December 31, 1994 and 1993, the total of accounts receivable and
installment receivables from foreign customers are $1,189,449 and
$1,693,490, respectively.
The Company recognizes foreign exchange gains and losses for transactions
denominated in a foreign currency. Foreign exchange gains (losses) amounted
to $25,000, $(60,000) and $65,789 for the years ended December 31, 1994,
1993, and 1992, respectively.
7. OPERATING LEASES
The Company is obligated under noncancelable operating leases for rental of
its office space and certain equipment. Total rental expense for all
operating leases aggregated $487,051,
-22-
<PAGE>
$586,259, and $412,713 for the years ended December 31, 1994, 1993 and
1992, respectively. Required minimum lease payments for operating leases
with noncancelable terms in excess of one year, including the Company's
share of estimated operating costs over the office lease period, are as
follows:
<TABLE>
<CAPTION>
Years ending December 31:
<S> <C>
1995 $287,640
1996 206,264
1997 130,741
1998 18,345
--------
Total minimum lease payments required $642,990
========
</TABLE>
8. INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. Prior to the adoption of SFAS No. 109, the Company followed the
provisions of SFAS No. 96. The effect of adopting SFAS No. 109 had no
cumulative impact at January 1, 1993 and no impact on the results of
operations for the years ended December 31, 1994 and 1993.
The Company has a tax net operating loss carryforward of approximately
$3,900,000 as of December 31, 1994. If not used, this carryforward will
begin to expire in 2000. Under the Tax Reform Act of 1986, certain changes
in ownership resulting from the sale or issuance of stock may limit the
amount of net operating loss carryforwards which can be utilized on an
annual basis.
The 1993 and 1992 income tax expense, which consists primarily of federal
income taxes, has been offset by the benefit of the utilization of income
tax net operating loss carryforwards. The Company has not recorded a tax
benefit in 1994 as no loss carrybacks exist and due to the uncertainty of
future taxable income.
Deferred tax assets and liabilities represent the tax impact of temporary
differences between the basis of assets and liabilities for financial
reporting purposes and income tax purposes.
Deferred taxes as of December 31, 1994 and 1993 consist of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Current deferred tax assets -
Allowance for doubtful accounts and other accruals $ 52,000 $ 100,000
Long-term deferred tax assets and liabilities:
Software development costs and other (951,000) (357,000)
Tax net operating loss carryforward 1,423,000 762,000
Valuation allowance (524,000) (505,000)
---------- ---------
Net deferred tax asset (liability) $ -- $ --
========== =========
</TABLE>
The Company has recorded a valuation allowance to reduce the recorded net
long-term deferred tax asset to the amount of deferred tax benefit expected
to be realized.
-23-
<PAGE>
9. ACQUISITION
Effective December 31, 1992, the Company acquired software technology,
fixed assets, certain accounts receivable and deferred maintenance
obligations from Phaser Systems, Inc. in exchange for 100,000 shares of
BlueLine common stock valued at $1.50 per share. The value of the stock was
determined by the Board of Directors based on their estimate of current
value. In addition to the 100,000 common shares, the Company was required
to issue Phaser Systems, Inc. 1.25% of the currently outstanding stock,
warrants and options for each $1,000,000 in revenue generated by the
products in excess of $5,000,000 for the 24-month period commencing as of
the general availability date of the software technology as established in
the purchase agreement. As of December 31, 1994, no revenues had been
generated by the products. The Company anticipates revenue may be generated
by the products in 1995. The acquisition has been accounted for as a
purchase and, accordingly, the acquired assets have been recorded at their
estimated fair values at the date of acquisition. The excess of the
purchase price and related costs over the net assets acquired of $165,363
was recorded as purchased software and will be amortized over four years
once the software is available for general release.
10. PURCHASE AND SALE OF SOFTWARE PRODUCTS
In September 1993, the Company sold a software product for $500,000 which
is to be paid in monthly installments through September 1996. The related
amounts receivable reflected in the financial statements at December 31,
1994 have been discounted at an effective interest rate of 8.3%.
In September and October of 1992, the Company sold five of its software
products to a related party. The Company believes this is an arms-length
transaction as the sales price and terms of this transaction are
substantially the same as a transaction completed in 1990 with an
independent third party. The sales agreement provides that the purchaser
pay royalties to the Company in the following amounts:
. 100% of the gross revenues received during the period commencing on the
date of closing through November 30, 1992;
. 60% of the gross revenues received from the programs during the 10 and
11 month periods prior to the first anniversary dates following closing;
. 40% of the gross revenues received from the programs during the 12 month
period prior to the second anniversary date following closing;
. 10% of the gross revenues received from the programs during the 12 month
period prior to the third anniversary date following closing.
The Company recognizes these contingent royalty payments as new products
are sold and maintenance contracts renewed. The amount of royalty income
recognized from this agreement during the years ended December 31, 1994 and
1993 was approximately $65,000 and $120,000, respectively. The amount of
royalty income recognized from this agreement during the year ended
December 31, 1992 was insignificant.
-24-
<PAGE>
In October 1990, the Company sold three of its software products. The
Company received royalties of $25,349, and $87,948 during the years ended
December 31, 1993 and 1992, respectively, in connection with this
agreement. Royalties received for these products during the year ended
December 31, 1994 were insignificant.
In May 1991, the Company acquired a software product for $467,317. The
purchase was paid $167,317 in cash and an agreement to pay $300,000 over
two years. As of December 31, 1994, this balance has been paid. These
payments are being applied against royalties equal to 15% of product
revenues, as defined, until such time as the Company recovers the amounts
paid. The Company then will pay an 8% royalty of all product revenues until
the contract expires on May 1, 1996. As of December 31, 1994, no additional
royalty amounts were due or recorded.
11. EMPLOYEE 401(k) PLAN
The Company has adopted a 401(k) plan which covers substantially all
domestic employees meeting the minimum eligibility requirement which
consists of working at least 1,000 hours per year. Employer contributions
are at the discretion of the Board of Directors, and the Company made no
contributions to the plan for the years ended December 31, 1994, 1993, and
1992, respectively.
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NONCASH INVESTING AND
FINANCING ACTIVITIES
The Company paid $96,200, $37,440, and $32,966 of interest for the years
ended December 31, 1994, 1993, and 1992. No income taxes were paid for the
years ended December 31, 1994, 1993, and 1992.
Investing and financing activities not affecting cash during the year ended
December 31, 1993 were:
. The Company sold a software product for $500,000, of which $406,000 of
principal and related interest receivable were recorded in accounts
receivable and installment receivables at December 31, 1993.
Investing and financing activities not affecting cash during the year ended
December 31, 1992 were:
. The Company issued a stock dividend on outstanding Convertible,
Redeemable Preferred Shares, Series I and Series II of 311,172 shares of
Convertible, Redeemable Preferred Shares, Series II.
-25-
<PAGE>
In connection with the acquisition of Phaser Systems, Inc. in December
1992, assets acquired, liabilities assumed, and consideration paid were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Assets acquired:
Purchased software $165,363
Fixed assets 24,375
Accounts receivable 5,625
--------
195,363
Liabilities assumed 27,813
--------
$167,550
========
Consideration:
Common stock $150,000
Acquisition costs 17,550
--------
$167,550
========
</TABLE>
13. SUBSEQUENT EVENTS
Additional borrowing - During June 1995, the Company borrowed $75,000 under
a promissory note payable to a holder of preferred shares of the Company.
Borrowings under the note bear interest at 10%, are due on demand, and are
collateralized by all assets of the Company. Repayment of the note payable
is subordinate to borrowings under the bank line of credit and other debt
outstanding at December 31, 1994 (Note 3).
Merger - On June 22, 1995, the Board of Directors approved an agreement to
merge the Company with an independent third party. Under the terms of the
agreement, upon approval by the holders of the Company's common and
preferred shares, the Company will become a subsidiary of the third party.
After settlement of outstanding options and warrants to purchase shares of
the Company's common stock and certain change of control obligations,
holders of the Company's common and preferred stock would receive
approximately $1.23 per share. The consideration will consist of $.45 per
share of cash at closing, $.11 per share of cash held in escrow for
indemnification of the acquiror, and $.67 per share in the form of the
acquiror's common stock.
-26-
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed financial information presents
the estimated effects of the Merger between Apertus and BlueLine as a purchase
for accounting purposes. The pro forma information assumes that the Merger had
occurred as of the beginning of the respective periods presented in the Pro
Forma Condensed Statements of Operations. In the case of the April 2, 1995 Pro
Forma Condensed Balance Sheet, the Merger is reflected on a pro forma basis as
if it occurred on April 2, 1995. The information presented in the following pro
forma financial statements reflects the financial statements of Apertus and
BlueLine as of and for the periods ended April 2, 1995 and December 31, 1994,
respectively.
The following pro forma financial data is not necessarily indicative of the
results of the future operations of the merged entity or the actual results that
would have been achieved had the Merger been consummated prior to the periods
presented. In the opinion of ApertusOs management, all adjustments necessary to
present fairly such pro forma financial statements have been in the terms and
structure of the transactions.
-27-
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED BALANCE SHEET AS OF APRIL 2, 1995
(IN THOUSANDS)
(UNAUDITED)
Apertus BlueLine Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $ 13,140 $ 29 $(4,375)(2) $ 8,794
Cash in escrow--current portion............ 106 -- -- 106
Marketable securities..................... 6,310 -- -- 6,310
Accounts receivable--net................... 14,067 1,640 -- 15,707
Inventories............................... 3,126 -- -- 3,126
Current portion of installment
receivables............................ 150 1,468 -- 1,618
Other..................................... 453 76 -- 529
-------- ------- ------- --------
Total Current Assets.................... 37,352 3,213 (4,375) 36,190
Property and Equipment--net.................. 3,709 154 -- 3,863
Other Assets:
Cash in escrow--net of
current portion......................... 757 -- -- 757
Note receivable........................... 8,700 -- -- 8,700
Capitalized software...................... 3,917 2,478 (1,500)(3) 4,895
Installment receivables--
net of current portion.................. 49 1,227 -- 1,276
Other..................................... 842 197 1,000(4) 1,847
(192)(3)
-------- ------- ------- --------
Total Other Assets...................... 14,265 3,902 (692) 17,475
-------- ------- ------- --------
Total Assets................................ $ 55,326 $ 7,269 $(5,067) $ 57,528
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Checks written in excess of book
balances................................ $ -- $ 37 $ -- $ 37
Accounts payable.......................... 2,932 103 -- 3,035
Accrued expenses.......................... 6,437 810 -- 7,247
Notes payable............................. -- 1,185 -- 1,185
Deferred revenue.......................... 3,863 1,542 -- 5,405
Other..................................... 151 -- -- 151
-------- ------- ------- --------
Total Current Liabilities............... 13,383 3,677 -- 17,060
Long-term debt--net of
current portion........................... 8,976 -- -- 8,976
Convertible, Redeemable Preferred Shares:
Series I.................................. -- 4,064 (4,064)(5) --
Series II................................. -- 2,416 (2,416)(5) --
-------- ------- ------- --------
Total Convertible, Redeemable
Preferred Shares........................ -- 6,480 (6,480) --
Shareholders' Equity (Deficit):
Common stock.............................. $ 676 $ 7 $ (7)(5) $ 701
25(2)
Additional paid-in capital................ 53,231 194 (194)(2) 57,581
4,350(2)
Accumulated deficit....................... (20,747) (3,056) 3,056(2) (26,597)
(5,850)(5)
Unearned compensation..................... (193) -- -- (193)
Notes receivable for purchase of
common and preferred stock.............. -- (33) 33(2) --
-------- ------- ------- --------
Total Shareholders' Equity
(Deficit)............................... 32,967 (2,888) 1,413 31,492
-------- ------- ------- --------
Total Liabilities and Shareholders'
Equity.................................... $ 55,326 $ 7,269 $(5,067) $ 57,528
======== ======= ======= ========
</TABLE>
See accompanying notes
-28-
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 2, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Apertus BlueLine Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Sales.................................. $45,713 $3,558 $ -- $49,271
Rentals and services................... 8,913 3,320 -- 12,233
------- ------ ----- -------
Total Revenues....................... 54,626 6,878 -- 61,504
Operating Expenses:
Cost of sales.......................... 12,794 328 100 (3) 13,222
Cost of rentals and services........... 3,474 -- -- 3,474
Research, development and engineering.. 10,674 1,912 -- 12,586
Selling, general and administrative.... 18,407 4,756 (100) (4) 23,063
------- ------ ----- -------
Total Operating Expenses............ 45,349 6,996 -- 52,345
------- ------ ----- -------
Income (Loss) From Operations........... 9,277 (118) -- 9,159
Other Income (Expense).................. 712 (98) -- 614
------- ------ ----- -------
Income (Loss) Before
Income Taxes........................... 9,989 (216) -- 9,773
Provision for Income Taxes............. (150) -- -- (150)
------- ------ ----- -------
Net Income (Loss)....................... $ 9,839 $ (216) $ -- $ 9,623
======= ====== ===== =======
Net Income Per Common and
Common Equivalent Share................ $ .69 $ .65
======= =======
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding............................ 14,266 14,771
======= =======
</TABLE>
See accompanying notes
-29-
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
1. Certain amounts in the BlueLine historical financial information have been
reclassified to conform with Apertus's financial statement presentation.
2. To reflect the aggregate merger consideration of $8,750,000 consisting of
$4,375,000 cash and 505,051 shares of Apertus Common Stock valued at
$8.6625 per share, which results in the elimination of convertible
redeemable preferred shares and the shareholders' equity of BlueLine.
3. To reflect the writedown to estimated fair value of capitalized software
and purchased software and the related amortization.
4. To reflect the preliminary estimate of goodwill and the related
amortization calculated over a 10-year life on a straight-line basis.
5. As a result of this transaction, Apertus is anticipating the purchase and
subsequent writedown of $5,850,000 associated with purchased research and
development. This writedown is reflected in shareholders' equity as of
April 2, 1995. Apertus anticipates reflecting this transaction as a charge
of earnings in its first quarter ending July 2, 1995.
-30-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 17, 1995 APERTUS TECHNOLOGIES INCORPORATED
/s/ Sue A. Hogue
------------------------------------------
Sue A. Hogue
Vice President and Chief Financial Officer
-31-
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Item Page
- ------- ---- ----
<S> <C> <C>
2 Acquisition Agreement dated June 26, 1995, among Electronically Filed
Apertus Technologies Incorporated, BlueLine
Acquisition Co. and BlueLine Software, Inc.,
including exhibits
23.2 Consent of Deloitte & Touche LLP Electronically Filed
</TABLE>
<PAGE>
EXHIBIT 2
ACQUISITION AGREEMENT
among
APERTUS TECHNOLOGIES INCORPORATED
BLUELINE ACQUISITION CO.
BLUELINE SOFTWARE, INC.
June 26, 1995
<PAGE>
TABLE OF CONTENTS
RECITALS................................................................. 1
ARTICLE I-THE MERGER..................................................... 2
1.01 Effectiveness................................................. 2
1.02 The Closing................................................... 2
1.03 Payment for Capital Stock..................................... 3
1.04 Holdback...................................................... 4
1.05 Amendment to this Agreement................................... 4
ARTICLE II-PURCHASE OF CAPITAL STOCK..................................... 5
2.01 The Offer..................................................... 5
2.02 Approval of the Offer......................................... 5
2.03 Best Efforts.................................................. 5
2.04 Short-Form Merger............................................. 5
ARTICLE III-REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 5
3.01 Incorporation and Corporate Power............................. 6
3.02 Execution, Delivery; Valid and Binding Agreement.............. 6
3.03 Approval of the Plan of Merger; Meeting of Shareholders....... 6
3.04 No Breach..................................................... 6
3.05 Governmental Authorities; Consents............................ 7
3.06 Capital Stock................................................. 7
3.07 Subsidiaries.................................................. 8
3.08 Financial Statements.......................................... 8
3.09 Absence of Undisclosed Liabilities............................ 9
3.10 No Material Adverse Changes................................... 9
3.11 Absence of Certain Developments............................... 9
3.12 Title to Properties........................................... 11
3.13 Accounts Receivable........................................... 12
3.14 Tax Matters................................................... 12
3.15 Contracts and Commitments..................................... 14
3.16 Intellectual Property Rights.................................. 16
3.17 Litigation.................................................... 19
3.18 Warranties.................................................... 19
3.19 Employees..................................................... 19
3.20 Employee Benefit Plans........................................ 20
3.21 Insurance..................................................... 21
3.22 Affiliate Transactions........................................ 21
3.23 Customers and Suppliers....................................... 21
-i-
<PAGE>
3.24 Officers and Directors; Bank Accounts......................... 21
3.25 Compliance with Laws; Permits................................. 22
3.26 Environmental Matters......................................... 22
3.27 Brokerage..................................................... 24
3.28 Disclosure.................................................... 24
3.29 Unaccredited Investors........................................ 25
ARTICLE IV-REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION CO................................. 25
4.01 Incorporation and Corporate Power............................. 25
4.02 Execution, Delivery; Valid and Binding Agreement.............. 25
4.03 No Breach..................................................... 26
4.04 Acquisition Co................................................ 26
4.05 Apertus Common Stock.......................................... 26
4.06 Governmental Authorities; Consents............................ 26
4.07 Brokerage..................................................... 26
ARTICLE V-COVENANTS OF THE COMPANY....................................... 27
5.01 Conduct of the Business....................................... 27
5.02 Access to Books and Records................................... 28
5.03 Meeting of Shareholders....................................... 29
5.04 Demands....................................................... 29
5.05 Conditions.................................................... 29
5.06 No Shop....................................................... 29
5.07 Termination Fee............................................... 30
5.08 Information Statement......................................... 30
ARTICLE VI-COVENANTS OF PARENT AND ACQUISITION CO....................... 30
6.01 Information Statement......................................... 30
6.02 Conditions.................................................... 30
6.03 Payment of Loans.............................................. 30
ARTICLE VII-CONDITIONS TO CLOSING........................................ 31
7.01 Conditions to Parent's and Acquisition Co.'s Obligations...... 31
7.02 Conditions to the Company's Obligations....................... 34
-ii-
<PAGE>
ARTICLE VIII-TERMINATION................................................. 35
8.01 Termination................................................... 35
8.02 Effect of Termination......................................... 36
ARTICLE IX-ADDITIONAL AGREEMENTS........................................ 36
9.01 Registration.................................................. 36
9.02 Termination of Registration................................... 36
9.03 Registration Procedures....................................... 37
9.04 Expenses...................................................... 37
9.05 Registration Rights of Transferees............................ 37
ARTICLE X-SURVIVAL; INDEMNIFICATION...................................... 38
10.01 Survival of Representations and Warranties................... 38
10.02 Indemnification by the Company and Indemnifying Parties...... 38
10.03 Indemnification by Parent.................................... 38
10.04 Method of Asserting Claims................................... 39
ARTICLE XI-MISCELLANEOUS................................................. 40
11.01 Press Releases and Announcements............................. 40
11.02 Expenses..................................................... 40
11.03 Amendment and Waiver......................................... 40
11.04 Notices...................................................... 40
11.05 Assignment................................................... 41
11.06 Severability................................................. 41
11.07 Complete Agreement........................................... 42
11.08 Counterparts................................................. 42
11.09 Governing Law................................................ 42
SIGNATURES............................................................... 43
EXHIBIT A-1 - Articles of Merger
EXHIBIT A-2 - Articles of Merger
EXHIBIT B - Plan of Merger
EXHIBIT C - Investment Letter
EXHIBIT D - Escrow Agreement
EXHIBIT E - Purchase Agreement
EXHIBIT F - Company Counsel Opinion
EXHIBIT G - Company Certificate
EXHIBIT H - Parent Counsel Opinion
EXHIBIT I - Parent Certificate
-iii-
<PAGE>
ACQUISITION AGREEMENT
This Acquisition Agreement (this "Agreement") dated June 26, 1995, is
entered into among Apertus Technologies Incorporated, a Minnesota corporation
("Parent"), BlueLine Acquisition Co., a Minnesota corporation and a wholly owned
subsidiary of Parent ("Acquisition Co."), and BlueLine Software, Inc., a
Minnesota corporation (the "Company"). Acquisition Co. and the Company are
hereinafter sometimes collectively referred to as the "Constituent
Corporations."
WHEREAS, the respective Boards of Directors of Parent, Acquisition Co.
and the Company have determined that it is advisable and in the best interests
of the respective corporations and their shareholders that they enter into this
Agreement pursuant to which Acquisition Co. would be merged with and into the
Company in accordance with the Minnesota Business Corporations Act (the "MBCA")
and the terms of this Agreement and the Company would be the surviving
corporation and would become a wholly owned subsidiary of Parent (the "Merger");
WHEREAS, the Board of Directors of the Company has recommended that
the shareholders of the Company vote to approve the Agreement;
WHEREAS, the parties intend that the aggregate consideration to be
paid in respect of the Merger shall be $8,750,000 in cash and common shares of
Parent ("Apertus Common Stock") including (w) the Company's expenses in
negotiating this Agreement, (x) payments to holders of the Company's capital
stock, (y) cashing out options and warrants by the Company and (z) making all
payments incurred by the Company that may arise solely because of the Merger,
whether or not such payments are to be made by Parent, Acquisition Co. or the
Company ("Aggregate Merger Consideration");
WHEREAS, the parties contemplate that, of the Aggregate Merger
Consideration, approximately half will be payable in Apertus Common Stock and
approximately half will be payable in cash, but payments to be made to certain
holders of the Company's capital stock and to holders of options, warrants and
contracts will be solely for cash;
WHEREAS, for purposes of determining the value of the Apertus Common
Stock, the parties used the average of the closing price as reported on NASDAQ
for the five business days ending on June 21, 1995, on which day the Merger was
first publicly announced by Parent after the close of the market, and such
average is $8.6625;
WHEREAS, each share of the Company's issued and outstanding capital
stock ("Capital Stock") would be converted into a combination of cash and
Apertus Common Stock as follows:
<PAGE>
Apertus
Cash Common Stock
-------- ------------
$0.56260 .076943 shs.
(the cash and Apertus Common Stock to be paid in respect of each share of
Capital Stock of each class and series being referred to as the "Merger
Consideration" as may be appropriate in the circumstances); and
WHEREAS, in furtherance of the Merger, Acquisition Co. proposes to
offer (the "Offer") to purchase Capital Stock for a purchase price equal to the
Merger Consideration; and
WHEREAS, the Board of Directors of the Company has determined that the
Offer is fair to and in the best interests of the Company's shareholders; and
WHEREAS, the Board of Directors of the Company has approved the making
of the Offer and has recommended that the shareholders of the Company accept the
Offer.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto hereby
agree as follows:
ARTICLE I
THE MERGER
1.01 Effectiveness. Upon satisfaction or waiver of the conditions set
forth in Article VII of this Agreement, the parties hereto will cause a copy of
the Articles of Merger, attached hereto as Exhibit A-1 (the "Articles of
Merger") including a Plan of Merger attached hereto as Exhibit B (the "Plan of
Merger"), to be signed and filed with the Secretary of State of the State of
Minnesota in accordance with the MBCA. The Plan of Merger is incorporated by
reference herein.
1.02 The Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Dorsey & Whitney P.L.L.P., 220
South Sixth Street, Minneapolis, Minnesota 55402, within three days of the
meeting of shareholders referred to in Section 5.03 and will be effective as of
the Effective Time (as defined in the Plan of Merger).
(b) The parties shall deliver to each other the documents required to
be delivered pursuant to Article VII hereof at the Closing.
-2-
<PAGE>
1.03 Payment for Capital Stock.
(a) Parent agrees that promptly after the Effective Time it will cause
to be distributed to holders of Capital Stock appropriate materials to
facilitate payment for Capital Stock, which shall include an Investment Letter
in the form of Exhibit C ("Investment Letter") to each person to whom Apertus
Common Stock would be issued, and will process such materials promptly after
receipt thereof. After the Effective Time, each holder of a certificate or
certificates representing shares of Capital Stock canceled and extinguished at
the Effective Time pursuant to the Plan of Merger may surrender such certificate
or certificates to Parent, as agent for the holders of shares of Capital Stock,
to effect the exchange of such certificate or certificates on such holder's
behalf. After surrender to Parent of any certificate which, prior to the
Effective Time, shall have represented any shares of Capital Stock, other than
Dissenting Shares, Parent shall distribute to the person in whose name such
certificate shall have been registered the Merger Consideration into which the
Capital Stock shall have been converted at the Effective Time pursuant to the
Plan of Merger. Until so surrendered and exchanged, each outstanding
certificate which, prior to the Effective Time, represented shares of Capital
Stock shall be deemed to represent and evidence only the right to receive the
Merger Consideration to be paid therefor as set forth in the Plan of Merger and
until such surrender and exchange, no portion of the Merger Consideration shall
be paid to the holder of such outstanding certificate in respect thereof.
(b) Notwithstanding any other provision of this Agreement, if Parent
fails to receive an Investment Letter promptly from each holder of Capital Stock
to whom Apertus Common Stock would be issued in the Merger or determines that
issuance of Apertus Common Stock to any holder of Capital Stock could affect the
exemption from registration of the Apertus Common Stock under the Securities Act
of 1933, as amended ("Securities Act"), then such holder shall instead receive
cash in lieu of Apertus Common Stock based upon a value of $8.6625 per share.
(c) If payment of the Merger Consideration is to be made to a person
other than the person in whose name the certificate surrendered in exchange
therefor is registered, it shall be a condition to such payment that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and that the person requesting such payment shall pay to
Parent any transfer and other taxes required by reason of such payment in any
name other than that of the registered holder of the certificate surrendered or
shall have established to the satisfaction of Parent that such tax either has
been paid or is not payable.
(d) No interest shall accrue or be payable with respect to any amounts
which any holder of shares of Capital Stock shall be so entitled to receive.
Parent shall be authorized to pay the Merger Consideration attributable to any
certificate theretofore issued which has been lost or destroyed, upon receipt of
satisfactory evidence of ownership of the shares of Capital Stock represented
thereby and of appropriate indemnification.
-3-
<PAGE>
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration as provided in this Section 1.03, subject to applicable law in the
case of Dissenting Shares.
(f) Fractional shares shall not be issued. Instead, any fractional
portion of a share of Apertus Common Stock shall be paid out in cash at a value
of $8.6625 per share.
1.04 Holdback. Notwithstanding anything contained in this Agreement,
20% of the cash portion of the Merger Consideration payable in respect of the
Capital Stock shall be paid to First Trust National Association (the "Escrow
Agent") to provide a source of indemnification to Parent and Acquisition Co.
Such portion of the Merger Consideration (the "Holdback") shall be held by and
dealt with by the Escrow Agent pursuant to an Escrow Agreement in substantially
the form of Exhibit D hereto.
For purposes of determining the Merger Consideration, the Company's
expenses in connection with the negotiation of this Agreement have been assumed
to be $50,000. To the extent that such expenses exceed that amount, Parent
shall be entitled to a payment from the Holdback equal to such excess. To the
extent that $50,000 exceeds such expenses, the Company shall make a payment to
the Escrow Agent equal to such excess, which shall become part of the Holdback.
The Company and Ronald Mittman entered into an amendment to Mittman's
employment letter on June 25, 1995 that provides that if he is terminated within
three months of the Effective Time, he will be entitled to a payment of $75,000.
If Mittman becomes entitled to such payment, it shall be made by the Company,
but Parent shall be entitled to a payment from the Holdback equal to $75,000.
The payments required by the second and third paragraphs of this
Section 1.04 are in addition to the indemnification provided in Section 10.02
and accordingly shall be made from the Holdback without regard to the provisions
of Section 10.02(b) establishing a threshold amount.
1.05 Amendment to this Agreement. If the Aggregate Merger
Consideration payable hereunder would exceed $8,750,000, the parties hereto
agree to amend this Agreement to decrease the Merger Consideration so that the
Aggregate Merger Consideration equals $8,750,000.
-4-
<PAGE>
ARTICLE II
PURCHASE OF CAPITAL STOCK
2.01 The Offer. Acquisition Co. shall make the Offer substantially in
the form of the Purchase Agreement ("Purchase Agreement") attached hereto as
Exhibit E no later than June 26, 1995. No change may be made to the Offer by
Acquisition Co. that decreases the amount or form of consideration or imposes
additional conditions to the Offer from those set forth herein.
2.02 Approval of the Offer. The Company hereby approves the Offer and
represents that (i) its Board of Directors at a meeting duly called and held on
June 22, 1995 has (a) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are fair to and in the
best interests of the holders of the Capital Stock and (b) approved this
Agreement and the transactions contemplated hereby, including the making of the
Offer, and has recommended that the stockholders of the Company accept the Offer
and approve this Agreement and the transactions contemplated hereby. The Company
shall promptly furnish Acquisition Co. with the names and addresses of all
record holders of Capital Stock.
2.03 Best Efforts. The Company agrees that it will transmit the Offer
to the holders of its Capital Stock and use its best efforts to obtain
acceptances of the Offer. If executed Purchase Agreements for a sufficient
number of shares of Capital Stock to allow Acquisition Co. to take the actions
set forth in Section 2.04 are received in a form acceptable to Acquisition Co.,
it agrees to close the purchases contemplated thereby upon satisfaction of the
conditions contained therein no later than June 30, 1995. At the closing of the
Purchase Agreements, the Company, the Parent and the Escrow Agent shall enter
into the Escrow Agreement and the Parent shall payover the Holdback pertaining
to the Purchase Agreements to the Escrow Agent.
2.04 Short-Form Merger. If Acquisition Co. is able to purchase a
sufficient amount of Capital Stock to allow it to effectuate the Merger as a
short form merger pursuant to Section 621 of the MBCA upon conversion of a
portion of the Capital Stock so purchased, it will convert the necessary amount
of such Capital Stock and then file Articles of Merger in the form set forth as
Exhibit A-2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Co. that:
-5-
<PAGE>
3.01 Incorporation and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota and, subject to approval of the Plan of Merger by the
Company's shareholders, has the requisite corporate power to execute and deliver
this Agreement and the Articles of Merger and to perform its obligations
hereunder and thereunder. The Company has the corporate power and authority and
all authorizations, licenses, permits and certifications necessary to own and
operate its properties and to carry on its business as now conducted and
presently proposed to be conducted. The copies of the Company's Articles of
Incorporation and Bylaws which have been furnished by the Company to Parent and
Acquisition Co. prior to the date hereof reflect all amendments made thereto and
are correct and complete as of the date hereof. Schedule 3.01 contains a correct
and complete list of each jurisdiction in which the conduct of the Company's
business or the ownership, leasing or operation of its properties and assets
requires the Company to be qualified to do business (except for those
jurisdictions where the failure of the Company to be so qualified would not have
a material adverse effect on the condition of the Company) and the Company is
qualified to do business and is in good standing as a foreign corporation under
the laws of each of those jurisdictions.
3.02 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement and the Articles of Merger by the
Company and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all requisite corporate action, and no
other corporate proceedings on its part are necessary to authorize the
execution, delivery and performance of this Agreement and the Articles of
Merger, other than the approval of the Plan of Merger by the shareholders of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, and the Articles of Merger, when executed and
delivered by the Company, will constitute the valid and binding obligation of
the Company, enforceable in accordance with its terms.
3.03 Approval of the Plan of Merger; Meeting of Shareholders. The
Company hereby represents that its Board of Directors has, by resolutions duly
adopted at a meeting held on June 22, 1995, approved this Agreement and the Plan
of Merger and the transactions contemplated hereby and thereby, including the
Merger, and resolved to recommend approval of the Plan of Merger by the
Company's shareholders. None of the resolutions described in this Section 3.03
has been amended or otherwise modified in any respect since the date of adoption
thereof and all such resolutions remain in full force and effect.
3.04 No Breach. The execution, delivery and performance of this
Agreement and the Plan of Merger by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not conflict with
or result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of a right of termination or
acceleration under, result in any lien, security interest, charge or encumbrance
upon any assets of
-6-
<PAGE>
the Company, or, except for those that have been obtained, require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of the Company or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which the Company is bound or
affected, or any law, statute, rule or regulation or order, judgment or decree
to which the Company is subject.
3.05 Governmental Authorities; Consents. Except for the filing of the
Articles of Merger with the Secretary of State of the State of Minnesota, the
Company is not required to submit any notice, report or other filing with any
governmental authority in connection with the execution or delivery by it of
this Agreement or the Articles of Merger or the consummation of the transactions
contemplated hereby or thereby. Except as set forth in Schedule 3.05, no
consent, approval or authorization of any governmental or regulatory authority
or any other party or person (except the approval of the Plan of Merger by the
shareholders of the Company) that has not been obtained is required to be
obtained by the Company in connection with its execution, delivery and
performance of this Agreement or the Articles of Merger or the transactions
contemplated hereby or thereby other than those the failure of which to obtain
would not have a materially adverse effect on the Company.
3.06 Capital Stock. The authorized capital stock of the Company
consists of 15,000,000 shares, par value $.01 per share, divisible into classes
and series. Shares issued not part of a class or series shall be Common Shares.
662,726 Common Shares ("Company Common Stock") are issued and outstanding. The
only other shares of Capital Stock are shown below:
<TABLE>
<CAPTION>
Class and Series Authorized Outstanding
---------------- ---------- -----------
<S> <C> <C>
Convertible Preferred Shares,
Series I ("Series I Preferred Stock") 4,063,352 4,063,352
Convertible Preferred Shares,
Series II ("Series II Preferred Stock") 1,950,000 1,837,843
</TABLE>
All of such outstanding shares of Capital Stock have been duly authorized and
are validly issued, fully paid and nonassessable. Schedule 3.06 shows the names
of all holders of Capital Stock, their last known address and the number of
shares of Company Common Stock, Series I Preferred Stock and Series II Preferred
Stock held of record by each. There are outstanding stock options to purchase
1,299,306 shares of Company Common Stock. Schedule 3.06 shows the names of
holders of outstanding stock options ("Outstanding Stock Options"), their last
known address, the number of shares of Capital Stock for which the option is
exercisable, the exercise price and the expiration date. The Company has
warrants to purchase 536,875 shares of Company Common Stock outstanding.
Schedule 3.06 shows the names of holders of outstanding warrants ("Outstanding
Warrants"), their last known address, the number of shares of Capital Stock for
which the Warrant is
-7-
<PAGE>
exercisable, the exercise price and the expiration date. The Company has no
other equity securities or securities containing any equity features authorized,
issued or outstanding. There are no agreements or other rights or arrangements
existing which provide for the sale or issuance of Capital Stock by the Company
and, except for the Series I Preferred Stock, the Series II Preferred Stock,
Outstanding Stock Options and Outstanding Warrants, there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire from the Company any shares of
capital stock or other securities of the Company of any kind. There are no
agreements or other obligations (contingent or otherwise) which may require the
Company to repurchase or otherwise acquire any shares of its capital stock.
3.07 Subsidiaries. Except as otherwise set forth in Schedule 3.07, the
Company does not own any stock, partnership interest, joint venture interest or
any other security of, or ownership interest or investment in, any other
corporation, organization or entity. All issued and outstanding shares of
capital stock of any of the subsidiaries set forth in Schedule 3.07 (the
"Subsidiaries") are owned by the Company free and clear of all liens, charges,
encumbrances, claims and options of any nature. All of the outstanding shares of
capital stock of the Subsidiaries have been duly and validly authorized and
issued, and are fully paid and nonassessable. Each of the Subsidiaries is duly
organized, validly existing and in good standing under the laws of the state or
country shown on Schedule 3.07 and has all requisite corporate power and
authority and all authorizations, licenses, permits and certifications necessary
to own and operate its properties and to carry on its business as now conducted
and presently proposed to be conducted. The copies of the Articles of
Incorporation and Bylaws of each Subsidiary which have been furnished by the
Company to Parent prior to the date hereof reflect all amendments made thereto
and are correct and complete as of the date hereof. Schedule 3.07 contains a
correct and complete list of each jurisdiction in which the conduct of each
Subsidiary's business or the ownership, leasing or operation of its properties
and assets requires such Subsidiary to be qualified to do business (except for
those jurisdictions where the failure of such Subsidiary to be so qualified
would not have a material adverse effect on the condition of the Company), and
such Subsidiary is qualified to do business and is in good standing as a foreign
corporation under the laws of each of those jurisdictions.
3.08 Financial Statements. The Company has delivered to Parent copies
of (a) the unaudited consolidated balance sheet, as of April 30, 1995, of the
Company (the "Latest Balance Sheet") and the unaudited consolidated statements
of earnings, shareholders' equity and cash flows of the Company for the four-
month period ended April 30, 1995 (such statements and the Latest Balance Sheet
being herein referred to as the "Latest Financial Statements") and (b) the
audited consolidated balance sheets, as of December 31, 1992, 1993 and 1994 of
the Company and the audited consolidated statements of earnings, shareholders'
equity and cash flows of the Company for each of the three years ended December
31, 1994 (collectively, the "Annual Financial Statements"). The Latest Financial
Statements and the Annual Financial Statements are based upon the information
contained in
-8-
<PAGE>
the books and records of the Company and fairly present the financial condition
of the Company as of the dates thereof and results of operations for the periods
referred to therein. The Annual Financial Statements have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods indicated. The Latest Financial Statements have been
prepared in accordance with generally accepted accounting principles applicable
to unaudited interim financial statements (and thus may not contain all notes
and may not contain prior period comparative data which are required to be
prepared in accordance with generally accepted accounting principles)
consistently with the Annual Financial Statements and reflect all adjustments
necessary to a fair statement of the results for the interim period(s)
presented.
3.09 Absence of Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any 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) as reflected in the Latest Balance Sheet, (ii) liabilities
which have arisen after the date of the Latest Balance Sheet (the "Balance Sheet
Date"), in the ordinary course of business and (iii) as otherwise set forth in
Schedule 3.09.
3.10 No Material Adverse Changes. Since the Balance Sheet Date, there
has been no material adverse change in the assets or liabilities, the business,
the financial condition, the results of operations or, to the best of the
Company's knowledge, the prospects (collectively, the "Condition") of the
Company and its Subsidiaries.
3.11 Absence of Certain Developments. Except as shown on Schedule
3.11, since the Balance Sheet Date, neither the Company nor any Subsidiary has:
(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 or (iv)
liens set forth on Schedule 3.11;
(c) discharged or satisfied any lien or encumbrance or paid any
liability, in each case with a value in excess of $10,000, other than current
liabilities paid in the ordinary course of business;
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(d) sold, assigned or transferred (including, without limitation,
transfers to any employee, affiliate or shareholder) any tangible assets with a
fair market value in excess of $10,000 or canceled or forgiven any debt, claim
or receivable, except in the ordinary course of business;
(e) sold, assigned or transferred (including, without limitation,
transfers to any employee, affiliate or shareholder) any patent, trademark,
trade name, copyright, trade secret or other intangible asset;
(f) disclosed to any person other than Parent or Acquisition Co. and
authorized representatives of Parent or Acquisition Co., any proprietary
confidential information, other than pursuant to a confidentiality agreement
prohibiting the use or further disclosure of such information, which agreement
is identified in the Schedule 3.11 and is in full force and effect on the date
hereof;
(g) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience;
(h) declared or paid any dividends or other distributions with respect
to the Capital Stock or redeemed or purchased, directly or indirectly, any
shares of the Capital Stock or any equity securities, securities convertible
into or exchangeable for its equity securities or warrants, options or other
rights to acquire its equity securities, or any bonds or debt securities;
(i) 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;
(j) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any "insider" (as defined in
Section 3.22 hereof) other than employment arrangements disclosed on Schedule
3.11;
(k) assumed, guaranteed, endorsed or otherwise become liable for the
obligation of any person;
(l) except as shown on Schedule 3.11 and except for payments in
accordance with past practices for goods and services provided in the ordinary
course of business, made any payment or other cash transfer to Company or any of
its affiliates;
(m) suffered any material theft, damage, destruction or loss of or to
any property or properties owned or used by it, whether or not covered by
insurance;
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(n) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee who earns more than $75,000 per
year, or consultant or other agent or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement, or adopted any new employee benefit plan
or arrangement or made any commitment or incurred any liability to any labor
organization;
(o) made any single capital expenditure or commitment therefor in
excess of $10,000;
(p) made any loan, advance or capital contribution to, or investment
in, any person;
(q) made charitable contributions or pledges which in the aggregate
exceed $1,000; or
(r) made any change in accounting principles or practices from those
utilized in the preparation of the Annual Financial Statements.
3.12 Title to Properties.
(a) The Company does not own any real property. The leases (the
"Leases") described on Schedule 3.12 constitute all of the real property used or
occupied by the Company and are in full force and effect, and the Company holds
a valid and existing leasehold interest under each of the Leases. The Company
has delivered to Parent and Acquisition Co. complete and accurate copies of each
of the Leases, and none of the Leases has been modified in any respect, except
to the extent that such modifications are disclosed by the copies delivered to
Parent and Acquisition Co. The Company is not in default, and no circumstances
exist which, if unremedied, would, either with or without notice or the passage
of time or both, result in such default under any of the Leases; nor, to the
best knowledge of the Company, is any other party to any of the Leases in
default.
(b) The Company owns good and marketable title to each of the tangible
properties and tangible assets reflected on the Latest Balance Sheet or acquired
since the date thereof, free and clear of all liens and encumbrances, except for
(i) liens for current taxes not yet due and payable, (ii) liens set forth on
Schedule 3.12, (iii) assets disposed of since the date of the Latest Balance
Sheet in the ordinary course of business, (iv) liens imposed by law and incurred
in the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers and materialmen and (v) liens in respect of pledges or
deposits under workers' compensation laws.
(c) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Company's business are in good condition
and repair, ordinary wear and tear excepted, and are usable in the ordinary
course of business. There are no defects known to the Company in such assets or
other
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conditions relating thereto which, in the aggregate, materially adversely
affect the operation of such assets. The Company owns, or leases under valid
leases, all buildings, machinery, equipment and other tangible assets which it
deems necessary for the conduct of its business.
(d) The Company is not in violation of any applicable zoning ordinance
or other law, regulation or requirement relating to the operation of any
properties used in the operation of its business, and the Company has not
received any notice of any such violation.
3.13 Accounts Receivable. The accounts receivable reflected on the
Latest Balance Sheet are valid receivables, are not subject to valid
counterclaims or setoffs, and are collectible in accordance with their terms
except to the extent of any allowance for doubtful accounts.
3.14 Tax Matters.
(a) Each of the Company and any Subsidiary, any affiliated, combined
or unitary group of which the Company or any Subsidiary is or was a member, any
"Plans" (as defined in Section 3.21 hereof), as the case may be, has: (i)
properly filed (or has had properly 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" (as
defined in subsection (o) below) or required to be filed or sent by it by any
taxing authority having jurisdiction; (ii) properly paid (or has had paid on its
behalf) all Taxes shown to be due and payable on such Returns; (iii) established
on the Latest Balance Sheet, in accordance with generally accepted accounting
principles, accounts 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 Internal
Revenue Code of 1986, as amended (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 the Company or of
any Subsidiary, except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed against the Company or any Subsidiary that has not been resolved and
paid in full. No waiver, extension or comparable consent given by the Company
or any Subsidiary 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 the
Company or any Subsidiary by any Taxing authority regarding any such Tax, audit
or other
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proceeding, or, to the best knowledge of the Company, is any such Tax
audit or other proceeding threatened with regard to any Taxes or Returns. The
Company does not expect the assessment of any additional Taxes of the Company or
the Tax Affiliates and is not aware of any unresolved questions, claims or
disputes concerning the liability for Taxes of the Company or the Subsidiary
which would exceed the estimated reserves established on its books and records.
(d) Neither the Company nor any Subsidiary is 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 the Company or any Subsidiary that are not deductible (in whole or in part)
under Section 280G of the Code.
(e) Except for the return for the year ended December 31, 1994,
neither the Company nor any Subsidiary has requested any extension of time
within which to file any Return, which Return has not since been filed. No
property of the Company or any Subsidiary is property that the Company or any
Subsidiary is or will be required to treat as being owned by another person
under the provisions of Section 168(f)(8) of the Code (as in effect prior to
amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within
the meaning of Section 168 of the Code.
(f) Neither the Company nor any Subsidiary is required to include in
income any adjustment under Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Company or any Subsidiary as a
result of the Tax Reform Act of 1986 and neither the Company nor any Subsidiary
has knowledge that the Internal Revenue Service has proposed any such adjustment
or change in accounting method.
(g) All transactions that could give rise to an understatement of
federal income tax (within the meaning of Section 6661 of the Code as it applied
prior to repeal) or an underpayment of tax (within the meaning of Section 6662
of the Code) were reported in a manner for which there is substantial authority
or were adequately disclosed (or, with respect to Returns filed before the
Closing Date, will be reported in such a manner or adequately disclosed) on the
Returns required in accordance with Sections 6661(b)(2)(B) and 6662(d)(2)(B) of
the Code.
(h) Neither the Company nor any Subsidiary has engaged in any
transaction that would result in a deemed election under Section 338(e) of the
Code, and neither the Company nor any Subsidiary will engage in any such
transaction within any applicable "consistency period" (as such term is defined
in Section 338 of the Code).
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(i) Neither the Company nor any Subsidiary has filed any consent under
Section 341(f) of the Code.
(j) The Company and the Subsidiaries have evidence of payment for all
taxes, charges, fees, levies or other assessments of a foreign country paid or
accrued from the date of the formation of each of them, respectively.
(k) Neither the Company nor any Subsidiary, to the extent they are
"controlled foreign corporations" within the meaning of Section 957 of the Code,
have now or have had at any time in the past "subpart F income" within the
meaning of Section 952 of the Code.
(l) Except for the Company's Dutch Subsidiary, the Company and the
Subsidiaries are, and at all times have been, corporations or associations
taxable as corporations for United States income tax purposes.
(m) Any "FSC" (within the meaning of Section 922 of the Code) has been
properly operated in accordance with the provisions of Sections 921-927 of the
Code.
(n) All deductions claimed or reported on all Returns of the Company
and any Subsidiary on account of royalties or similar fees payable with respect
to any intellectual property of the Company or any other party are allowable in
full.
(o) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies, or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property, or
other taxes, customs duties, fees, assessments, or charges of any kind
whatsoever, including, without limitation, all interest and penalties thereon,
and additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign, upon the Company or any Subsidiary.
3.15 Contracts and Commitments.
(a) Schedule 3.15 lists the following agreements to which the Company
or any Subsidiary is a party, which are currently in effect, and which relate to
the operation of the business of the Company or any Subsidiary: (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) except for the
Company's standard offer letter, 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) agreement prohibiting the
Company or any Subsidiary
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from soliciting any person to become an employee of the Company; (vii) contract,
agreement or understanding relating to the voting of Common Stock or the
election of directors of the Company; (viii) agreement relating to the borrowing
of money on an unsecured basis in excess of $50,000 in the aggregate; (ix)
guaranty of any obligation for borrowed money or; (x) lease or agreement under
which the Company or any Subsidiary is lessee of, or holds or operates any
property, real or personal, owned by any other party requiring rentals in excess
of $5,000 per year, other than shown on Schedule 3.12; (xi) except for the
software leases to customers, lease or agreement under which the Company or any
Subsidiary is lessor of, or permits any third party to hold or operate, any
property, real or personal; (xii) contract or group of related contracts with
the same party by which the Company or any Subsidiary has agreed to purchase
products or services with an undelivered balance of such products or services in
excess of $25,000; (xiii) contract or group of related contracts with the same
party by which the Company or any Subsidiary has agreed to sell products or
services with an undelivered balance of such products or services in excess of
$25,000; (xiv) contract or group of related contracts with the same party (other
than any contract or group of related contracts for the purchase or sale of
products or services) with the Company or any Subsidiary involving more than
$25,000; (xv) contract within Company's knowledge which prohibits the Company or
any Subsidiary from freely engaging in business anywhere in the world; (xvi)
franchise agreement; (xvii) license agreement or agreement providing for the
payment or receipt of royalties or other compensation by the Company or any
Subsidiary in excess of $25,000 other than as shown on Schedule 3.16(a)(vii);
(xviii) contract or commitment for capital expenditures by the Company or any
Subsidiary in excess of $25,000; (xix) agreement by the Company or any
Subsidiary for the sale of any capital asset; (xx) contract with any affiliate
which in any way relates to the Company or any Subsidiary (other than for
employment on customary terms); or (xxi) other agreement which provides for
payments in excess of $25,000 per year.
(b) The Company has performed all material obligations required to be
performed by it in connection with each of the contracts or commitments required
to be disclosed in Schedule 3.15 and is not in default under any contract or
commitment required to be disclosed in Schedule 3.15; the Company has no present
expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed in Schedule
3.15; and to the Company's knowledge there is no breach or anticipated breach by
any other party to any contract or commitment required to be disclosed in
Schedule 3.15.
(c) Prior to the date of this Agreement, Parent has been either
supplied with or given access to a true and correct copy of each written
contract or commitment referred to in Schedule 3.15, together with all
amendments, waivers or other changes thereto.
(d) Any contract or commitment which requires a payment to any person
solely by virtue of the Merger is referred to as a "Change of Control Contract."
All such Change of Control Contracts are shown on Schedule 3.15.
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3.16 Intellectual Property Rights. As used in this Agreement, the
following terms shall have the following meaning:
(i) "Business" shall mean the business(es) in which the Company
and the Subsidiaries are engaged as of the Closing Date;
(ii) "Copyrights" shall mean rights in original works of
authorship including, without limitation, computer programs, as those terms
are used in 17 U.S.C. (S)101 et seq. and corresponding rights under foreign
laws;
(iii) "Distribution Agreements" shall mean each agreement under
which third parties are granted rights to distribute products or provide
services incorporating or utilizing any of the Intellectual Property
Rights, all of which are identified in Schedule 3.16(a)(iii);
(iv) "Intellectual Property Rights" shall mean all the Patent
Rights, Copyrights, Trademarks and Trade Secrets, and other similar rights
in technology or business information that are owned or exclusively
controlled by the Company or any Subsidiary on the Closing Date and used in
or held for use in the Business. Intellectual Property Rights includes,
without limitation, those properties listed on Schedule 3.16(a)(iv);
(v) "Know-How" shall mean (i) design documents, (ii)
specifications and performance criteria, (iii) operating instructions and
maintenance manuals, (iv) manufacturing information, including production
documentation, methods, layouts and supplier and cost information, (v)
computer software tools and related documentation, including, without
limitation, source and object code listings, (vi) prototypes, models or
samples, (vii) computer-aided design or computer-aided manufacturing data,
(viii) information communicated to Parent in meetings or conferences, (ix)
files relating to applications for Intellectual Property Rights and (x) all
other tangible materials (not necessarily proprietary) used in or held for
use in the Business as of the Closing Date;
(vi) "Patent Rights" shall mean rights provided by a United
States or foreign patent, including reissues or extensions thereof, and on
applications for the foregoing, including any divisions, continuations and
continuations-in-part thereof filed by the Company or any Subsidiary on or
before the Closing Date or by Parent, the Company or any Subsidiary after
the Closing Date;
(vii) "License Agreements" shall mean each agreement under which
the Company or any Subsidiary is granted the right to use any intellectual
property rights owned or controlled by a third party, for monetary or other
consideration in excess of $25,000 in any one of 1992, 1993 or 1994, all of
which are identified in Schedule 3.16(a)(vii);
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(viii) "Software" shall mean all computer software products that
are owned or exclusively controlled by the Company or any Subsidiary on the
Closing Date and used in or held for use in the Business, including,
without limitation, those identified by title on Schedule 3.16(a)(viii);
(ix) "Trademarks" shall mean trade names, trademarks, service
marks, trade dress and product configurations that are used or intended to
be used in connection with the Business or any part thereof as of the
Closing Date and all (1) goodwill and common law rights associated
therewith, (2) registration applications pending thereon in any state and
in any country, and (3) registrations issued thereon in any state and in
any country, including, but not limited to, those names, marks, etc.
identified in Schedule 3.16(a)(ix); and
(x) "Trade Secrets" shall mean all proprietary information that
is used in or held for use in connection with the Business and that (1)
derives independent economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
third parties who can obtain economic value from its disclosure or use and
(2) is the subject of efforts by the Company or any Subsidiary that were
and are reasonable under the circumstances to maintain its secrecy, such
as, without limitation, computer program designs, unpublished computer
programs, inventions conceived but not embodied in a patent application,
customer lists, vendor lists, merchandising information, cost and
unpublished pricing information, and information regarding future business
opportunities.
(b) Company hereby represents and warrants to Parent that:
(i) The Company and the Subsidiaries own and possess all right,
title and interest in the Intellectual Property Rights and the Know-How
and, except as shown on Schedule 3.16(b)(i), have the right to disclose all
material Know-How to Parent. The Company and the Subsidiaries have taken
all reasonable action to protect the Intellectual Property Rights,
including, without limitation, use of reasonable secrecy measures to
protect the Trade Secrets included in the Intellectual Property Rights,
except that the Company has not attempted to register trade names or copy
rights;
(ii) The Intellectual Property Rights together with the third
party rights licensed to the Company and the Subsidiaries under the License
Agreements comprise all intellectual property rights used or held for use
in the Business;
(iii) No claim by any third party contesting the validity of any
Intellectual Property Rights has been made or is currently outstanding, and
neither the Company nor any Subsidiary has received any notice and is aware
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of no facts concerning any infringement, misappropriation or violation by
others of any Intellectual Property Rights;
(iv) To Company's knowledge, no infringement, misappropriation or
violation of any third party intellectual property rights has occurred with
respect to Parent's use of the Intellectual Property Rights and Know-How as
currently being used by the Company and the Subsidiaries;
(v) The License Agreements constitute all agreements under which
the Company or any Subsidiary has obtained the right to use any
intellectual property rights of third parties in exchange for a royalty or
any other consideration in excess of $25,000 in any one of 1992, 1993 or
1994; and
(vi) The Distribution Agreements constitute all agreements (other
than agreements with end-users of Software) under which the Company or any
Subsidiary has granted to third parties the right to use the Intellectual
Property Rights which resulted in revenues to the Company in excess of
$25,000 in 1992, 1993 or 1994;
(c) Specifically with respect to the Software and without limiting the
foregoing, Company hereby represents and warrants to Parent that:
(i) Except as shown on Schedule 3.16(c)(i), the Company is the
sole proprietor of the Software;
(ii) The Company has the full power and authority to commercially
exploit all rights in the Software, and except for the Distribution
Agreements, no person has previously assigned, transferred or otherwise
encumbered these rights;
(iii) No material portion of the Software is in the public
domain;
(iv) The Software and the reproduction, preparation of derivative
works based upon, performance of or display of the Software does not
infringe any statutory copyright;
(v) To Company's knowledge, the Software does not invade the
right of privacy or publicity of any person or contain any matter libelous
or otherwise in contravention of the rights of any third person;
(vi) The Software contains no matter, the publication or sale of
which otherwise violates any federal or state statute or regulation, nor is
the Software in any other manner unlawful;
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(vii) Nothing in the contents of the Software constitutes a
"virus" or "worm"; and
(viii) Except for Software in the public domain, written
permission has been obtained for the incorporation of any code, text or
other subject matter not owned by the Company or a Subsidiary and
incorporated in the Software.
3.17 Litigation. Except as set forth in Schedule 3.17, there are no
actions, suits, proceedings, orders or investigations pending or, to the best
knowledge of the Company and its Subsidiaries, threatened against the Company or
any Subsidiary, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
3.18 Warranties. Schedule 3.18 summarizes all claims pending or, to
the best knowledge of the Company and its Subsidiaries, threatened for breach of
any warranty or agreement relating to any products or services sold or provided
by the Company or any Subsidiary prior to the date hereof. Schedule 3.18 lists
all products that the Company has contracted to deliver whose development has
not been completed. To the best of Company's knowledge, there are no inherent
design defects or systemic or chronic problems in such products. Schedule 3.18
shows release dates for all announced versions of software products.
3.19 Employees. Schedule 3.19 lists each employee of the Company and
each Subsidiary (the "Employees") and the position, title, remuneration
(including any scheduled salary or remuneration increases, bonus, retention and
deferred compensation arrangements), date of employment and whether each
Employee has a written employment agreement with the Company or a Subsidiary.
Except as disclosed on Schedule 3.19, (a) to the best knowledge of Company, no
Employee of the Company or any Subsidiary has any plans to terminate his, her or
its employment; (b) the Company and each Subsidiary has complied in all material
respects 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) neither the Company nor any
Subsidiary has any material labor relations problem pending; (d) there is no
workers' compensation claim pending against the Company or any Subsidiary nor is
the Company aware of any facts that would give rise to such a claim; (e) to
Company's knowledge no Employee is subject to any secrecy or noncompetition
agreement or any other agreement or restriction of any kind that would impede in
any way the ability of such employee to carry out fully all activities of such
employee in furtherance of the business of the Company or any Subsidiary; (f) no
Employee or former employee has any valid claim with respect to any Intellectual
Property Rights of the Company or any Subsidiary; (g) no Employee has a right to
receive a bonus based on any period ending after December 31, 1995; and (h) no
employee has any severance rights except as shown on Schedule 3.19.
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3.20 Employee Benefit Plans.
(a) Schedule 3.20 lists (i) all nonqualified deferred compensation or
retirement plans, contracts or arrangements; (ii) all 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) all qualified defined benefit plans (as defined in Section 3(35) of
ERISA or Section 414(j) of the Code); and (iv) all employee welfare benefit
plans (as defined in Section 3(1) of ERISA) maintained or contributed to by the
Company or any Subsidiary with respect to Employees and former employees of the
Company or any Subsidiary and all dependents and beneficiaries of such Employees
and former employees.
(b) All employee benefit plans (as defined in Section 3(3) of ERISA)
which the Company or any Subsidiary maintains or to which it contributes
(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) Company has provided or made available to Parent true and complete
copies of (i) the most recent determination letter, if any, received by the
Company or any Subsidiary from the Internal Revenue Service regarding the Plans
which the Company or any Subsidiary maintains or to which it contributes and any
amendment to any Plan made subsequent to any Plan amendments covered by any such
determination letter; (ii) the most recent financial statements and annual
report or return for the Plans; and (iii) the most recently prepared actuarial
valuation reports, if any.
(d) Neither the Company nor any Subsidiary contributes (and has not
ever contributed) to any multi-employer plan, as defined in Section 3(37) of
ERISA. Neither the Company nor any Subsidiary has any actual or potential
liabilities under Section 4201 of ERISA for any complete or partial withdrawal
from a multi-employer plan. Neither the Company nor any Subsidiary has any
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 3.20, (ii)
health care continuation benefits described in Section 4980B of the Code or
(iii) as otherwise required by applicable law.
(e) Neither the Company, any Subsidiary nor any of their 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
the Company, any Subsidiary, Parent, Parent's subsidiaries or any of their
respective directors, officers or employees to any liability under ERISA or any
applicable law.
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(f) Neither the Company nor any Subsidiary has 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.
3.21 Insurance. Schedule 3.21 lists and briefly describes each
insurance policy maintained by the Company or any Subsidiary with respect to
their 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. Neither the
Company nor any Subsidiary is in default with respect to its obligations under
any of such insurance policies.
3.22 Affiliate Transactions. Except as disclosed Schedule 3.22, no
officer, director or employee of the Company or any Subsidiary or any member of
the immediate family of any such officer, director or employee, or any entity in
which any of such persons owns any beneficial interest (other than any publicly
held corporation whose stock is traded on a national securities exchange or in
the over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "insiders"), has any
agreement with the Company or any Subsidiary (other than normal employment
arrangements) or any interest in any property, real, personal or mixed, tangible
or intangible, used in or pertaining to the business of the Company or any
Subsidiary. None of the insiders has any direct or indirect interest in any
competitor, supplier or customer of the Company or any Subsidiary or in any
person, firm or entity from whom or to whom the Company or any Subsidiary leases
any property, or in any other person, firm or entity with whom the Company or
any Subsidiary transacts business of any nature. For purposes of this Section
3.22, the members of the immediate family of an officer, director or employee
shall consist of the spouse, parents, children, siblings, mothers- and fathers-
in-law, sons- and daughters-in-law, and brothers-and sisters-in-law of such
officer, director or employee.
3.23 Customers and Suppliers. Schedule 3.23 lists the 50 largest
customers of the Company for each of 1993 and 1994 and sets forth opposite the
name of each such customer the dollar amount thereof. Since the Balance Sheet
Date, no customer listed on Schedule 3.23 has notified the Company that it will
stop doing business with the Company. Schedule 3.23 lists each vendor to the
Company for which the Company accrued more than $25,000 in expenses during the
24 months ended March 31, 1995 and sets forth opposite the name of each such
vendor the dollar amount thereof. Since the Balance Sheet Date, no vendor listed
on Schedule 3.23 has notified the Company that it will terminate its
relationship with the Company.
3.24 Officers and Directors; Bank Accounts. Schedule 3.24 lists all
officers and directors of the Company and all of the Company's bank accounts
(designating each authorized signer).
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3.25 Compliance with Laws; Permits.
(a) The Company, the Subsidiaries and their 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 product labeling, consumer products safety, equal
employment opportunity, employee retirement, affirmative action and other hiring
practices, occupational safety and health, workers' compensation, unemployment
and building and zoning codes which the Company or any Subsidiary may be subject
where the failure to comply would have a material adverse effect on the Company.
Neither the Company nor any Subsidiary is relying on any exemption from or
deferral of any such applicable law, regulation or other requirement that would
not be available after the Closing Date.
(b) The Company and each Subsidiary 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 (collectively, the "Permits"). A true, correct
and complete list of all the Permits is set forth in Schedule 3.25. The Company
and any Subsidiary has conducted its business in compliance with all material
terms and conditions of the Permits.
(c) Neither the Company nor any Subsidiary has made or agreed to make
gifts of money, other property or similar benefits (other than incidental gifts
of articles of nominal value) to any actual or potential customer, supplier,
governmental employee or any other person in a position to assist or hinder the
Company or any Subsidiary in connection with any actual or proposed transaction.
(d) In particular, but without limiting the generality of the
foregoing, neither the Company nor any Subsidiary has 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.
3.26 Environmental Matters.
(a) As used in this Section 3.26, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined
in or governed by any federal, state or local law, statute, code,
ordinance, regulation, rule or other requirement relating to such substance
or
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otherwise relating to the environment or human health or safety, including
without limitation any waste, material, substance, pollutant or contaminant
that might cause any injury to human health or safety or to the environment
or might subject the Company to any imposition of costs or liability under
any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
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.
(b) The Company and each Subsidiary is in material compliance with all
applicable Environmental Laws.
(c) The Company and each Subsidiary 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 and operate its properties (collectively, the "Environmental Permits").
A true and correct copy of each such Environmental Permit has been provided by
the Company to Parent and Acquisition Co. The Company and each Subsidiary has
conducted its business in compliance with all terms and conditions of the
Environmental Permits. The Company and each Subsidiary has filed all reports
and notifications required to be filed under and pursuant to all Environmental
Laws.
(d) Except as set forth in Schedule 3.26: (i) no Hazardous Materials
have been generated, treated, contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited, stored, or released on, under or
about any part of the property owned or leased by the Company or any Subsidiary
at any time (the "Real Property"), (ii) the Real Property contains no asbestos,
urea, formaldehyde, radon at levels above natural background, polychlorinated
biphenyls (PCBs) or pesticides, and (iii) no aboveground or underground storage
tanks are located on, under or about the Real Property, or have been located on,
under or about the Real Property and then subsequently been removed or filled.
If any such storage tanks exist on, under or about the Real Property, such
storage tanks have been duly registered with all appropriate governmental
entities and are otherwise in compliance with all applicable Environmental Laws.
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(e) Except as set forth in Schedule 3.26, neither the Company nor any
Subsidiary has received notice alleging in any manner that it is or might be
potentially responsible for any Release of Hazardous Materials, or any costs
arising under or violation of Environmental Laws.
(f) No expenditure will be required in order for Parent, Acquisition
Co. or the Surviving Corporation 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 the Company or any Subsidiary or the Real Property
in a manner consistent with the current operation thereof by the Company.
(g) Neither the Company, any Subsidiary nor the Real Property is or
has 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.
(h) The Company has disclosed and delivered to Parent and Acquisition
Co. all environmental reports and investigations which the Company has obtained
or ordered with respect to the business of the Company or any Subsidiary.
(i) No part of the Real Property has been used as a landfill, dump or
other disposal, storage, transfer, handling or treatment area for Hazardous
Materials, or as a gasoline service station or a facility for selling,
dispensing, storing, transferring, disposing or handling petroleum and/or
petroleum products.
(j) No lien has been attached or filed against the Company, any
Subsidiary or the 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.
(k) The Company, on behalf of itself and its successors and assigns,
hereby waives, releases and agrees not to bring any claim, demand, cause of
action or proceeding, including without limitation any cost recovery action,
against Parent, Acquisition Co. or the Surviving Corporation under any
Environmental Law.
3.27 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for fairness opinion or financial
advisory services or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company, except for Robertson & Stephens, which is entitled to
receive $125,000.
3.28 Disclosure. Neither this Agreement nor any of the exhibits
hereto nor any of the documents delivered by or on behalf of the Company
pursuant to Article VII hereof nor the schedules nor any of the financial
statements referred to in Section 3.08 hereof, taken as a whole, contains any
untrue statement of
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a material fact regarding the Company or its business or any of the other
matters dealt with in this Article III relating to the Company or the
transactions contemplated by this Agreement that materially adversely affects
the Condition of the Company. This Agreement, the exhibits hereto, the
documents delivered to Parent and Acquisition Co. by or on behalf of the Company
pursuant to Article VII hereof, the schedules and the financial statements
referred to in Section 3.08 hereof, taken as a whole, do not omit any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading that materially
adversely affects the Condition of the Company.
3.29 Unaccredited Investors. In connection with the Merger and the
Offer, not more than 35 persons who are not Accredited Investors within the
meaning of Rule 501 under the Securities Act will receive Apertus Common Stock.
3.30. Preferred Stock. Each share of Series I Preferred Stock and
Series II Preferred Stock (the "Preferred Stock") is presently convertible into
one share of Common Stock. Upon purchase of Preferred Stock pursuant to the
Offer and delivery of certificates therefor to the Company, the Company agrees
that it will immediately transfer such Preferred Stock on the records of the
Company and issue to Acquisition Co. certificates therefor in due and proper
form. Upon transfer of Preferred Stock into its name on the books of the
Company, Acquisition Co. will be entitled to immediately convert such Preferred
Stock into Common Stock and simultaneously become the holder of record of Common
Stock. If conversion of Preferred Stock is requested by Acquisition Co. and
certificates representing the Preferred Stock are surrendered to the Company,
the Company will immediately issue to Acquisition Co. certificates for such
Common Stock in due and proper form.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION CO.
Parent and Acquisition Co., jointly and severally, hereby represent
and warrant to the Company that:
4.01 Incorporation and Corporate Power. Each of Parent and
Acquisition Co. is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota, with the requisite corporate
power and authority to enter into this Agreement and the Articles of Merger and
perform its obligations hereunder and thereunder.
4.02 Execution, Delivery; Valid and Binding Agreement. The
execution, delivery and performance of this Agreement, by Parent and Acquisition
Co., and the Articles of Merger by Acquisition Co. and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on
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their part are necessary to authorize the execution, delivery or performance of
this Agreement or the Articles of Merger. This Agreement has been duly executed
and delivered by Parent and Acquisition Co. and constitutes the valid and
binding obligation of Parent and Acquisition Co., enforceable in accordance with
its terms, and the Articles of Merger, when executed and delivered by
Acquisition Co., will constitute the valid and binding obligation of Acquisition
Co., enforceable in accordance with its terms.
4.03 No Breach. The execution, delivery and performance of this
Agreement and the Articles of Merger by Parent and Acquisition Co. and the
consummation by Parent and Acquisition Co. of the transactions contemplated
hereby and thereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any assets of Parent or Acquisition Co., or
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, under the provisions of the
Articles of Incorporation or Bylaws of either Parent or Acquisition Co. or any
indenture, mortgage, lease, loan agreement or other agreement or instrument by
which either Parent or Acquisition Co. is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which either Parent
or Acquisition Co. is subject.
4.04 Acquisition Co. All of the outstanding capital stock of
Acquisition Co. is owned by Parent. Since the date of its incorporation,
Acquisition Co. has not engaged in any activity of any nature except in
connection with or as contemplated by this Agreement and the Articles of Merger.
4.05 Apertus Common Stock. The Apertus Common Stock to be issued as a
part of the Aggregate Merger Consideration has been duly authorized and, upon
issuance, will be validly issued, fully paid and nonassessable.
4.06 Governmental Authorities; Consents. Except for the filing of the
Articles of Merger with the Secretary of State of the State of Minnesota and any
filings under the Securities Act or the Securities Act of 1934, as amended,
neither Parent or Acquisition Co. is required to submit any notice, report or
other filing with any governmental authority in connection with the execution or
delivery by it of this Agreement or the Articles of Merger or the consummation
of the transactions contemplated hereby or thereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by either Parent or Acquisition Co. in
connection with its execution, delivery and performance of this Agreement or the
Articles of Merger or the transactions contemplated hereby or thereby.
4.07 Brokerage. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement
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based on any arrangement or agreement made by or on behalf of Parent or
Acquisition Co.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Conduct of the Business. The Company shall observe each term set
forth in this Section 5.01 and agrees that, from the date hereof until the
Effective Time, unless otherwise consented to by Parent or Acquisition Co. in
writing:
(a) The business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of the
Company's business, on an arm's-length basis and in accordance in all material
respects with all applicable laws, rules and regulations and the Company's past
custom and practice;
(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue or sell any additional shares of, or any
options, warrants, conversion privileges or rights of any kind to acquire any
shares of, any of Capital Stock, (ii) sell, pledge, dispose of or encumber any
of its assets, except in the ordinary course of business; (iii) amend or propose
to amend its Articles of Incorporation or Bylaws; (iv) split, combine or
reclassify any outstanding shares of Capital Stock, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or otherwise
with respect to shares of Capital Stock; (v) except by virtue of the Merger
redeem, purchase or acquire or offer to acquire any shares of Capital Stock or
other securities of the Company; (vi) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or
material assets thereof; (vii) incur any indebtedness for borrowed money or
issue any debt securities except the borrowing of working capital in the
ordinary course of business and consistent with past practice; (viii)
accelerate, beyond the normal collection cycle, collection of accounts
receivable; or (ix) enter into or propose to enter into, or modify or propose to
modify, any agreement, arrangement or understanding with respect to any of the
matters set forth in this Section 5.01(b);
(c) The Company shall not, directly or indirectly, (i) enter into or
modify any employment, severance or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination pay to, any
officers or directors or consultants; or (ii) take any action with respect to
the grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof;
(d) The Company shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit sharing,
compensation,
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stock option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or arrangements for the benefit or
welfare of any director;
(e) The Company shall not cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect;
(f) The Company shall (i) use its best efforts to preserve intact the
Company's business organization and goodwill, keep available the services of the
Company's officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with the Company; (ii) confer on a regular and frequent basis with
representatives of Parent or Acquisition Co. to report operational matters and
the general status of ongoing operations; (iii) not intentionally take any
action which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at the Closing;
(iv) notify Parent and Acquisition Co. of any emergency or other change in the
normal course of the Company's business or in the operation of the Company's
properties and of any governmental or third party complaints, investigations or
hearings (or communications indicating that the same may be contemplated) if
such emergency, change, complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations or financial
condition of the Company or to the Company's, Parent's or Acquisition Co.'s
ability to consummate the transactions contemplated by this Agreement; and (v)
promptly notify Parent and Acquisition Co. in writing if the Company shall
discover that any representation or warranty made by it in this Agreement was
when made, or has subsequently become, untrue in any material respect;
(g) Other than for withholding Taxes, the Company shall (i) file any
Tax returns, elections or information statements with respect to any liabilities
for Taxes of the Company or other matters relating to Taxes of the Company which
pursuant to applicable law must be filed prior to the Closing Date; (ii)
promptly upon filing provide copies of any such Tax returns, elections or
information statements to Parent and Acquisition Co.; (iii) make any such Tax
elections or other discretionary positions with respect to Taxes taken by or
affecting the Company only upon prior consultation with and consent of Parent or
Acquisition Co.; and (iv) not amend any Return; and
(h) The Company shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of Section 3.11.
5.02 Access to Books and Records. Between the date hereof and the
Closing Date, the Company shall afford to Parent and Acquisition Co. and
authorized representatives full access at all reasonable times and upon
reasonable
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notice to the offices, properties, books, records, officers, employees and other
items of the Company, and the work papers of Deloitte & Touche, the Company's
independent accountants, and otherwise provide such assistance as is reasonably
requested by Parent and Acquisition Co. in order that Parent and Acquisition Co.
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 Company. In
addition, the Company and its officers and directors shall cooperate fully
(including providing introductions, where necessary) with Parent to enable
Parent to contact such third parties, including customers, prospective
customers, specifying agencies, vendors, or suppliers of the Company as Parent
deems reasonably necessary to complete its due diligence; provided that, Parent
agrees not to initiate such contacts without the prior approval of the Company,
which approval will not be unreasonably withheld.
5.03 Meeting of Shareholders. The Company shall, promptly after the
date of this Agreement and in no event later than July 28, 1995, take all action
necessary in accordance with the MBCA and its Articles of Incorporation and
Bylaws to convene a meeting of the shareholders of the Company for the purpose
of voting to approve the Plan of Merger, and the Company shall consult with
Parent in connection therewith. The Company shall use its best efforts to
obtain from the shareholders of the Company votes in favor of the Merger.
5.04 Demands. The Company shall give Parent (i) prompt notice of any
written demand for fair value, any withdrawal of a demand for fair value and any
other instrument served pursuant to Section 302A.473 of the MBCA received by the
Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for fair value under such Section 302A.473 of the MBCA.
The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demand for fair value or offer
to settle or settle any such demand.
5.05 Conditions. The Company shall take all actions necessary or
desirable to cause the conditions set forth in Section 7.01 to be satisfied and
to consummate the transactions contemplated herein as soon as reasonably
possible after the satisfaction thereof (but in any event within three business
days of such date).
5.06 No Shop. The Company will not, directly or indirectly, through
any officer, director, agent, affiliate, employee or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person, group
or entity relating to any acquisition of the Capital Stock or business of the
Company, or all or a material portion of the assets of the Company, or other
similar transaction or business combination involving the business of the
Company; will not participate in any negotiations or discussions regarding or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage
any effort or attempt by any other person or entity to do or seek such
acquisition or other transaction; will inform any person
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making inquiry with respect to the Company of this letter; and will inform
Parent of any such inquiry.
5.07 Termination Fee. If (x) the acquisition of the Company or its
equity securities is proposed by any third party, or an announcement of an
intention to make such a proposal is made by a third party, whether by merger,
consolidation, purchase of all or a substantial part of the Company's assets or
acquisition of more than 50% of its equity securities, (y) the Closing does not
occur by December 31, 1995, and (z) an agreement with respect thereto is entered
into between such third party and Company by December 31, 1995, then the Company
shall pay Parent a fee equal to 4% of the Aggregate Merger Consideration within
30 days after the closing of such other transaction. No such fee shall be due
if the Closing does not occur by December 31, 1995 because this Agreement is
terminated pursuant to Section 8.01(a), (d), (e) or (f) or because this
Agreement is terminated by the Company pursuant to Section 8.01(b). Under no
circumstances would a withdrawal by Parent of its offer result in payment of a
termination fee.
5.08 Information Statement. The Company will promptly provide to
Parent information pertaining to the Company, including financial statements,
necessary for Parent to prepare an Information Statement complying with the
requirements of Regulation D under the Securities Act.
ARTICLE VI
COVENANTS OF PARENT AND ACQUISITION CO.
6.01 Information Statement. Parent will prepare an Information
Statement complying with the requirements of Regulation D under the Securities
Act promptly after the date hereof, which it will use in connection with the
Offer and which shall be sent to holders of the Capital Stock that would receive
Apertus Common Stock in connection with the Merger.
6.02 Conditions. Parent or Acquisition Co. shall take all actions
necessary or desirable to cause the conditions set forth in Section 7.02 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
6.03 Payment of Loans. Parent shall, at the closing under the
Purchase Agreement, cause the Company to repay that certain Demand Promissory
Note in the amount of $75,000 to Pathfinder Venture Capital Fund II, L.P. and
any borrowings under that certain Revolving Credit Note to Minnesota Seed
Capital Fund II L.P., together with accrued interest thereon.
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ARTICLE VII
CONDITIONS TO CLOSING
7.01 Conditions to Parent's and Acquisition Co.'s Obligations. The
obligation of Parent and Acquisition Co. to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions at or before the Effective Time:
(a) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects at and as of the Effective
Time as though then made and as though the Effective Time had been substituted
for the date of this Agreement throughout such representations and warranties
(without taking into account any disclosures by the Company of discoveries,
events or occurrences arising on or after the date hereof), except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) The Company shall have performed in all material respects all of
the covenants and agreements required to be performed and complied with by it
under this Agreement and the Articles of Merger prior to the Effective Time;
(c) The Company shall have obtained, or caused to be obtained, each
consent and approval necessary in order that the transactions contemplated
herein not constitute a breach or violation of, or result in a right of
termination or acceleration of, or creation of any encumbrance on any of the
Company's assets pursuant to the provisions of, any agreement, arrangement or
undertaking of or affecting the Company or any license, franchise or permit of
or affecting the Company;
(d) This Agreement, the Articles of Merger and the Merger shall have
been duly and validly authorized by the Board of Directors and the Plan of
Merger shall have been duly and validly approved by the shareholders of the
Company, and the Company shall have delivered to Parent evidence, in form
satisfactory to Parent's counsel, of such authorization and approval, and the
Articles of Merger shall have been duly executed by the Company;
(e) All other material governmental filings, authorizations and
approvals that are required for the consummation of the transactions
contemplated by this Agreement or the Articles of Merger will have been duly
made and obtained;
(f) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or the Articles of Merger or seeking to obtain
material damages in connection with such transactions, (ii) seeking to prohibit
direct or indirect
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ownership or operation by Parent of all or a material portion of the business or
assets of the Company and its subsidiaries, or to Parent or Acquisition Co. or
any of their subsidiaries or the Company to dispose of or to hold separately all
or a material portion of the business or assets of Parent or Acquisition Co. and
their subsidiaries or of the Company, as a result of the transactions
contemplated hereby, (iii) seeking to require direct or indirect transfer or
sale by Parent or Acquisition Co. of any of the shares of Capital Stock, (iv)
seeking to invalidate or render unenforceable any material provision of this
Agreement or the Articles of Merger or any of the other agreements attached as
exhibits hereto (collectively, the "Related Agreements"), or (v) otherwise
relating to and materially adversely affecting the transactions contemplated
hereby;
(g) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated, by
this Agreement or the Articles of Merger, by any federal, state or foreign
court, government or governmental authority or agency, which would reasonably be
expected to result, directly or indirectly, in any of the consequences referred
to in Section 7.01(f) hereof;
(h) Parent or Acquisition Co. shall not have discovered any fact or
circumstance existing as of the date of this Agreement which has not been
disclosed to Parent and Acquisition Co. as of the date of this Agreement
regarding the business, assets, properties, condition (financial or otherwise),
results of operations or prospects of the Company which is, individually or in
the aggregate with other such facts and circumstances, materially adverse to the
Company or to the value of the shares of Capital Stock;
(i) There shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company, whether or not covered by
insurance, which, in the aggregate, has, or would be reasonably likely to have,
a material adverse effect on the Company;
(j) No more than 5% of the outstanding shares of Capital Stock, giving
effect to the conversion of all preferred shares, shall be qualified to be
Dissenting Shares as of the Effective Time;
(k) Parent shall have received from counsel for the Company a written
opinion, dated the date of the Effective Time, addressed to Parent and
satisfactory to Parent's counsel, in form and substance substantially as set
forth in Exhibit F;
(l) Prior to the Effective Time, the Company shall have delivered to
Parent all of the following:
(i) a certificate of the Willard J. Cecchi substantially in the
form set forth in Exhibit G attached hereto, dated as of the date of the
Effective
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Time, stating that the conditions precedent set forth in subsections (a)
and (b) above have been satisfied;
(ii) copies of the third party and governmental consents and
approvals and of the authorizations referred to in subsections (c), (d) and
(e) above;
(iii) the Company's minute books, stock transfer records,
corporate seal and other materials related to the Company's corporate
administration;
(iv) resignations (effective as of the Effective Time) from (x)
such of the Company's officers as Parent shall have requested prior to the
Effective Time and (y) the Company's directors;
(v) a copy of the Articles of Incorporation of the Company,
certified by the Secretary of State of the State of Minnesota, and
Certificates of Good Standing from the Secretary(ies) of State of the
State(s) of Minnesota and New Jersey evidencing the good standing of the
Company in each such jurisdiction;
(vi) a copy of each of (X) the text of the resolutions adopted by
the board of directors of the Company authorizing the execution, delivery
and performance of this Agreement and the Articles of Merger and the
consummation of all of the transactions contemplated by this Agreement and
the Articles of Merger and (Y) the bylaws of the Company; along with
certificates executed on behalf of the Company by its corporate secretary
certifying to Parent that such copies are true, correct and complete copies
of such resolutions and bylaws, respectively, and that such resolutions and
bylaws were duly adopted and have not been amended or rescinded;
(ix) incumbency certificates executed on behalf of the Company by
its corporate secretary certifying the signature and office of each officer
executing this Agreement and the Articles of Merger and the Related
Agreements executed by the Company;
(x) an executed copy of each of the Related Agreements; and
(xi) such other certificates, documents and instruments as Parent
reasonably requests related to the transactions contemplated hereby;
(m) Upon consummation of the Merger, the Company shall have the
contractual right to cancel each outstanding option and warrant and the
aggregate cash consideration to cash out options and warrants and make payments
under Change of Control Contracts shall not to exceed $633,000; and
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(n) Parent shall have entered into employment agreements with Willard
J. Cecchi and Lloyd A. Hagemo with terms and conditions satisfactory to it.
(o) Upon consummation of the Merger, any default or event of default
under that certain Revolving Credit Agreement between the Company and Marquette
Bank Minneapolis, National Association, as amended to date, shall, giving effect
to the Merger, shall be waived.
(p) Any necessary consents to the Merger from Minnesota Seed Capital,
Inc. shall have been obtained.
7.02 Conditions to the Company's Obligations. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions at or before the
Effective Time:
(a) The representations and warranties set forth in Article IV hereof
will be true and correct in all material respects at and as of the Effective
Time as though then made and as though the Effective Time had been substituted
for the date of this Agreement throughout such representations and warranties,
except that any such representation or warranty made as of a specified date
(other than the date hereof) shall only need to have been true on and as of such
date;
(b) Parent and Acquisition Co. shall have performed in all material
respects all the covenants and agreements required to be performed by them under
this Agreement and the Articles of Merger prior to the Effective Time, and
Acquisition Co. shall have executed the Articles of Merger;
(c) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby
will have been duly made and obtained;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated by this Agreement or the Articles of Merger or seeking
to obtain material damages in connection with such transactions, (ii) seeking to
invalidate or render unenforceable any material provision of this Agreement, the
Articles of Merger or any of the Related Agreements, or (iii) otherwise relating
to and materially adversely affecting the transactions contemplated hereby or
thereby;
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated by
this Agreement or the Articles of Merger, by any federal, state or foreign
court, government or governmental authority or agency, which would reasonably be
expected to result, directly or indirectly, in any of the consequences referred
to in Section 7.02(d) hereof;
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(f) The Company shall have received from counsel for Parent and
Acquisition Co. a written opinion, dated as of the date of the Effective Time,
addressed to the Company and satisfactory to the Company's counsel, in form and
substance substantially as set forth in Exhibit H; and
(g) At or prior to the Effective Time, Parent will have delivered to
the Company (i) a certificate of Robert D. Gordon substantially in the form set
forth as Exhibit I attached hereto, dated as of the date of the Effective Time,
stating that the conditions precedent set forth in subsections (a) and (b) above
have been satisfied, (ii) a copy of each of (X) the text of the resolutions
adopted by the board of directors of Parent and Acquisition Co. authorizing the
execution, delivery and performance of this Agreement and the Articles of Merger
and the consummation of all of the transactions contemplated by this Agreement
and the Articles of Merger and (Y) the bylaws of Parent, along with certificates
executed on behalf of each of Parent and Acquisition Co. by its corporate
secretary certifying to the Company that such copies are true, correct and
complete copies of such resolutions and bylaws, respectively, and that such
resolutions and bylaws were duly adopted and have not been amended or rescinded,
and (iii) incumbency certificates executed on behalf of each of Parent and
Acquisition Co. by its corporate secretary certifying the signature and office
of each officer executing this Agreement, the Articles of Merger and of the
Related Agreements as to which such corporation is a party, and (iv) an executed
copy of each of the Related Agreements.
(h) The Company's shareholders shall have approved the Plan of Merger.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior
to the Effective Time:
(a) by the mutual consent of Parent, Acquisition Co. and the Company;
(b) by either Parent or Acquisition Co., on the one hand, or the
Company, on the other, if there has been a material misrepresentation, breach of
warranty or breach of covenant on the part of the other in the representations,
warranties and covenants set forth in this Agreement;
(c) by either Parent or Acquisition Co., on the one hand, or the
Company, on the other, if the transactions contemplated by this Agreement or the
Articles of Merger have not been consummated by July 31, 1995; provided that,
neither will be entitled to terminate this Agreement pursuant to this Section
8.01(c)
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if such party's willful breach of this Agreement has prevented the
consummation of the transactions contemplated by this Agreement or the Articles
of Merger;
(d) by Parent or Acquisition Co. if, after the date hereof, there
shall have been a material adverse change in the financial condition or business
of the Company 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 Parent or Acquisition Co;
(e) by Parent or Acquisition Co. if Acquisition Co. is unable to
purchase by June 30, 1995, sufficient shares of Capital Stock to enable it to
accomplish the Merger as a short-form merger pursuant to Section 621 of the
MBCA;
(f) by Parent if it shall determine that the Offer and the Merger
would require registration under the Securities Act of the Apertus Common Stock;
or
(g) by Parent if it shall determine that the Aggregate Merger
Consideration would exceed $8,750,000 and the Company shall not have entered
into the amendment to this Agreement contemplated by Section 1.05.
8.02 Effect of Termination. In the event of termination of this
Agreement by either Parent or Acquisition Co., on the one hand, or the Company,
on the other, as provided in Section 8.01, all provisions of this Agreement
shall terminate and there shall be no liability on the part of any of Parent,
Acquisition Co., the Company or their respective shareholders, officers, or
directors, except that Sections 5.07, 11.01, 11.02 and 11.09 hereof shall
survive indefinitely, except that parties shall remain liable for willful
breaches of this Agreement prior to the time of such termination.
ARTICLE IX
ADDITIONAL AGREEMENTS
9.01 Registration. Parent shall prepare and file within 45 days after
the Effective Time a registration statement under the Securities Act covering
the Apertus Common Stock issued pursuant to the Offer or the Merger and shall
use its best efforts to cause such registration statement to become effective.
9.02 Termination of Registration. Parent may terminate such
registration statement at any time two years after the Effective Time.
9.03 Registration Procedures. Parent will:
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(a) use its best efforts to cause such registration statement to
become and remain effective until all of the Apertus Common Stock has been
sold but no longer than two years after the Effective Time;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective;
(c) furnish to the holders of the Apertus Common Stock such reasonable
number of copies of the registration statement, preliminary prospectus,
final prospectus and such other documents as such holders may reasonably
request in order to facilitate the offering of the Apertus Common Stock;
(d) notify the holders of the Apertus Common Stock promptly after it
shall receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(e) notify the holders of the Apertus Common Stock promptly of any
request by the Commission for the amending or supplementing of such
registration statement or prospectus or for additional information;
(f) advise the holders of the Apertus Common Stock, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such stop order should be
issued;
9.04 Expenses. With respect to such registration, Parent shall bear
the following fees, costs and expenses: all registration fees, printing
expenses, fees and disbursements of counsel and accountants for Parent and all
internal Company expenses. Fees and disbursements of counsel and accountants
for the holders, underwriting discounts and commissions and transfer taxes for
holders and any other expenses incurred by the holders not expressly included
above shall be borne by the holders.
9.05 Registration Rights of Transferees. The registration rights
granted to the holders of Apertus Common Stock pursuant to this Article IX shall
also be for the benefit of, and enforceable by, any subsequent holder of Apertus
Common Stock, whether or not any express assignment of such rights to any such
subsequent holder is made.
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ARTICLE X
SURVIVAL; INDEMNIFICATION
10.01 Survival of Representations and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article III and
Article IV hereof shall survive until December 30, 1996.
10.02 Indemnification by the Company and Indemnifying Parties.
(a) Subject to the limitations of Section 10.02(b), the Company, prior
to the Effective Time, and, at and after the Effective Time, the Escrow Agent
pursuant to the Escrow Agreement agree to indemnify in full Parent and
Acquisition Co. and their respective officers, directors, employees, agents and
shareholders (collectively, the "Parent Indemnified Parties") and hold them
harmless against any loss, liability, deficiency, damage, expense or cost
(including reasonable legal expenses) (collectively, "Losses"), which Parent
Indemnified Parties may suffer, sustain or become subject to, prior to
December 30, 1996, as a result of (i) any misrepresentation by the Company
contained in this Agreement or in any exhibits, schedules, certificates or other
documents delivered or to be delivered by or on behalf of the Company pursuant
to the terms of this Agreement or otherwise referenced or incorporated in this
Agreement (collectively, the "Related Documents"), (ii) any breach of, or
failure to perform, any agreement of the Company contained in this Agreement or
any of the Related Documents, or (iii) any action or proceeding, judicial or
administrative, instituted by any third party arising out of or the actions,
inactions or status of the Company prior to the Effective Time (collectively,
"Parent Losses").
(b) The Company and the Escrow Agent will be liable to the Parent
Indemnified Parties for any Parent Loss only if the aggregate amount of all
Parent Losses exceeds $50,000 ("the Basket Amount"), in which case the Company
and the Escrow Agent shall be obligated to indemnify the Parent Indemnified
Parties only for the excess of the aggregate amount of all such Parent Losses
over the Basket Amount.
10.03 Indemnification by Parent.
(a) Subject to the limitations of Section 10.03(b), Parent agrees to
indemnify in full the Company and the Company's officers, directors, employees,
agents and stockholders (collectively, the "Company Indemnified Parties") and
hold them harmless against any Losses which any of the Company Indemnified
Parties may suffer, sustain or become subject to, prior to December 30, 1996, as
a result of (i) any misrepresentation of Parent and Acquisition Co. contained in
this Agreement or in any of the Related Documents, (ii) any breach of, or
failure to perform, any
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agreement of Parent or Acquisition Co. contained in this Agreement or any of the
Related Documents, or (iii) any action or proceeding, judicial or
administrative, instituted by any third party arising out of the actions,
inactions or status of Parent or Acquisition Co. after the Effective Time
(collectively, "Company Losses").
(b) Parent will be liable to the Company Indemnified Parties for any
Company Loss only if the aggregate amount of all Company Losses exceeds the
Basket Amount, in which case Parent shall be obligated to indemnify the Company
Indemnified Parties only for the excess of the aggregate amount of all such
Company Losses over the Basket Amount.
10.04 Method of Asserting Claims. As used herein, an "Indemnified
Party" shall refer to a "Parent Indemnified Party" or "Company Indemnified
Party," as applicable, the "Notifying Party" shall refer to the party hereto
whose Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event any Indemnified Party should have a claim against any
Indemnifying Party, the Notifying Party shall deliver a notice of such claim to
the Indemnifying Party. If the Indemnifying Party notifies the Notifying Party
that it does not dispute the claim described in such notice or fails to notify
the Notifying Party within 30 days after delivery of such notice by the
Notifying Party whether the Indemnifying Party disputes the claim described in
such notice, the Loss in the amount specified in the Notifying Party's notice
will be conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its Liability with
respect to such claim, such dispute shall be resolved fully and finally in
Minneapolis, Minnesota by an arbitrator selected pursuant to, and an arbitration
governed by, the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall resolve the dispute within 30 days after
selection and judgment upon the award rendered by such arbitrator may be entered
in any court of competent jurisdiction.
(b) After the Effective Time the rights set forth in this Article X
and the Escrow Agreement shall be each party's sole and exclusive remedies
against the other party hereto for misrepresentations or breaches of covenants
contained in this Agreement and the Related Documents.
(d) Any indemnification payable under this Article X shall be, to the
extent permitted by law, an adjustment to purchase price.
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ARTICLE XI
MISCELLANEOUS
11.01 Press Releases and Announcements. Prior to the Effective Time,
no party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of the Company
without prior written approval of the other party hereto, except as may be
necessary, in the opinion of counsel to the party seeking to make disclosure, to
comply with the requirements of this Agreement, the Articles of Merger or
applicable law. If any such press release or public announcement is so required,
the party making such disclosure shall consult with the other party prior to
making such disclosure, and the parties shall use all reasonable efforts, acting
in good faith, to agree upon a text for such disclosure which is satisfactory to
both parties.
11.02 Expenses. Except as otherwise expressly provided for herein,
Parent and Acquisition Co. will each pay all of their own expenses (including
attorneys' and accountants' fees) in connection with the negotiation of this
Agreement, the performance of their respective obligations under this Agreement
and the Articles of Merger and the consummation of the transactions contemplated
hereby and thereby (whether consummated or not). The Company will be responsible
for its expenses in connection with the negotiation of this Agreement, but such
expenses have been offset in determining the Aggregate Merger Consideration.
11.03 Amendment and Waiver. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced; provided, however, that after the approval of
the Plan of Merger by the shareholders of the Company, no amendment may be made
which reduces the Merger Consideration or which effects any changes which would
materially adversely affect the shareholders of the Company without the further
approval of the shareholders of the Company. No course of dealing between or
among any persons having any interest in this Agreement will be deemed effective
to modify or amend any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
11.04 Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
three days after being mailed, if mailed by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Parent, Acquisition Co. and the Company will, unless another address is
specified in writing, be sent to the address indicated below:
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Notices to Parent or Acquisition Co.
Apertus Technologies Incorporated
7275 Flying Cloud Drive
Eden Prairie, MN 55344
Attention: Julie Cummins Brady
Telecopy: (612) 828-0454
with a copy to:
Dorsey & Whitney P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: William B. Payne
Telecopy: (612) 340-8738
Notices to the Company
BlueLine Software, Inc.
5775 Wayzata Boulevard
Suite 690
St. Louis Park, MN 55416
Attention: Willard J. Cecchi
Telecopy: (612) 542-9566
with a copy to:
Siegel, Brill, Greupner & Duffy, P.A.
300 Washington Square
100 Washington Avenue South
Minneapolis, MN 55401
Attention: James R. Greupner
Fax: (612) 339-6591
11.05 Assignment. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by any
party hereto without the prior written consent of the other parties hereto.
11.06 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
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11.07 Complete Agreement. This Agreement, the Articles of Merger and
the Related Agreements and other exhibits hereto, the schedules and the other
documents referred to herein contain the complete agreement between the parties
and supersede any prior understandings, agreements or representations by or
between the parties, written or oral, which may have related to the subject
matter hereof in any way.
11.08 Counterparts. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
11.09 Governing Law. The internal law, without regard for conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APERTUS TECHNOLOGIES
INCORPORATED
By /s/ Robert D. Gordon
-------------------------------------
Its
-------------------------------------
BLUELINE ACQUISITION CO.
By /s/ Julie Cummins Brady
-------------------------------------
Its Vice President and General Counsel
------------------------------------
BLUELINE SOFTWARE, INC.
By /s/ Willard J. Cecchi
------------------------------------
Its President
------------------------------------
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EXHIBIT A-1
ARTICLES OF MERGER
OF
BLUELINE ACQUISITION CO.
INTO
BLUELINE SOFTWARE, INC.
The undersigned, the president of BlueLine Software, Inc., a Minnesota
corporation, and the secretary of BlueLine Acquisition Co., a Minnesota
corporation, hereby certify as follows:
1. The plan of merger attached hereto provides for the merger of
BlueLine Acquisition Co. into BlueLine Software, Inc.
2. The plan of merger has been approved by BlueLine Software,
Inc. and by BlueLine Acquisition Co. pursuant to the Minnesota
Business Corporation Act.
IN WITNESS WHEREOF, the undersigned have duly executed this document
on behalf of their respective corporations.
Date: July , 1995
--
BLUELINE ACQUISITION CO. BLUELINE SOFTWARE, INC.
By:______________________ By:_________________________
Name:__________________ Name:_____________________
<PAGE>
EXHIBIT A-2
ARTICLES OF MERGER
OF
BLUELINE ACQUISITION CO.
INTO
BLUELINE SOFTWARE, INC.
The undersigned, the secretary of BlueLine Acquisition Co., a
Minnesota corporation, hereby certifies as follows:
1. The plan of merger attached hereto provides for the merger of
BlueLine Acquisition Co. into BlueLine Software, Inc.
2. The number of outstanding shares of each class and series of
BlueLine Software, Inc., and the number of shares of each class of
series owned by BlueLine Acquisition Co., is set forth below:
Class and Series Outstanding Owned
- ----------------------------------- --------------- -----------
Common Shares
Cumulative Preferred, Series I
Cumulative Preferred, Series II
3. A copy of the plan of merger was mailed to shareholders of
BlueLine Software, Inc. on the date hereof.
4. BlueLine Acquisition Co. owns at least 90% of the outstanding
shares of each class and series of BlueLine Software, Inc., and the
plan of merger has been duly approved by BlueLine Acquisition Co.
pursuant to Section 621 of the Minnesota Business Corporation Act.
IN WITNESS WHEREOF, the undersigned, being duly authorized on behalf
of BlueLine Acquisition Co., has executed this document.
Dated: June __,1995
BLUELINE ACQUISITION CO.
By: ______________________________
Name: ____________________________
<PAGE>
EXHIBIT B
PLAN OF MERGER
This Plan of Merger (the "Plan of Merger") pursuant to the Minnesota
Business Corporation Act (the "MBCA"):
ARTICLE I
THE MERGER
----------
1.01 The Merger. At the Effective Time (as defined in Section 1.03
hereof) in accordance with this Plan of Merger and the MBCA, BlueLine
Acquisition Co. ("Acquisition Co."), a wholly owned subsidiary of Apertus
Technologies Incorporated ("Parent"), shall be merged (the "Merger") into
BlueLine Software, Inc. (the "Company"), the separate existence of Acquisition
Co. shall cease, and the Company shall continue as the surviving corporation
under the corporate name it possesses immediately prior to the Effective Time.
The Company, in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation." Acquisition
Co. and the Company are hereinafter sometimes collectively referred to as the
"Constituent Corporations."
1.02 Effect of the Merger. The effect of the Merger shall be as set
forth in Section 302A.641 of the MBCA and the Surviving Corporation shall
succeed to and possess all the properties, rights, privileges, immunities,
powers, franchises and purposes, and be subject to all the duties, liabilities,
debts, obligations, restrictions and disabilities, of the Constituent
Corporations, all without further act or deed.
1.03 Effective Time. The Merger shall become effective immediately
upon the filing of this Plan of Merger with the Secretary of State of the State
of Minnesota. The date and time on which the Merger shall become effective is
referred to herein as the "Effective Time."
1.04 Directors and Officers. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Acquisition Co. immediately prior to the Effective Time and the
officers of the Surviving Corporation shall be the persons who were the officers
of Acquisition Co. immediately prior to the Effective Time. Said directors and
officers of the Surviving Corporation shall hold office for the term specified
in, and subject to the provisions contained in, the Articles of Incorporation
and Bylaws of the Surviving Corporation and applicable law.
<PAGE>
1.05 Articles of Incorporation; Bylaws. From and after the Effective
Time and until further amended in accordance with applicable law, the Articles
of Incorporation of Acquisition Co. as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation, except that Article 1 thereof is hereby amended to provide "The
name of this corporation is BlueLine Software, Inc." From and after the
Effective Time and until further amended in accordance with law, the Bylaws of
Acquisition Co. as in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation.
1.06 Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this Plan
of Merger and to vest the Surviving Corporation with full right, title and
possession to all properties, rights, privileges, immunities, powers and
franchises of either of the Constituent Corporations, the officers of the
Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
ARTICLE II
CONVERSION OF SECURITIES
------------------------
2.01 Conversion of Secuities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition Co., the Company, the
Surviving Corporation or the holder of any of the following securities:
(a) each common share, $.01 par value, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the
Effective Time (other than (i) shares of Company Common Stock owned by
Parent, Acquisition Co. or the Company or any direct or indirect
subsidiary of Parent, Acquisition Co. or the Company and (ii) any
Dissenting Shares (as defined in Section 2.02 hereof)) shall be
canceled and extinguished and be converted into and become a right to
receive a cash payment of $0.56260 and .076943 common shares, $.01 par
value, of Parent ("Apertus Common Stock") without interest;
(b) each share of convertible preferred stock, Series I, $.01
par value, of the Company ("Series I Preferred Stock") issued and
outstanding immediately prior to the Effective Time (other than (i)
shares of Series I Preferred Stock owned by Parent, Acquisition Co. or
the Company or any direct or indirect subsidiary of Parent,
Acquisition Co. or the Company and (ii) any Dissenting Shares (as
defined in Section 2.02 hereof)) shall be canceled and extinguished
and be converted into and become a right to receive a cash payment of
$0.56260 and .076943 shares of Apertus Common Stock without interest;
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(c) each share of convertible preferred stock, Series II, $.01
par value, of the Company ("Series II Preferred Stock") issued and
outstanding immediately prior to the Effective Time (other than (i)
shares of Series II Preferred Stock owned by Parent, Acquisition Co.
or the Company or any direct or indirect subsidiary of Parent,
Acquisition Co. or the Company and (ii) any Dissenting Shares (as
defined in Section 2.03 hereof)) shall be canceled and extinguished
and be converted into and become a right to receive a cash payment of
$0.56260 and .076943 shares of Apertus Common Stock without interest;
(d) each share of Company Common Stock, Series I Preferred Stock
and Series II Preferred Stock issued and outstanding immediately prior
to the Effective Time and owned by Parent, Acquisition Co. or the
Company or any direct or indirect subsidiary of Parent, Acquisition
Co. or the Company shall be canceled and extinguished, and no payment
shall be made with respect thereto;
(e) each common share, $1.00 par value, of Acquisition Co. issued
and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable common share $1.00 par
value, of the Surviving Corporation.
(f) any option issued pursuant to the Company's stock option
plans and outstanding immediately prior to the Effective Time (an
"Outstanding Stock Option") shall be canceled and extinguished and,
whether or not vested, be converted into and become the right to
receive a cash payment equal in amount to the difference (the
"Spread") to the extent positive between (i) $1.22912 and (ii) the
exercise price of such Outstanding Stock Option. As soon as
practicable after the Effective Time, the Surviving Corporation shall
pay out the Spread, without interest, on each Outstanding Stock
Option; and
(g) any warrant issued and outstanding immediately prior to the
Effective Time (a "Warrant") shall be canceled and extinguished and be
converted into and become the right to receive a cash payment equal in
amount to the difference to the extent positive between (i) $1.22912
and (ii) the exercise price of such Warrant. As soon as practicable
after the Effective Time, the Surviving Corporation shall pay out such
difference, without interest, on each Warrant.
Notwithstanding the foregoing, any person who would otherwise receive fewer than
100 shares of Apertus Common Stock by virtue of the Merger shall instead receive
in lieu of such Apertus Common Stock cash based on a value of $8.6625 per share
of Apertus Common Stock.
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2.02 Dissenting Shares.
(a) Notwithstanding anything in this Plan of Merger to the contrary,
if Section 302A.471 of the MCBA shall be applicable to the Merger, shares of
Company Common Stock, Series I Preferred Stock or Series II Preferred 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,
which 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 ("Dissenting Shares") shall not be
converted into or represent a right to receive cash and Apertus Common Stock
pursuant to Section 2.01 hereof, but the holders thereof shall be entitled only
to such rights as are granted by Section 302A.473 of the MBCA. Each holder of
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 Corporation in accordance with the MBCA; provided, however, that
if any such holder of 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 the Surviving Corporation, as provided in Section
2.01 hereof.
(b) If the holder of any shares of Company Common Stock, the Series I
Preferred Stock or the Series II Preferred Stock shall become entitled to
receive payment for such shares pursuant to Sections 302A.471 and 302A.473 of
the MBCA, such payment shall be made by the Surviving Corporation.
-4-
<PAGE>
EXHIBIT C
INVESTMENT LETTER
Apertus Technologies Incorporated:
This Investment Letter (the "Letter") is furnished in connection with
the merger (the "Merger") of BlueLine Acquisition Co. into BlueLine Software,
Inc. (the "Company") pursuant to the terms of an Acquisition Agreement among
Apertus Technologies Incorporated ("Apertus"), BlueLine Acquisition Co. and the
Company (the "Agreement"), dated June 26, 1995. As of the Closing Date (as
defined in the Agreement), the undersigned's capital stock in the Company will
be converted into cash and Apertus common stock.
The undersigned hereby acknowledges, represents and warrants to, and
agrees with Apertus, as follows:
(a) Information Statement. The undersigned has been furnished with a
copy of the Information Statement dated June 26, 1995 with respect to the
Merger.
(b) Exempt Offering. The undersigned understands that the offer and
sale of Apertus common stock is intended to be exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act"), by virtue of
Section 4(2) of the Securities Act or Regulation D promulgated thereunder, and
that no registration statement relating to the Apertus common stock has been
filed with the Securities and Exchange Commission or any state securities
commission.
(c) Access to Information. The undersigned has reviewed the
Information Statement and understands the information contained therein and
information otherwise provided to the undersigned relating to the Merger. The
undersigned has had an opportunity to ask questions of and receive information
and answers from Apertus concerning the terms and conditions of the Merger.
(d) Investor Sophistication. The undersigned has, either alone or
together with the undersigned's purchaser representative, such knowledge and
experience in financial, tax and business matters as to be capable of evaluating
the merits and risks of an investment in Apertus common stock and protecting the
undersigned's interests in connection with an investment in the Apertus common
stock and, in the undersigned's judgment, has obtained, either alone or together
<PAGE>
with the undersigned's purchaser representative, sufficient information to
evaluate the merits and risks of an investment in the Apertus common stock. The
undersigned acknowledges that the undersigned has the financial ability to bear
the economic risk of the undersigned's investment in the Apertus common stock,
has adequate means for providing for the undersigned's current needs and has no
need for liquidity with respect to the undersigned's investment in the Apertus
common stock.
(e) Investment Intent. The undersigned is acquiring the Apertus
common stock in connection with the Merger solely for the undersigned's account,
for investment purposes only and not with a view to the resale or distribution
thereof.
(f) Transfer Restrictions. Apertus has agreed to register the Apertus
common stock, to be issued to the undersigned hereunder. However, such Apertus
common stock has not been registered under the Securities Act or applicable
state securities laws on the date hereof, and the economic risk of investment
must be borne indefinitely by the undersigned. Such Apertus common stock cannot
be sold by the undersigned unless subsequently registered under the Securities
Act or an exemption from such registration is available. There is no assurance
that the Apertus common stock will be so registered in the future.
(g) Restrictive Legends. The certificates representing the Apertus
common stock will bear legends indicating the restriction on transfers to which
the Apertus common stock is subject. A notation will be made in the transfer
records indicating the transfer restrictions to which the Apertus common stock
is subject.
Dated: _____________, 1995
___________________________
Name of Holder
(By)_________________________
Signature
(Its)______________________
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<PAGE>
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into this _ day of June
1995, among BlueLine Software, Inc., a Minnesota corporation (the "Company"),
Apertus Technologies Incorporated, a Minnesota corporation (the "Parent"), and
First Trust National Association (the "Escrow Agent").
Reference is made to the Acquisition Agreement dated June 26, 1995
(the "Agreement") among the Company, BlueLine Acquisition Co. ("Acquisition
Co.") and the Parent.
In consideration of the mutual covenants of the parties contained
herein and of other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. Definitions. Capitalized terms used and not defined herein shall
have the meaning given them in the Agreement.
2. Appointment of Escrow Agent. Escrow Agent is hereby appointed as
escrow agent for the purposes set forth in this Escrow Agreement and in the
Agreement, and the Escrow Agent hereby accepts such appointment under the terms
and conditions set forth herein.
3. Escrow Deposit and Investment. Parent has delivered $_____ (the
"Holdback") to the Escrow Agent, and the Escrow Agent acknowledges receipt of
same. The Holdback shall be held and released as provided herein.
4. Release of Escrow Funds to Parent. The money delivered to the
Escrow Agent shall be released to Parent in accordance with this paragraph 4.
(a) Maintenance of Holdback. The Escrow Agent shall hold and maintain
the Holdback in accordance with the terms hereof and shall apply the Holdback
and amounts received in respect thereof as hereinafter set forth. Any income on
the Holdback or additional deposits shall be added to and become a part of the
Holdback.
(b) Investment of Holdback. Until such time as the escrow hereunder
terminates, the Escrow Agent shall deposit or invest the Holdback in its own
name in a money market fund maintained by the Escrow Agent or in such other
investments as Parent and the Claim Representative shall approve in writing.
<PAGE>
(c) Claim Representative. The Claim Representative designated
hereunder is acting in a representative capacity, but shall not be entitled to
any reimbursement from the Holdback.
(1) Claims. In the event any Parent Indemnified Party
should have a claim, the Parent Indemnified Party shall deliver a
notice of such claim substantially simultaneously to the Claim
Representative and the Escrow Agent. If the Claim Representative
notifies the Escrow Agent that it does not dispute the claim described
in such notice or fails to notify the Escrow Agent within 30 days
after delivery of such notice by the Parent Indemnified Party whether
the Claim Representative disputes the claim described in such notice,
the Loss in the amount specified in the Parent Indemnified Party's
notice will be conclusively deemed a liability of Holdback and the
Escrow Agent shall pay the amount of such Loss to the Parent
Indemnified Party on demand to the Escrow Agent, with a copy to the
Claim Representative. If the Claim Representative has timely disputed
its Liability with respect to such claim, such dispute shall be
resolved fully and finally in Minneapolis, Minnesota by an arbitrator
selected pursuant to, and an arbitration governed by, the Commercial
Arbitration Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute promptly and judgment upon the
award rendered by such arbitrator may be entered in any court of
competent jurisdiction.
(2) Final Determination. For purposes of this paragraph 4,
a Final Determination shall be (i) an award of any arbitration; (ii) a
written termination signed by all the parties; (iii) written
acknowledgment by the Claim Representative that it no longer disputes
the validity of a disputed claim; or (iv) such other evidence of a
Final Determination that shall be acceptable to the Escrow Agent. If
the Escrow Agent gives written notice to the Claim Representative
stating that it believes that there has been a Final Determination of
a disputed claim and the Claim Representative fails within five days
of such notice to deny, by notice in writing to the Escrow Agent, that
there has been a Final Determination, the Claim Representative shall
be conclusively presumed to have admitted to the Escrow Agent that
there has been a Final Determination.
(3) Notice of Final Determination. Within 10 days after a
Final Determination, Parent shall give the Escrow Agent notice of the
Final Determination. If the Parent fails to provide such notice, the
Claim Representative may provide the Escrow Agent with proof of the
Final Determination.
(4) Resolution of Claim. Upon receipt of proof satisfactory
to it of a Final Determination, the Escrow Agent, if such Final
Determination is in favor of Parent, promptly pay to Parent the
amount, including interest, set forth in the judgment, award or other
paper constituting the Final Determination of such claim, plus the
additional amount, if any, specified in
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<PAGE>
the Final Determination for costs and expenses, including, without
limitation, reasonable attorneys' fees, or, in the absence of such
specified amount for costs and expenses, then in the amount certified
and served pursuant to, or in the same manner as set forth in,
paragraph 4(c)(2).
5. Release of Escrow Funds to Holders.
(a) Final Distributions. By December 30, 1996 (the "Distribution
Date"), the Escrow Agent shall pay over to the Holders the amount remaining in
the Escrow account less the total amount that the Escrow Agent shall have set
aside with respect to disputed claims still pending a Final Determination
("Pending Claims"). Within 10 days prior to the Distribution Date, Parent shall
submit to the Escrow Agent and the Claim Representative a final statement of the
amount to which it is entitled with respect to each Pending Claim. Upon receipt
of such final statement, the Escrow Agent shall promptly pay to Holders the
amount provided in the first sentence of this paragraph. Upon the Final
Determination of all Pending Claims, the Escrow Agent shall pay to Parent the
amount to which Parent is entitled pursuant to the provisions of section 4.
Upon the final disposition of all Pending Claims, the Escrow Agent shall
promptly pay to the Holders any remaining balance in the Escrow Account.
(b) Claims Still Pending. For purposes of section 5(a), a Final
Determination in favor of Parent shall be considered "still pending" if the
Escrow Agent has not received from Parent notice of the amount constituting
Parent's costs and expenses in connection with the Claim, unless the time set
forth in such paragraph for Parent to certify such amount has elapsed.
(c) Holders. Any payment to Holders shall be made to the persons and
proportionate to the amounts set forth in Schedule A.
6. Overpayment. If Parent receives any amount which is later
determined to be in excess of the amount for which the Agreement requires Parent
to be indemnified, Parent shall promptly repay such excess amount to the Escrow
Agent. The Escrow Agent shall add to the Escrow Account any amounts it receives
hereunder and shall use such funds for the purposes and pay them out in
accordance with the applicable provisions of paragraph 4.
7. Claim Representative. The Holders shall select the Claim
Representative (the "Claim Representative") by action of Holders shown in
Schedule A having a majority in interest. If the Holders are unable to agree on
a Claim Representative or if a Claim Representative shall cease to act by reason
of death, disability, dissolution, resignation or other infirmity and the
Holders have not selected a successor, then Willard J. Cecchi shall act as Claim
Representative.
-3-
<PAGE>
8. Fees of Escrow Agent. Escrow Agent shall be entitled to its
normal, customary fees for its services pursuant to this Escrow Agreement
pursuant to Schedule B attached. Such fees shall be paid from the Holdback.
Such fees shall be paid prior to the payment of any other amounts from the
Holdback.
9. Duty and Liability of Escrow Agent. The sole duty of Escrow Agent
shall be as provided herein and in the Agreement. Escrow Agent shall incur no
liability with respect to any action taken by it in reliance upon or in response
to any notice, direction, instruction or consent of the parties which may be
given under the terms of this Escrow Agreement or the Agreement, nor for any
action or omission of Escrow Agent hereunder or thereunder, except for its own
willful misconduct. The duties and responsibilities of Escrow Agent shall be
limited to those expressly set forth in this Escrow Agreement and the Agreement,
and Escrow Agent shall not be subject to nor bound by the terms of any other
agreement between the parties.
10. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by first-
class, registered or certified mail, return receipt requested, in the case of
Parent to:
Apertus Technologies Incorporated
7275 Flying Cloud Drive
Eden Prairie, MN 55344
Attention: Julie Cummins Brady
with a copy to:
Dorsey & Whitney P.L.L.P.
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402-14958
Attention: William B. Payne, Esq.
and, in the case of the Claim Representative, to:
Pathfinder Venture Capital Funds II,
A Limited Partnership
7300 Metro Boulevard
Suite 585
Minneapolis, MN 55439
Attention: Brian P. Johnson
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<PAGE>
with a copy to:
Siegel, Brill, Greupner & Duffy, P.A.
300 Washington Square
100 Washington Avenue South
Minneapolis, MN 55401
Attention: James R. Greupner
and, in the case of the Escrow Agent, to its principal business address.
Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other parties in the manner
provided above for giving notice.
11. Assignment; Binding Effect. This Escrow Agreement shall extend
to, shall inure to the benefit of and shall be binding upon all of the parties
hereto and upon all of their respective successors and permitted assigns. This
Escrow Agreement shall not be assignable or transferable, in whole or in part,
by any of the parties hereto except upon the express prior written consent of
all of the other parties hereto, and nothing contained in this Escrow Agreement
is intended to confer upon any person, other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under, or by reason of, this Escrow Agreement.
12 Amendment. This Escrow Agreement may be amended only by a
written instrument signed by all of the parties.
13. Governing Law. This Escrow Agreement 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.
14. Counterparts. This Escrow Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute but one agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the day and year first above written.
APERTUS TECHNOLOGIES
INCORPORATED
By __________________________________
Its _________________________________
BLUELINE SOFTWARE, INC.
By __________________________________
Its _________________________________
FIRST TRUST NATIONAL
ASSOCIATION
By __________________________________
Its _________________________________
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<PAGE>
EXHIBIT E
PURCHASE AGREEMENT
This Purchase Agreement is entered into between BlueLine Acquisition
Co., a Minnesota corporation ("Buyer"), and the undersigned ("Seller").
WHEREAS, Seller owns the number of shares (the "Shares") of Capital
Stock ("Company Capital Stock"), par value $.01 per share, of BlueLine Software,
Inc., a Minnesota corporation (the "Company"), set forth opposite Seller's name
below;
WHEREAS, Buyer and its parent, Apertus Technologies Incorporated
("Parent"), have entered into an Acquisition Agreement (the "Acquisition
Agreement") dated June 26, 1995 with the Company by which Buyer will be merged
(the "Merger") into the Company, the holders of Company Capital Stock will
receive cash and/or common stock of Parent ("Apertus Common Stock") and the
Company will become a wholly owned subsidiary of Parent;
WHEREAS, Buyer is offering to purchase the Shares for the same
consideration that Seller would otherwise receive pursuant to the Merger,
conditioned upon aggregate purchases of outstanding Company Capital Stock by
Buyer such that, upon conversion of a portion thereof, it would be able to
effectuate a short-form merger with the Company;
WHEREAS, Parent has agreed in the Acquisition Agreement to register
the Apertus Common Stock to be issued to Seller pursuant hereto; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, the
Shares on the terms and subject to the conditions set forth in this agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. Seller agrees to sell to Buyer, and Buyer
agrees to purchase from Seller, all of the right, title and interest of Seller
in and to the Shares at the Closing (as defined in Section 1.03) on the terms
and subject to the conditions set forth in this agreement.
<PAGE>
1.02 Purchase Price. The purchase price for each share of Company
Capital Stock is payable in cash and Apertus Common Stock as set forth below:
Apertus
Cash Common Stock
-------- ------------
$0.56260 .076943 shs.
1.03 The Closing.
(a) The closing of the transactions contemplated by this agreement
(the "Closing") will take place at the offices of Dorsey & Whitney P.L.L.P., 220
South Sixth Street, Minneapolis, Minnesota, at 10:00 a.m. on June 29, 1995 (the
"Closing Date"), or at such other place and on such other date as Buyer shall
determine, but no later than June 30, 1995.
(b) Subject to the conditions set forth in this agreement, on the
Closing Date:
(i) Seller shall assign and transfer to Buyer good and valid
title in and to the Shares, free and clear of all liens, by delivering
to Buyer a stock certificate or certificates representing the Shares,
duly endorsed for transfer or accompanied by duly executed stock
powers endorsed in blank with requisite stock transfer tax stamps, if
any, attached; and
(ii) Buyer shall deliver to Seller the purchase price determined
based upon the price per share of Company Capital Stock set forth
above and the Shares, by check and delivery of one or more
certificates for Apertus Common Stock.
Notwithstanding anything contained herein, 20% of the cash portion of the
purchase price shall be withheld by Buyer and paid to the Escrow Holder under
the Acquisition Agreement. Such portion of the purchase price shall be used by
the Escrow Holder pursuant to an Escrow Agreement in substantially the form of
Exhibit D to the Acquisition Agreement to provide indemnification to Parent in
respect of the Acquisition Agreement.
(c) Upon the Closing, the transactions contemplated hereby shall be
complete and any risk of not completing the Merger shall be that of Buyer alone.
ARTICLE II
SELLER'S REPRESENTATIONS
2.01 Power. Seller has full legal right, power and authority to enter
into this agreement and to sell, assign, transfer and deliver the Shares.
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<PAGE>
2.02 Execution Delivery; Valid and Binding Agreements. This agreement
has been duly executed and delivered by Seller and constitutes the valid and
binding obligation of Seller, enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights and remedies of creditors generally and to
general principles of equity (regardless of whether in equity or at law).
2.03 Ownerships of Shares. Seller owns, of record, all right, title
and interest in and to the Shares free and clear of any security interests,
claims, liens, pledges, options, encumbrances, charges, agreements, voting
trusts, proxies or other arrangements, restrictions or limitations of any kind,
and, on the Closing Date, the delivery by Seller of a certificate or
certificates in the manner set forth in Section 1.03(b) hereof will transfer
good and valid title to the Shares to Buyer, free and clear of any security
interests, claims, liens, pledges, options, encumbrances, charges, agreements,
voting trusts, proxies or other arrangements, restrictions or other legal or
equitable limitations of any kind.
ARTICLE III
CONDITIONS; TERMINATION
3.01 Conditions to Buyer's Obligations. The obligation of Buyer to
purchase the Shares is subject to the satisfaction of the following conditions
on or before the Closing Date:
(a) The representations and warranties set forth in Article II
hereof shall be true and correct at and as of the Closing Date as
though then made;
(b) All conditions shall have been satisfied to the closing of the
Acquisition Agreement other than the requisite vote of shareholders.
(c) Buyer shall at the Closing concurrently obtain ownership to a
sufficient number of shares of Company Capital Stock to enable it to
enter into a short-form merger with the Company under Section 621 of
the Minnesota Business Corporation Act ("MBCA").
3.02 Termination. This agreement may be terminated by Buyer if it
shall not have entered into purchase agreements by 5:00 p.m. on June 29, 1995 in
substantially the form of this agreement with holders of Company Capital Stock
which if closed would allow it to enter into a short-form merger with the
Company under Section 621 of the MBCA or if the closing of such purchase
agreements shall not occur by 1:00 p.m. on June 30, 1995.
3.03 Investment Intent. Seller hereby acknowledges, represents and
warrants to, and agrees with Buyer, as follows:
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<PAGE>
(a) Information Statement. Seller has been furnished with a copy of
the Information Statement dated June 26, 1995.
(b) Exempt Offering. Seller understands that the offer and sale of
Apertus Common Stock is intended to be exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act"), by
virtue of Section 4(2) of the Securities Act or Regulation D
promulgated thereunder, and that no registration statement relating to
the Apertus Common Stock has been filed with the Securities and
Exchange Commission or any state securities commission.
(c) Access to Information. Seller has reviewed the Information
Statement and understands the information contained therein and
information otherwise provided to Seller relating to the Merger.
Seller has had an opportunity to ask questions of and receive
information and answers from Parent concerning the terms and
conditions of the Merger.
(d) Investor Sophistication. Seller has, either alone or together
with Seller's purchaser representative, such knowledge and experience
in financial, tax and business matters as to be capable of evaluating
the merits and risks of an investment in the Apertus Common Stock and
protecting Seller's interests in connection with an investment in
Apertus Common Stock and, in Seller's judgment, has obtained, either
alone or together with Seller's purchaser representative, sufficient
information to evaluate the merits and risks of an investment in the
Apertus Common Stock. Seller acknowledges that Seller has the
financial ability to bear the economic risk of Seller's investment in
the Apertus Common Stock, has adequate means for providing for
Seller's current needs and has no need for liquidity with respect to
Seller's investment in the Apertus Common Stock.
(e) Transfer Restrictions. Parent has agreed in the Acquisition
Agreement to register the Apertus Common Stock, to be issued to Seller
hereunder. However, such Apertus Common Stock has not been registered
under the Securities Act or applicable state securities laws on the
date hereof, and the economic risk of investment must be borne
indefinitely by Seller. Such Apertus Common Stock cannot be sold by
Seller unless subsequently registered under the Securities Act or an
exemption from such registration is available. There is no assurance
that the Apertus Common Stock will be so registered in the future.
(f) Restrictive Legends. The certificates representing the Apertus
Common Stock will bear legends and a notation will be made in the
transfer records indicating the restriction on transfer to which the
Apertus Common Stock is subject.
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<PAGE>
ARTICLE IV
MISCELLANEOUS
4.01 Amendment and Waiver. This agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced. No course of dealing between or among any
persons having any interest in this agreement will be deemed effective to modify
or amend any part of this agreement or any rights or obligations of any person
under or by reason of this agreement.
4.02 Assignment. This agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
4.03 Severability. Whenever possible, each provision of this
agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this agreement.
4.04 Complete Agreement. This agreement contains the complete
agreement between the parties and supersedes any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
4.05 Counterparts. This agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
-5-
<PAGE>
4.06 Governing Law. The internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this agreement and the
performance of the obligations imposed by this agreement.
<TABLE>
<S> <C>
BLUELINE ACQUISITION CO.
By:
.............................................
Its:
.............................................
SELLER: No. of shares being sold:
Name: ..................... Common Stock ____________ Shs.
Address: ..................... Cumulative Preferred Stock, Series I ____________ Shs.
City: ..................... Cumulative Preferred Stock, Series II ____________ Shs.
State: ..................... Seller is an accredited investor within the
meaning of Rule 501 of the Securities and
Exchange Commission
Zip: ..................... [_] YES [_] NO
SSAN or EIN: .................
...............................................
Signature
</TABLE>
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<PAGE>
EXHIBIT F
FORM OF OPINION OF COUNSEL FOR THE COMPANY
(1) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota and, subject to
approval of the Plan of Merger by the Company's shareholders, has the requisite
corporate power and authority to enter into the Agreement and the Articles of
Merger and perform its obligations hereunder and thereunder. The Company has
the corporate power and authority and all authorizations, licenses, permits and
certifications necessary to own and operate its properties and to carry on its
business as now conducted and presently proposed to be conducted. New Jersey is
the only jurisdiction in which the conduct of the Company's business or the
ownership, leasing or operation of its properties and assets requires the
Company to be qualified to do business (except for those jurisdictions where the
failure of the Company to be so qualified would not have a material adverse
effect on the condition of the Company) and the Company is qualified to do
business and is in good standing as a foreign corporation under the laws of New
Jersey.
(2) The execution, delivery and performance of the Agreement and the
Articles of Merger by the Company and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all requisite
corporate action, and no other corporate proceedings on their part are necessary
to authorize the execution, delivery or performance of the Agreement and the
Articles of Merger, other than the approval of the Plan of Merger by the
shareholders of the Company. The Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, and the Articles of Merger, when
approved by the Company's shareholders and executed and delivered by the
Company, will constitute the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the rights and remedies of creditors generally and to general principles of
equity (regardless of whether in equity or at law).
(3) The execution, delivery and performance of the Agreement and the
Articles of Merger by the Company and the consummation by the Company of the
transactions contemplated thereby do not conflict with or result in any breach
of any of the provisions of, constitute a default under, result in a violation
of, result in the creation of a right of termination or acceleration under,
result in any lien, security interest, charge or encumbrance upon any assets of
the Company, or, except for those that have been obtained, require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body under the provisions of the Articles of
Incorporation or Bylaws of the Company or any indenture, mortgage, lease, loan
agreement or other agreement or instrument known to me by which the Company is
bound or affected, or any law, statute, rule or regulation or order, judgment or
decree to which the Company is subject.
<PAGE>
(4) Except for the filing of the Articles of Merger with the Secretary
of State of the State of Minnesota, the Company is not required to submit any
notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of the Agreement or the Articles of Merger
or the consummation of the transactions contemplated thereby. No consent,
approval or authorization of any governmental or regulatory authority or, to the
best of my knowledge, any other party or person (except the approval of the Plan
of Merger by the shareholders of the Company) that has not been obtained is
required to be obtained by the Company in connection with its execution,
delivery and performance of the Agreement or the Articles of Merger or the
transactions contemplated thereby.
(5) The authorized capital stock of the Company consists of 15,000,000
shares, par value $.01 per share, divisible into classes and series. Shares
issued not part of a class or series shall be Common Shares. The only
authorized classes and series of Capital Stock are shown below:
Class and Series Authorized Outstanding
---------------- ---------- -----------
Company Common Stock 662,728 Shares
Series I Preferred Stock 4,063,352 4,063,352 Shares
Series II Preferred Stock 1,950,000 1,837,843 Shares
All of such outstanding shares of Capital Stock have been duly authorized and
are validly issued, fully paid and nonassessable. Other than the Company
Common Stock, Series I Preferred Stock, Series II Preferred Stock, Outstanding
Stock Options and Outstanding Warrants, the Company has no other equity
securities or securities containing any equity features authorized, issued or
outstanding. There are no agreements or other rights or arrangements existing
which provide for the sale or issuance of Capital Stock by the Company and,
except for the Series I Preferred Stock, the Series II Preferred Stock,
Outstanding Stock Options and Outstanding Warrants, there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire from the Company any shares of
Capital Stock or other securities of the Company of any kind. There are no
agreements or other obligations (contingent or otherwise) which may require the
Company to repurchase or otherwise acquire any shares of its capital stock.
(6) All of the outstanding capital stock of Subsidiaries is owned by
the Company.
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<PAGE>
EXHIBIT G
OFFICER'S CERTIFICATE
Pursuant to Section 7.01(l)(i) of that certain Acquisition Agreement
among Apertus Technologies Incorporated ("Parent"), a Minnesota corporation,
BlueLine Acquisition Co. ("Acquisition Co."), a Minnesota corporation, and
BlueLine Software, Inc. (the "Company"), a Minnesota corporation, dated June 26,
1995 (the "Agreement"), the undersigned hereby certifies that he has supervised
or conducted a reasonable investigation necessary for the purposes of this
Officer's Certificate and that:
(a) The representations and warranties of the Company set forth in
Article III of the Agreement are true and correct in all material respects
at and as of the date hereof as though such representations and warranties
had been made on the date hereof and as though the date hereof had been
substituted for the date of the Agreement throughout such representations
and warranties (without taking into account any disclosures by the Company
of discoveries, events or occurrences arising on or after the date hereof),
except that any such representation or warranty made as of a specified date
(other than the date hereof) was true and correct in all material respects
on and as of such date;
(b) The Company has performed in all material respects all of the
covenants and agreements required to be performed by it under the Agreement
and the Articles of Merger prior to the Closing;
(c) The Company has obtained, or caused to be obtained, each consent and
approval necessary in order that the transactions contemplated herein not
constitute a breach or violation of, or result in a right of termination or
acceleration of, or creation of any encumbrance on any of the Company's
assets pursuant to the provisions of, any agreement, arrangement or
undertaking of or affecting the Company or any license, franchise or permit
of or affecting the Company;
(d) The Agreement, the Articles of Merger and the Merger have been duly
and validly authorized by the Board of Directors;
(e) All material governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated by the
Agreement have been duly made and obtained;
<PAGE>
(f) There is not 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 restrain or prohibit, the consummation of
the transactions contemplated by the Agreement or the Articles of Merger or
seeking to obtain material damages in connection with such transactions,
(ii) seeking to prohibit direct or indirect ownership or operation by
Parent of all or a material portion of the business or assets of the
Company and the Subsidiaries, or to compel Parent or any of the
Subsidiaries or the Company to dispose of or to hold separately all or a
material portion of the business or assets of Parent and its subsidiaries
or of the Company, as a result of the transactions contemplated by the
Agreement, (iii) seeking to require direct or indirect transfer or sale by
Parent or Acquisition Co. of any of the shares of capital stock, (iv)
seeking to invalidate or render unenforceable any provision of the
Agreement, the Articles of Merger or the Related Agreements or (v)
otherwise relating to and materially adversely affecting the transactions
contemplated by the Agreement;
(g) There has not been any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated
by the Agreement by any federal, state or foreign court, government or
governmental authority or agency, which would reasonably be expected to
result, directly or indirectly, in any of the consequences referred to in
Section 7.01(f) of the Agreement;
(h) There has been no damage, destruction or loss of or to any property
or properties owned or used by the Company, whether or not covered by
insurance, which, in the aggregate, has, or would be reasonably likely to
have, a material adverse effect on the Condition of the Company; and
(i) There has been no material adverse change in the Condition of the
Company or the Subsidiaries since April 30, 1995.
All capitalized terms used herein and not otherwise defined herein have
the meanings ascribed to them under the Agreement.
IN WITNESS WHEREOF, the undersigned does hereby execute this Officers'
Certificate, as of the ____ day of June, 1995.
-----------------------------
Willard J. Cecchi
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<PAGE>
EXHIBIT H
FORM OF OPINION OF COUNSEL FOR PARENT
BlueLine Software, Inc.
5775 Wayzata Boulevard
Minneapolis, MN 55416
Ladies and Gentlemen:
I have acted as counsel to Apertus Technologies Incorporated
("Parent") in connection with that certain Acquisition Agreement, dated June 26,
1995 (the "Agreement") among Parent, BlueLine Acquisition Co. ("Acquisition
Co.") and BlueLine Software, Inc. (the "Company") and the transactions
contemplated to be performed by the parties thereto. This opinion is being
delivered pursuant to Section 7.02(f) of the Agreement. All capitalized terms
used herein and not defined herein have the meanings assigned to them in the
Agreement.
I have examined such documents and have reviewed such questions of law
as I have considered necessary and appropriate for the purposes of my opinions
set forth below.
In rendering my opinions set forth below, I have assumed the
authenticity of all documents submitted to me as originals, the genuineness of
all signatures and the conformity to authentic originals of all documents
submitted to me as copies. I have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all parties
to agreements or instruments relevant hereto other than Parent, that such
parties had the requisite power and authority (corporate or otherwise) to
execute, deliver and perform such agreements or instruments, that such
agreements or instruments have been duly authorized by all requisite action
(corporate or otherwise), executed and delivered by such parties and that such
agreements or instruments are the valid, binding and enforceable obligations of
such parties. As to questions of fact material to my opinions, I have relied
upon certificates of officers of Parent and of public officials (including,
without limitation, those certificates delivered to others at the Closing).
On the basis of the foregoing and of my examination of such other
questions of law and fact as I deem relevant under the circumstances, and in
reliance thereon, and subject to the limitations, qualifications and exceptions
set forth herein, I am of the opinion that, as of the date hereof:
(1) Each of Parent and Acquisition Co. is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota and has the
<PAGE>
requisite corporate power and authority to enter into the Agreement and the
Articles of Merger and perform its obligations thereunder.
(2) The execution, delivery and performance of the Agreement by Parent
and Acquisition Co., and of the Articles of Merger by Acquisition Co., and the
consummation of the transactions contemplated thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on their part are necessary to authorize the execution, delivery or performance
of the Agreement or the Articles of Merger. The Agreement has been duly
executed and delivered by Parent and Acquisition Co. and constitutes the valid
and binding obligation of Parent and Acquisition Co., and the Articles of Merger
constitute the valid and binding obligation of Acquisition Co., enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights and
remedies of creditors generally and to general principles of equity (regardless
of whether in equity or at law).
(3) The execution, delivery and performance of the Agreement and the
Articles of Merger by Parent and Acquisition Co. and the consummation by Parent
and Acquisition Co. of the transactions contemplated thereby do not conflict
with or result in any breach of any of the provisions of, constitute a default
under, result in a violation of, result in the creation of a right of
termination or acceleration under, result in any lien, security interest, charge
or encumbrance upon any assets of Parent or Acquisition Co. pursuant to, or
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body under the provisions of the
Articles of Incorporation or Bylaws of either Parent or Acquisition Co. or any
indenture, mortgage, lease, loan agreement or other agreement or instrument
known to me by which either Parent or Acquisition Co. is bound or affected, or
any law, statute, rule or regulation or order, judgment or decree to which
either Parent or Acquisition Co. is subject.
(4) All of the outstanding capital stock of Acquisition Co. is owned
by Parent.
(5) The Apertus Common Stock issued pursuant to the Offer and to be
issued in connection with the Merger has been duly authorized and, upon
issuance, will be validly issued, fully paid and nonassessable.
(6) Except for the filing of the Articles of Merger with the Secretary
of State of Minnesota and any filings under the Securities Act or the Securities
Exchange Act of 1934, as amended, neither Parent nor Acquisition Co. is required
to submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of the Agreement or the Articles
of Merger or the consummation of the transactions contemplated thereby. No
consent, approval or authorization of any governmental or regulatory authority
or, to the best of my knowledge, any other person or party is required to be
obtained by Parent or Acquisition Co. in connection with its execution, delivery
and
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<PAGE>
performance of the Agreement or the Articles of Merger or the transactions
contemplated thereby.
My opinions expressed above are limited to the laws of the State of
Minnesota and the federal laws of the United States of America.
The foregoing opinions are being furnished to you solely for your
benefit and may not be relied upon by, nor may copies be delivered to, any other
person without my prior written consent.
Dated: June__, 1995
Very truly yours,
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<PAGE>
EXHIBIT I
OFFICER'S CERTIFICATE
Pursuant to Section 7.02(g)(i) of that certain Acquisition Agreement
among Apertus Technologies Incorporated ("Parent"), a Minnesota corporation,
BlueLine Acquisition Co. ("Acquisition Co."), a Minnesota corporation and
BlueLine Software, Inc. (the "Company"), a Minnesota corporation, dated June 26,
1995 (the "Agreement"), the undersigned hereby certifies that he has supervised
or conducted a reasonable investigation necessary for the purposes of this
Officer's Certificate and that:
(a) The representations and warranties of Parent and Acquisition Co. set
forth in Article IV of the Agreement are true and correct in all material
respects at and as of the date hereof as though such representations and
warranties had been made on the date hereof and as though the date hereof
had been substituted for the date of the Agreement throughout such
representations and warranties, except that any such representation or
warranty made as of a specified date (other than the date hereof) was true
and correct in all material respects on and as of such date;
(b) Parent and Acquisition Co. have performed in all material respects
all the covenants and agreements required to be performed by them under the
Agreement and the Articles of Merger prior to the Closing;
(c) All material governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated by the
Agreement have been duly made and obtained;
(d) There is not 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 restrain or prohibit, the consummation of
the transactions contemplated by the Agreement or the Articles of Merger or
seeking to obtain material damages in connection with such transactions,
(ii) seeking to invalidate or render unenforceable any provision of the
Agreement, the Articles of Merger or any of the Related Agreements or (iii)
otherwise relating to and materially adversely affecting the transactions
contemplated by the Agreement; and
(e) There has not been any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
<PAGE>
promulgated, issued or deemed applicable to the transactions contemplated
by the Agreement or the Articles of Merger, by any federal, state or
foreign court, government or governmental authority or agency, which would
reasonably be expected to result, directly or indirectly, in any of the
consequences referred to in Section 7.02(d) of the Agreement.
All capitalized terms used herein and not otherwise defined herein have
the meanings ascribed to them under the Agreement.
IN WITNESS WHEREOF, the undersigned does hereby execute this Officer's
Certificate, as of the ___ day of June, 1995.
-----------------------------
Robert D. Gordon
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<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No. 2-
91060 on Form S-8 (related to the Lee Data Corporation Savings and Investment
Plan), in Registration Statement No. 33-38924 on Form S-8 (related to the
Apertus Technologies Incorporated 1990 Long-Term Incentive Plan), in
Registration Statement No. 33-50648 on Form S-8 (related to the Apertus
Technologies Incorporated Stock Acquisition Loan Assistance Program), in
Registration Statement No. 33-77176 on Form S-8 (related to the Apertus
Technologies Incorporated Stock Acquisition Loan Assistance Program) and in
Registration Statement No. 33-88884 on Form S-8 (related to the Apertus
Technologies Incorporated 1990 Long-Term Incentive Plan) of our report (on the
consolidated financial statement of BlueLine Software, Inc. as of December 31,
1994 and 1993 and for each of the three years in the period ended December 31,
1994) dated April 6, 1995, except for the third paragraph of Note 3, Notes 4 and
13, as to which the date is June 22, 1995 (which expresses an unqualified
opinion and includes an explanatory paragraph relating to the uncertainty
concerning the Company's ability to continue as a going concern) appearing in
the Form 8-K of Apertus Technologies Incorporated.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
July 17, 1995
