<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------
FORM 10-K
---------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For the fiscal year ended March 31, 1996 Commission File No. 0-19499
</TABLE>
CHAMPION FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
UTAH 88-0169547
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
19 HILLSYDE COURT
COCKEYSVILLE, MARYLAND 21030
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code: (410) 628-0040
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of each exchange on
Title of each class which registered
------------------- ----------------------------
NONE NONE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
$.001 PAR VALUE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
---------- ---------
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. / /
<PAGE> 2
Based on the closing sale price of the Company's common stock of $6.75
on July 5, 1996, the aggregate market value of the Company's common stock held
by non-affiliates was $1,951,250.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
---------- -----------
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of March 31, 1996, 619,302 shares of the
Company's common stock were outstanding.
<PAGE> 3
PART I
ITEM 1. BUSINESS
Champion Financial Corporation (the "Company") was incorporated
in Utah on February 5, 1981 as "Berscham Energy & Minerals,
Inc." The Company originally was engaged in the business of
energy, mineral, and hydrocarbon exploration and production. In
1984, the Company changed its name to "Champion Energy
Corporation." In 1989, as the Company had diversified into real
estate holdings, international trade, and computer engineering
services, it changed its name to "Champion Financial
Corporation." In 1992, the Company decided to focus its
business strategy on international trade. To this end, in 1993,
it liquidated its real estate holdings and ceased its computer
engineering business and established an international joint
venture with a Russian concern to market and distribute
Russian-made synthetic rubber and other polymers in the United
States. The joint venture was unsuccessful and during the
fiscal year ended March 31, 1994, the joint venture activities
were suspended indefinitely and the Company began to search for
a merger candidate.
During the fiscal year ended March 31, 1995, the Company
continued its active search for a merger candidate. The
inactivity of the Company during that fiscal year, combined with
the investment of most of its assets in investment securities,
may have caused the Company to be deemed an investment company.
On March 31, 1995 a change in control occurred, when Marcy M.
Engelbrecht purchased approximately 45% of the company's issued
and outstanding shares from the Company's former Chief Executive
Officer. New management has continued to seek acquisition
opportunities and restart business activities.
During the fiscal year ended March 31, 1996, the Company
continued to seek merger and acquisition opportunities
throughout the United States, including an attempt to purchase
Legal Security Life Insurance Company, which offer was formally
withdrawn after the merger was deemed unfeasible. The Company
also resumed international business activities and has extended
a loan of $100,000 to Vectar Trading Company (Jersey) Limited,
an exporter of ceramic tiles, $95,600 of which was repaid during
that fiscal year.
In November 1995, the Board approved a plan to acquire between
49% and 75% of the issued and outstanding stock of Winifred S.
Hayes, Inc. d/b/a HAYES, Incorporated, a privately held company
engaged in the business of health care technology assessments
that publishes The HAYES Directory of New Medical Tecnologies'
Status and The HAYES Directory Legal Precedent Reports. The
consummation of the plan depends upon the Company's ability to
successfully raise no less than $700,000 in net proceeds from a
private placement of its securities.
-1-
<PAGE> 4
ITEM 2. DESCRIPTION OF PROPERTY
From April 1, 1995 to November 30, 1995, the Company rented
office space on a month-to-month basis at Suite 1820, Charles
Center South, 36 South Charles Street, Baltimore, Maryland. On
November 30, 1995, the rental was assumed by a related entity,
MPLC, Inc. who paid all rent through April 30, 1996. On May 1,
1996, the Company moved its corporate offices to 19 Hillsyde
Court, Cockeysville, Maryland. All rental expenses at this
location have been assumed by MPLC, Inc.
ITEM 3. LEGAL PROCEEDINGS
The Company was a party to a lawsuit entitled "Keltec
Associates, Inc. v. Champion Financial Corporation, et. al.",
filed as Case No. 94-166561, in the County of Tulare, State of
California (the "Keltec Action"). The Keltec Action alleged a
cause of action for breach of contract, and fraud and deceit
against the company and former directors, Jack Gregory, Ninette
Gregory, and Jasmine Gregory, for failure to deliver shares of
the common stock issued to Keltec Associates, Inc. ("Keltec") in
exchange for certain considerations. The individual defendants
were dismissed as parties to the suit.
The Keltec Action arose from transactions pursuant to two
agreements entered into by the Company in 1991. The first, a
subscription agreement (the "Subscription Agreement"), provided
for (i) Keltec's purchase of 600,000 pre-reverse split shares of
common stock of the Company for a $600,000 note and (ii)
Keltec's purchase of an additional 350,000 pre-reverse split
shares in exchange for a Note with a face amount of $295,000 and
secured by a Deed of Trust. The second agreement, with a former
stockholder and director of Keltec (the "Keltec Stockholder"),
provided for his purchase of 1,070,000 pre-reverse split shares
of the Company in exchange for three properties which the
stockholder claimed had an aggregate value of $1,070,000.
The Company suspended the issuance of shares to Keltec upon
Keltec's default on the $600,000 Promissory Note and the
foreclosure on the property that secured the $295,000 Promissory
Note which netted the Company $151,533. Keltec filed suit
seeking general and punitive damages.
Following the filing of the Keltec Action, the Company filed a
cross complaint against the Keltec Stockholder upon discovery
that the property exchanged by the Keltec Stockholder for shares
was overvalued. The Company won a default judgment in the
amount of $1,035,000 against the Keltec Stockholder. The
Company, however, did not believe it would be able to collect
this judgment.
On September 14, 1995, the Superior Court of the State of
California, County of Tulare, ruled that the purchase of 600,000
shares pursuant to the subscription agreement was deemed
rescinded and that Champion should transfer to Keltec 15,159
post-reverse split shares representing the value of the note
and deed of trust. Moreover, the court ruled that Keltec was
not liable to Champion for any loss suffered by Champion arising
from the agreement with the Keltec Stockholder.
-2-
<PAGE> 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
None.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information
The Company's common stock is currently traded over-the-counter
through four Bulletin Board Market Makers under the trading
symbol of "CPFC." There is no other established public trading
market for the Company's securities at this time.
The following table sets forth the range of high and low bid
information for each full quarterly period of the last fiscal
year.
<TABLE>
<CAPTION>
PERIOD REPORTED AVERAGE HIGH BID AVERAGE LOW BID
Year Ended March 31, Year Ended March 31,
------------------------ -------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Quarter Ended 6/30 $ 1.75 $ 1.00 $ 0.5625 $ 0.50
Quarter Ended 9/30 $ 3.50 $ 0.875 $ 1.375 $ 0.25
Quarter Ended 12/31 $ 3.50 $ 0.875 $ 1.25 $ 0.25
Quarter Ended 3/31 $ 5.50 $ 1.125 $ 2.75 $ 0.50
</TABLE>
(b) Holders.
The approximate number of holders of record of the Company's
common stock was 782 as of March 31, 1996 (including Cede & Co.
as nominee).
(c) Dividends.
The Company has never paid dividends on its common stock and
does not anticipate that this policy will change in the
foreseeable future. Future dividends, if any, will depend on
future earnings, capital requirements, and the financial
condition of the Company.
-3-
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data contained
within the attached financial statements. For more information
regarding the Company's financial data, please refer to the
financial statements contained herein in Item 8.
<TABLE>
<CAPTION>
Years ended March 31,
1996 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total Revenue $ -0- $ -0- $ 180,417 $ 246,317
Net Income (Loss) $ (347,228) $ (49,189) $ (919,858) $ 8,708
Net Income (Loss) Per Share $ (.56) $ (.08) $ (1.49) $ .001
Total Assets $ 76,718 $ 356,755 $ 406,844 $ 1,520,823
Working Capital $ (46,843) $ 356,755 $ 351,572 $ 49,151
Long-Term Liabilities $ 19,531 $ -0- $ -0- $ 195,000
Stockholders' Equity $ 9,527 $ 356,755 $ 405,944 $ 1,279,599
</TABLE>
See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, for matters affecting the
comparability of the above information.
-4-
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal Year Ended March 31, 1996 Compared to Fiscal Year Ended
March 31, 1995
The Company earned no revenue in fiscal years ended March 31,
1996 or 1995. In fiscal year ended March 31, 1995, the Company
effectively ceased operations as management sought a merger
candidate. In fiscal year ended March 31, 1996, the Company
continued to seek merger candidates and acquisitions, including
an attempt to acquire Legal Security Life Insurance Company.
The offer was withdrawn when the acquisition was deemed to be
not feasible.
Operating expenses increased to $250,797 in fiscal year ended
March 31, 1996 (primarily comprised of approximately $152,000
for consulting and professional fees) from $12,526 in fiscal
year ended March 31, 1995, reflecting the substantial costs
incurred to seek merger candidates and acquisitions.
The Company had a net loss of $347,228 in fiscal year ended
March 31, 1996 compared to a net loss of $49,189 in fiscal year
ended March 31, 1995. The loss in fiscal year ended March 31,
1995 was impacted by a $48,000 write off of its interest in a
Russian joint venture. The loss in fiscal year ended March 31,
1996 resulted from: (a) significant losses realized from
investment activities and investment fees, and (b) significant
accounting, legal, and consulting fees incurred in connection
with the attempt to acquire Legal Security Life Insurance
Company.
Fiscal Year Ended March 31, 1995 Compared to Fiscal Year Ended
March 31, 1994
The Company earned no revenue in fiscal year ended March 31,
1995 compared to $180,417 in fiscal year ended March 31, 1994.
In fiscal year ended March 31, 1995, the Company effectively
ceased operations as management sought a merger candidate. In
fiscal year 1994, they wrote off their interest in a Russian
joint venture, and recognized a loss in the amount of $48,000 in
connection therewith.
Operating expenses decreased to $12,526 in fiscal year ended
March 31, 1995 from $176,299 in fiscal year ended March 31,
1994, reflecting the cessation of business activity.
The Company had a net loss of $49,189 in fiscal year ended March
31, 1995 compared to a net loss of $919,858 in fiscal year ended
March 31, 1994. The loss in fiscal year ended March 31, 1994
largely was the result of a loss on the sale of assets in the
amount of $908,393. The loss in fiscal year ended March 31,
1995 was impacted by the write off of the Russian joint venture
investment.
-5-
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash of approximately $469.
The Company has had no cash provided by operating activities for
the last three fiscal years. Also, the Company currently has no
credit facilities. Management executed an agreement in December
1995 to acquire Winifred B. Hayes Inc., which acquisition will
enable the Company to become operational and generate funds
internally. The acquisition is dependent on the Company's
ability to raise a minimum of $700,000 in a private placement
offering of its common stock. Subsequent to the execution of
the agreement, all costs of the acquisition have been borne by
MPLC, Inc., a Maryland corporation owned by the principal
shareholder of the Company.
No assurance can be given that the Company will be able to raise
capital sufficient to effect the acquisition. In the event that
the Company is not successful in raising the capital or
undertaking other activities or acquiring businesses that will
generate funds internally, it is unlikely that the Company would
be able to continue in business.
ITEM 8. FINANCIAL STATEMENTS
The financial statements of the Company required by this item
are filed as exhibits hereto, are listed under Item 14(a)(1) and
(2), and are incorporated herein by reference.
-6-
<PAGE> 9
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The following reports are incorporated by reference to:
(1) Form 8-K, dated May 22, 1995, regarding a change in
accountants;
(2) Amendment No. 1 to Form 8-K, dated May 25, 1995,
submitting the accountant's letter indicating agreement; and
(3) Amendment No. 2 to Form 8-K, dated July 19, 1995, relating
to changes in accountants.
As of November 30, 1995, the registrant terminated Roger B.
Castro, CPA as its principal accountant to audit its financial
statements. In the past two fiscal years, the accountant's report of
the registrants's financial statements did not contain an adverse
opinion or disclaimer of opinion, and was not modified as to
uncertainty, audit scope or accounting principles. The registrant had
no disagreements with its former accountant on any matter of accounting
principles or practices, financial statements disclosure, or auditing
scope or procedure, which, if not resolved to the former accountant's
satisfaction, would have caused him to make reference to such in
connection with his report. The decision to change accountants was
approved by the Board of Directors of the registrant on November 30,
1995. As of November 30, 1995, the registrant has retained Dohan & Co.
as its principal accountant to audit the registrants's financial
statements.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a) The following table lists the directors and officers for
the fiscal year ended March 31, 1996 and the current
directors and officers of the Company.
<TABLE>
<CAPTION>
Position with the Company
Name Age and Principal Occupation
------------------------ --- ---------------------------
<S> <C> <C>
Marcy M. Engelbrecht 43 President and Chief Executive
Officer since March 31, 1995;
President, Law Offices of
Marcy M. Engelbrecht, P.A.
(formerly Marcy M. Hallock, P.A.)
since 1984; attorney at law, Willkie
Farr & Gallagher from 1981 -
1984; attorney at law, Weinberg
& Green from 1979 - 1981;
Senior Advisor, Labor Relations
- American Petroleum Institute
for 1977 - 1979.
</TABLE>
-7-
<PAGE> 10
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
<TABLE>
<CAPTION>
Position with the Company
Name Age and Principal Occupation
-------------------- --- ----------------------------
<S> <C> <C>
Dr. Lawrence G. Miller 42 Director since April 24, 1995;
Vice President, Clinical Affairs
Medical Director, Health Payment
Review, Inc. since 1990; Adjunct
Professor, Department of Pharm-
acology and Experimental Thera-
peutics, Tufts University School
of Medicine since 1994 and
Assistant Professor from 1988 -
1992.
Bonnie Gottlieb 45 Resigned 2/1/96 as Director
and Secretary
Christopher Onyekwelu 55 Resigned 3/1/96 as Chief
Financial Officer
Warren Davison Director since 10/6/95;
Nancy Volpe Secretary since 10/6/95;
</TABLE>
Dr. Lawrence G. Miller and Marcy M. Engelbrecht are brother and sister.
ITEM 11. EXECUTIVE COMPENSATION
No compensation was paid to any officer or director during the last four
fiscal years of the Company.
-8-
<PAGE> 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 31, 1996, the ownership of the
Common Stock of the Company by management and owners of 5% or more of the
common stock of the Company:
<TABLE>
<CAPTION>
Percent and Name and Address Amount and Nature
Title of Class of Beneficial Owner of Beneficial Ownership
- - -------------- ------------------- -----------------------
<S> <C> <C>
Common Stock Marcy Engelbrecht 330,228 (1)
53.3% 19 Hillsyde Court sole voting and
Cockeysville, Maryland 21030 investment power
Common Stock Dr. Jack Gregory 107,400
17.3% 590 West Putnam, Suite 3 sole voting and
Porterville, California 93257 investing power
Common stock Directors and Executives as 330,228
53.3% a Group sole voting and
investment power
</TABLE>
(1) includes all shares held by relatives and corporate pension plans
-9-
<PAGE> 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of July 3, 1995, the Company purchased certain assets from
Marcy M. Engelbrecht, P.A., a corporation owned by Marcy M.
Engelbrecht, for $80,629. Ms. Engelbrecht is a director,
officer and shareholder of the Company. Pursuant to the
Agreement of Sale and Purchase of Assets, $53,314,71 was paid
in cash by the Company and the balance of $27,314.29 is being
paid pursuant to a 60 month promissory note that bears
interest at 9%. The assets consist primarily of office
furniture and equipment. The price paid by the Company was
based on an independent asset valuation conducted by a
professional appraisal company (Martucci & Associates) prior
to the purchase.
See Item 1 with respect to the loan to Vectar Trading Company
(Jersey) Limited. The Company's former Chief Financial
Officer, Christopher Onyedwelu, owned a fifteen percent (15%)
interest in Vectar.
See Item # 1 with respect to the Company's agreement to
acquire an interest in Hayes.
Commencing November, 30, 1995, substantially all of the
operating expenses of Champion Financial Corporation,
including rent expense. were paid by MPLC, Inc., a corporation
whose principal stockholder is Marcy M. Engelbrecht. The
Company has no obligation to repay these expenses.
As of March 31, 1996, the Company was indebted to Infoplan,
Inc., a corporation owned by Ms. Engelbrecht and her spouse,
in the amount of $6,010 as a result of advances made to the
Company.
-10-
<PAGE> 13
PART IV
ITEM 14 EXHIBITS
<TABLE>
<CAPTION>
PAGE(S)
----------
<S> <C>
(a) 1. INDEX TO FINANCIAL STATEMENTS
The financial statements required by this item are submitted
in a separate section beginning on page F-1 of this report.
Index to Financial Statements . . . . . . . . . . . . . F-1
Report of Certified Public Accountants . . . . . . . . F-2
Balance Sheets as of March 31, 1996 and
March 31, 1995 . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations for each of the Three
Years in the Period Ended March 31, 1996 . . . . . . F-4
Statements of Stockholders' Equity for Each
of the Two Years in the Period Ended
March 31, 1996 . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows for each of the
Three Years in the Period Ended March
31, 1996 . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . F-7 - F-13
</TABLE>
-11-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CHAMPION FINANCIAL CORPORATION
By:
----------------------------------------
Marcy M. Engelbrecht, President/Director
and Chief Executive Director
----------------------------------------
Date
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By:
----------------------------------------
Marcy M. Engelbrecht / Secretary
----------------------------------------
Date
By:
----------------------------------------
Lawrence G. Miller, Director
----------------------------------------
Date
By:
----------------------------------------
Warren Davison, Director
----------------------------------------
Date
-12-
<PAGE> 15
EXHIBIT INDEX
PAGE(S)
3. (i) Articles of Incorporation dated February 15, 1981,
and all amendments thereto (A)
(ii) By-Laws (A)
4. Specimen Stock Certificate (A)
10. Material Contracts
(i) Agreement with Vectar Trading Company
(Jersey) Limited (B)
(ii) Acquisition Agreement (with Winifred S. Hayes, Inc.)
(iii) Amended and Restated Aquisition Agreement (with
Winifred S. Hayes, Inc.)
16. Letter regarding change in accountants
--------------------------------------
(A) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1992.
(B) Incorporated by reference to the company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1995.
-13-
<PAGE> 16
CHAMPION FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
-----------
<S> <C>
Report of Certified Public Accountants . . . . . . . . . . . . F-2
Balance Sheets as of March 31, 1996 and
March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations for Each of Three
Years in the Period Ended March 31, 1996 . . . . . . . . . F-4
Statements of Stockholders' Equity for Each
of the Three Years in the Period Ended
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows for Each of the Three
Years in the Period ended March 31, 1996 . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . F-7 - F13
</TABLE>
F-1
<PAGE> 17
[DOHAN AND COMPANY LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Champion Financial Corporation:
We have audited the accompanying balance sheet of Champion Financial
Corporation at March 31, 1996, and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Champion Financial Corporation as of
March 31, 1995, and for the years ended March 31, 1994 and 1995, were audited
by other auditors whose report dated August 2,1995, expressed an unqualified
opinion on those statements.
We conducted our audit In accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit Includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Champion Financial Corporation
at March 31, 1996, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During the year ended March 31,
1996, the Company incurred a net loss of $347,228 and, at March 31, 1996, has a
deficiency in working capital of $46,843. The Company's immediate and future
working capital requirements are dependent on the Company's ability to Attain
profitable operations through its plan of acquisitions, to structure its
financing arrangements and to successfully offer and place additional shares of
the Company's stock. It is not possible to predict the outcome of future
operations or whether the necessary acquisitions will be consummated or whether
alternative capital or financing may be arranged. Management's plans regarding
these matters are described in Note 8. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Dohan and Company, P.A., CPA's
Miami, Florida
July 10, 1996
F-2
<PAGE> 18
CHAMPION FINANCIAL CORPORATION
BALANCE SHEETS
MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (Note 7) $ 469 $ 356,755
Prepaid expenses 348 -0-
---------- -----------
Total Current Assets 817 356,755
---------- -----------
PROPERTY AND EQUIPMENT (Note 3)
Office furniture and equipment 80,629 -0-
Less accumulated depreciation (9,128) -0-
---------- -----------
Property and Equipment, net 71,501 -0-
---------- -----------
OTHER ASSETS
Loan receivable and investment (Notes 2 and 7) 4,400 -0-
---------- -----------
TOTAL ASSETS $ 76,718 $ 356,755
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 36,649 $ -0-
Due to related parties (Notes 3 and 7) 6,202 -0-
Current portion of note payable - related party (Notes 3 and 7) 4,809 -0-
---------- -----------
Total Current Liabilities 47,660 -0-
LONG-TERM DEBT
Long-term portion of note payable - related party (Notes 3 and 7) 19,531 -0-
---------- -----------
TOTAL LIABILITIES 67,191 -0-
---------- -----------
COMMITMENTS (Notes 6 and 9)
STOCKHOLDERS' EQUITY
Common stock, $.001 par value:
100,000,000 shares authorized;
619,302 shares issued and outstanding 619 619
Additional paid-in capital 2,586,650 2,586,650
Accumulated deficit (2,577,742) (2,230,514)
---------- -----------
Total Stockholders' Equity 9,527 356,755
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,718 $ 356,755
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 19
CHAMPION FINANCIAL CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ---------- ------------
<S> <C> <C> <C>
REVENUES $ -0- $ -0- $ 180,417
------------ ------------ ----------
OPERATING EXPENSES
Consulting and professional 151,574 9,860 86,052
Depreciation 9,128 -0- 1,809
Employee salaries, costs, and benefits 15,970 -0- -0-
Occupancy and office expense (Note 9) 39,126 2,666 77,762
Travel and entertainment 34,999 -0- 10,676
------------ ------------ ----------
Total Operating Expenses 250,797 12,526 176,299
------------ ------------ ----------
INCOME (LOSS) FROM OPERATIONS (250,797) (12,526) 4,118
------------ ------------ ----------
OTHER INCOME (EXPENSE)
Investment income 967 11,337 2,867
Interest and other investment expense (18,607) -0- (17,550)
Loss on sale of marketable securities (78,791) -0- -0-
Loss on discontinued joint venture (Note 4) -0- (48,000) -0-
Loss on sale of assets -0- -0- (908,393)
------------ ------------ ----------
Net Other Expense (96,431) (36,663) (923,076)
------------ ------------ ----------
LOSS BEFORE INCOME TAXES (347,228) (49,189) (918,958)
PROVISION FOR INCOME TAXES (Note 5) -0- -0- (900)
------------ ------------ ----------
NET LOSS $ (347,228) $ (49,189) $ (919,858)
============ ============ ===========
NET LOSS PER SHARE $ (.56) $ (.08) $ (1.49)
============ ============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 619,302 619,302 617,458
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 20
CHAMPION FINANCIAL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------- ADDITIONAL
SHARES PAR PAID-IN ACCUMULATED STOCKHOLDERS'
OUTSTANDING VALUE CAPITAL DEFICIT EQUITY
------------- --------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCES - April 1, 1993 6,137,705 $ 6,138 $2,534,928 $(1,261,467) $ 1,279,599
Net loss for the year ended
March 31, 1994 (919,858) (919,858)
Stock split reversal (5,523,934) (5,524) 5,524
Net issued shares 5,531 5 46,198 46,203
----------- ------------ ---------- ----------- -----------
BALANCES - March 31, 1994 619,302 619 2,586,650 (2,181,325) 405,944
Net loss for the year ended
March 31, 1995 (49,189) (49,189)
----------- ------------ ---------- ----------- -----------
BALANCES - March 31, 1995 619,302 619 2,586,650 (2,230,514) 356,755
Net loss for the year ended
March 31, 1996 (347,228) (347,228)
----------- ------------ ---------- ----------- -----------
BALANCES - March 31, 1996 619,302 $ 619 $2,586,650 $(2,577,742) $9,527
=========== ============ ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 21
CHAMPION FINANCIAL CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (347,228) $ (49,189) $ (919,858)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 9,128 -0- 1,809
Loss on sale of marketable securities 78,791 -0- -0-
Loss on discontinued joint venture -0- 48,000 -0-
Loss on sale of assets -0- -0- 908,393
Changes in operating assets and liabilities:
Decrease in inventory -0- -0- 12,167
Increase in accounts payable and accrued expenses 36,649 -0- -0-
Decrease in income taxes payable -0- (900) (9,324)
Other (348) -0- -0-
----------- --------- ----------
Net Cash Used in Operating Activities (223,008) (2,089) (6,813)
----------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (3,289,024) -0- -0-
Sale of marketable securities 3,210,233 -0- -0-
Decrease in short-term investment -0- -0- 44,545
Purchase of property and equipment (53,315) -0- -0-
Sale of assets -0- 6,372 416,329
Loan receivable and investment (100,000) -0- -0-
Loan receivable repaid 95,600 -0- -0-
----------- --------- ----------
Net Cash Provided by (Used in) Investing Activities (136,506) 6,372 460,874
----------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of loans from officer -0- -0- (36,000)
Repayment of long-term debt -0- -0- (195,000)
Net advances to related parties 6,202 -0- -0-
Reduction of note payable - related party (2,974) -0- -0-
Common stock issued -0- -0- 553
Additional paid-in capital -0- -0- 45,650
----------- --------- ----------
Net Cash Provided by (Used in) Financing Activities 3,228 -0- (184,797)
----------- --------- ----------
INCREASE (DECREASE) IN CASH (356,286) 4,283 269,264
CASH AT BEGINNING OF YEAR 356,755 352,472 83,208
----------- --------- ----------
CASH AT END OF YEAR $ 469 $ 356,755 $ 352,472
=========== ========= ==========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 9,187 $ -0- $ 17 550
=========== ========= ==========
Income taxes paid $ -0- $ 900 $ -0-
=========== ========= ==========
Non-cash investing and financing activities:
Purchase of property and equipment $ 80,629 $ -0- $ -0-
Cash paid 53,315 -0- -0-
----------- --------- ----------
Note payable - related party $ 27,314 $ -0- $ -0-
=========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 22
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity: Champion Financial Corporation (the Company) was
incorporated in Utah on February 5, 1981 as Berscham Energy & Minerals, Inc.
The Company was originally engaged in the business of energy, mineral, and
hydrocarbon exploration and production. In 1984, the Company changed its name
to Champion Energy Corporation. In 1989, the Company diversified into real
estate holdings, international trade, and computer engineering services and
changed its name to Champion Financial Corporation. In 1992, the Company
decided to focus its business strategy on international trade and in 1993
liquidated its real estate holdings and ceased its computer engineering
business to concentrate on its international joint venture activities (see Note
4). By the end of the fiscal year ended March 31, 1994, the Company had
discontinued most of its business activities. On March 31, 1995, the
management of the Company changed as a result of the sale of a majority of its
outstanding shares of common stock. Under its new management, the Company has
actively sought international trade opportunities and acquisition opportunities
throughout the United States. During the fiscal year ended March 31, 1996, the
Company unsuccessfully attempted to acquire a life insurance company and is
currently in the process of acquiring a controlling interest in a health care
technology company (see Note 6).
Marketable Securities: The Company accounts for investments in
marketable securities in accordance with provisions of Statement of Financial
Accounting Standards No. 115, which requires that investments in debt and
equity securities be classified into one of three categories: Held to
maturity, trading, or available for sale. All securities held by the Company
were classified as trading securities. Statement No. 115 requires trading
securities to be carried at fair value and the net unrealized gain or loss on
those securities to be reported on the statement of operations.
Property and Equipment: Property and equipment is stated at cost, less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which vary from five to
ten years.
Long-Term Investments: The Company accounts for long-term investments
at cost due to the lack of available information and marketability.
Income Taxes: The Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards No. 109. Statement
No. 109 provides for the recognition and measurement of deferred income tax
benefits based on the likelihood of their realization in future years.
Net Loss Per Share: Net loss per share of common stock is based on the
weighted average number of shares outstanding during the years presented.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
F-7
<PAGE> 23
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk: As of March 31, 1996, the Company has an
outstanding loan receivable with a foreign corporation in which the Company
owns a 7.5% interest (see Note 2). The receivable is unsecured and
non-interest bearing.
NOTE 2: LOAN RECEIVABLE AND INVESTMENT
On April 5, 1995, the Company purchased 7.5% of the outstanding stock of
Vectar Trading Company (Jersey) Limited ("Vectar") for $1. Vectar is a trading
company specializing in building materials and commodities and is the exclusive
agent of Pentas Limited, Czech Republic ("Pentas") for the distribution of
glass and ceramic tiles throughout Western Europe, the Middle East, and South
Africa. In connection with the purchase of the stock interest, the Company
loaned Vectar approximately $99,999, without interest. Under the terms of the
purchase agreement, the Company is entitled to receive 30% of the gross profit
on tile sales by Pentas until a maximum of $300,000 is received. As of March
31, 1996, the Company had been repaid $95,600 from the proceeds of sales
transactions, reducing the balance of the loan to $4,399.
If the Company receives $300,000 from Vectar, it will have the option of
purchasing newly issued shares of Vectar up to 22% of the total issued and
outstanding shares at an agreed-upon price of four times the prior year's
earnings per share. The option expires on April 4, 2000.
NOTE 3: RELATED PARTY TRANSACTIONS
Long-Term Debt: In July, 1995, the Company purchased office furniture
and equipment from a corporation owned by the beneficial principal stockholder
of the Company for $80,629, based on an independent appraisal of its estimated
fair market value. Initial payments of $53,315 were made, and the remaining
balance of $27,314 was evidenced by a note payable from the Company. The note
bears interest at 9% and is payable in monthly installments of principal and
interest totaling $567 through July, 2000. The annual maturities of the note
payable, summarized by fiscal years ending March 31, are as follows:
<TABLE>
<S> <C>
1997 $ 4,809
1998 5,260
1999 5,753
2000 6,293
2001 2,225
--------
Total $ 24,340
========
</TABLE>
F-8
<PAGE> 24
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 3: RELATED PARTY TRANSACTIONS (CONTINUED)
Due to Related Parties: During the year ended March 31, 1996, various
advances were made to the Company by Risk Resolution Group, a partnership whose
principal partner is also the beneficial principal stockholder of the Company.
The advances were unsecured and non-interest bearing. The outstanding balance
as of March 31, 1996 was $192. During the year ended March 31, 1996, various
advances were made to the Company by Infoplan, Inc., a corporation whose
stockholders are the beneficial principal stockholder of the Company and her
spouse. The advances were unsecured, non-interest bearing, and had no specific
terms of repayment. The outstanding balance as of March 31, 1996 was $6,010.
Other: The chief financial officer of the Company, who resigned on
March 1, 1996, owned a 15% interest in Vectar Trading Company (Jersey) Limited
(see Note 2).
NOTE 4: JOINT VENTURE
In October, 1991, a joint venture agreement was entered into between the
Company and VNIISK (the former Synthetic Rubber Institute of the Soviet Union),
which formed Champion VNIISK Limited ("CIVIEL") as a stock corporation with its
principal place of business in St. Petersburgh, Russia. This venture was
intended to facilitate the marketing and distribution of synthetic rubber and
other polymers from Russia in the United States. As of March 31, 1995, the
total investment in the joint venture of $48,000 was determined to be worthless
since CIVIEL was not actively operating due to the uncertainty about the
economy in Russia. In addition, the Company's executive in charge of this
division of business was no longer employed by the Company.
NOTE 5: INCOME TAXES
For the year ended March 31, 1996, the Company generated for income tax
purposes a net operating loss carryforward of approximately $260,000 which
expires in the year 2011 and a capital loss carryforward of approximately
$79,000 which expires in the year 2001. The Company had a net operating loss
carryforward of approximately $445,000 and a capital loss carryforward of
approximately $950,000 as of March 31, 1995. However, as of March 24, 1995,
there was an ownership change in the Company as defined in Section 382 of the
Internal Revenue Code. As a result of this change, the Company's ability to
utilize net operating losses and capital losses available before the ownership
change is restricted to a total of approximately $46,000 per year (6.83% of the
market value of the Company at the time of the ownership change). Therefore,
substantial net operating loss and capital loss carryforwards will be
eliminated in future years due to the change in ownership. The utilization of
the remaining carryforwards is dependent on the Company's ability to generate
sufficient taxable income and capital gains during the carryforward periods and
no further significant changes in ownership.
F-9
<PAGE> 25
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 5: INCOME TAXES (CONTINUED)
The Company computes deferred income taxes under the provisions of
Statement of Financial Accounting Standards No. 109, which requires the use of
an asset and liability method of accounting for income taxes. Statement No.
109 provides for the recognition and measurement of deferred income tax
benefits based on the likelihood of their realization in future years. A
valuation allowance must be established to reduce deferred income tax benefits
if it is more likely than not that a portion of the deferred income tax
benefits will not be realized. It is management's opinion that the entire
deferred tax benefit may not be recognized in future years. Therefore, a
valuation allowance equal to the deferred tax benefit has been established,
resulting in no deferred tax benefits as of the balance sheet dates.
NOTE 6: ACQUISITION
On December 4, 1995, the Company entered into an agreement to
effectively acquire up to 75% of the issued and outstanding stock of Winifred
S. Hayes, Incorporated ("Hayes"). Hayes is a privately-held company engaged in
the business of health care technology assessments that publishes The Hayes
Directory of New Medical Technologies' Status and The Hayes Directory Legal
Precedent Reports.
Immediately prior to the acquisition, the stockholders of Hayes will
exchange 51% of that corporation's outstanding common stock for 961 shares of
common stock of MPLC, Inc. ("MPLC"), a Maryland corporation whose principal
stockholder is the beneficial principal stockholder of the Company. The
stockholders of Hayes will also place 24% of the outstanding stock in an escrow
account. The escrow agents will exchange these shares for up to an 453
additional shares of MPLC, upon certain conditions as described below.
Simultaneously with the exchange of Hayes stock for MPLC stock, certain
entities and individuals having incurred costs associated with locating,
evaluating, and investigating this acquisition for MPLC, will exchange their
right, title, and interest in the Hayes acquisition agreement for 3,586 shares
of MPLC common stock.
Prior to the exchange of stock and merger, the Company intends to
conduct a private placement, offering its common stock at a minimum price of
$3.00 per share with the intention of raising a minimum of $700,000 net of
transaction costs and a maximum of $2,100,000. Upon the initial closing of the
private placement, the Company intends to contribute $700,000 of the proceeds
of the offering to the capital of Hayes. In the event that the initial closing
of the private placement does not occur within six months from the date of the
agreement, the stockholders of Hayes will have the right to terminate the
agreement (see Note 10). In the event that the Company fails to raise the
minimum amount of $700,000 net of transaction costs within nine months from the
date of the agreement, the original stockholders of Hayes will have the right
to reacquire at par value 2% of the stock of Hayes, thereby giving them
control. In addition, the shares of Hayes held in escrow will be returned to
the original stockholders. In the event that the Company is able to raise
$2,000,000 within nine months from the date of the agreement, the escrow will
close and the shares representing 24% of the total outstanding stock of Hayes
will be exchanged for 453 shares of common stock of MPLC.
F-10
<PAGE> 26
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 6: ACQUISITION (CONTINUED)
Subsequent to the exchanges MPLC will be merged into the Company. The
current stockholders of Hayes will receive 731,000 shares of Company stock in
exchange for their 961 shares of MPLC common stock and 344,000 shares of
Company stock for their 453 shares of MPLC, in the event that the private
placement offering raises $2,000,000. The remaining stockholders of MPLC will
receive 2,726,000 shares of Company stock in exchange for their 3,586 shares of
MPLC common stock.
NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107. The fair value amounts have been
determined based on available market information and appropriate valuation
methodology. The carrying amounts and estimated fair values of the Company's
financial assets and liabilities as of March 31, 1996 are as follows:
<TABLE>
<CAPTION>
Estimated
Carrying Fair
Amount Value
-------------- --------------
<S> <C> <C>
Cash $ 469 $ 469
Loan receivable $ 4,399 $ 3,700
Note payable - related party $ (24,340) $ (24,340)
Due to related parties $ (6,202) $ (5,700)
</TABLE>
The carrying amount of cash approximates fair value. Based on borrowing
rates currently available to the Company for obligations with similar terms and
maturities, the fair value of the note payable - related party also
approximates its carrying amount. The fair values of the loan receivable and
the amounts due to related parties are estimated based on the rate of the note
payable - related party and the anticipated dates of payment. Fair value
estimates are subjective in nature and involve uncertainties and matters of
significant judgment; therefore, fair value cannot be determined with
precision.
NOTE 8: MANAGEMENT'S PLANS
The Company's financial statements for the year ended March 31, 1996
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal
course of business. The Company has suffered recurring losses from operations,
as a result of which there is an accumulated deficit and a working capital
deficiency as of March 31, 1996. All of these factors raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
F-11
<PAGE> 27
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 8: MANAGEMENT'S PLANS (CONTINUED)
Management recognizes that the Company must generate additional
resources in order to continue. Management's plans include the proposed
acquisition of up to 75% of the issued and outstanding stock of Winifred S.
Hayes, Inc. (see Note 6). Subject to the generation of no less than $700,000
in net proceeds from a private placement offering, management anticipates
resuming operating activities and generating funds during the year ended March
31, 1997.
NOTE 9: COMMITMENTS
Leased Premises: During the year ended March 31, 1996, the Company
incurred rental expenses of $14,978 relating to month-to-month rental of its
office in Baltimore, Maryland.
Employment Agreement: The Company and Hayes have entered into an
employment agreement with Dr. Winifred S. Hayes (Employee), which becomes
effective if the Company acquires an interest in Hayes (see Note 6). Under the
terms of the agreement, the Employee will serve as the chairman of the board,
president and chief executive officer of Hayes, and vice-president and a member
of the board of directors of the Company for an initial term of five years.
The Employee will receive an annual salary of $110,000 from Hayes, which will
be increased each year by 7 1/2%. In addition, the Employee will receive an
annual bonus consisting of both cash and shares of the Company's stock,
depending upon predetermined net earnings and profit margin targets.
Stock Options: The Company has a stock option plan, the purpose of
which is to enable the Company to compete successfully in attracting and
retaining key employees with outstanding abilities by making it possible for
them to purchase shares of the Company's common stock on terms that will give
them a more direct and continuing interest in the future success of the
Company's business. The original total number of shares for which options
might be granted under this Plan could not exceed 300,000 shares. This number
was adjusted because the number of issued shares were reduced by the 1 for 10
reverse stock split. As of March 31, 1996, 30,000 shares were reserved under
the plan.
The Board of Directors is authorized to grant options to selected
employees pursuant to this plan until December 31, 1996, but not thereafter.
The option price shall be fixed by the Board but shall in no event be less than
100% of the fair market value of the shares subject to the option on the date
the option is granted. The fair market value shall be the average of the high
and low prices of a share as reported on the date the option is granted. The
Board may include, but shall not be obligated to do so, a stock appreciation
right with any option granted under the plan to officers of the Company. No
options have been granted under the plan.
F-12
<PAGE> 28
CHAMPION FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996, 1995, AND 1994
NOTE 10: SUBSEQUENT EVENTS
On July 9, 1996, the Company formed a wholly-owned subsidiary, MPLCACQ
Corp., (ACQ) a Delaware corporation, for the purpose of acquiring various
operating businesses, including Hayes. The Company will be initially
capitalized by 100 shares of common stock. On July 10, 1996, the Company and
other parties entered into an amended and restated acquisition agreement
(Amendment) in connection with its acquisition of an interest in Hayes
(previously discussed in Note 6). The restated agreement provides for the
following major changes:
A. The $700,000 originally contemplated to be contributed
directly to the capital of Hayes by the Company, will now be
used to capitalize ACQ, which will in turn contribute that
same sum to the capital of Hayes.
B. The time period for consummating the transaction was
extended to 120 days from the date of the Amendment.
C. MPLC will be merged into ACQ in a statutory merger, and MPLC
shareholders, including the original Hayes shareholders,
will receive 3,801,000 shares of newly issued restricted
common stock of the Company. The shares are not intended to
be registered for sale to the general public, except as
permitted under Rule 144 of the Securities Act of 1933.
F-13
<PAGE> 1
EXHIBIT 10(ii)
ACQUISITION AGREEMENT
THIS AGREEMENT (hereinafter "the agreement"), is made and entered into as
of the 4th day of December, 1995, by and between DR. WINIFRED S. HAYES and
ROBERT E. HAYES, JR. (hereinafter collectively "Transferor"), and CHAMPION
FINANCIAL CORPORATION, a publicly held Utah corporation, registered pursuant to
the Securities Exchange Act of 1934, as amended (hereinafter "Champion"), MPLC,
INC., a Maryland Corporation (hereinafter "MPLC"), INFOPLAN, INC., a Delaware
corporation (hereinafter "Infoplan"), GARY BRYANT (hereinafter "Bryant"), DR.
LAWRENCE G. MILLER ("Miller"), and RISK RESOLUTION GROUP, a partnership formed
under the laws of the state of Maryland, who agree as follows:
1. RECITALS:
This agreement is made and entered into with reference to the
following facts and circumstances:
A. Champion wishes to acquire up to 75% of the issued and outstanding
stock of HAYES, Incorporated ("HAYES") from Transferor, and Transferor desires
to acquire stock of Champion, pursuant to the terms and conditions set forth in
this agreement;
B. There are currently outstanding One Hundred (100) shares of common
stock of HAYES, Incorporated and Six Hundred Nineteen Thousand Three Hundred
Two (619,302) shares of common stock of Champion. MPLC is authorized to issue
a total of Five Thousand (5000) shares of common stock.
C. Marcy M. Engelbrecht is a partner of Risk Resolution Group. Marcy M.
Engelbrecht currently owns 300,000 shares of Champion.
2. CONTRIBUTION OF STOCK AND MERGER
A. Contribution of Stock. Immediately prior to the Closing of the
Merger (as such terms are hereinafter defined), Transferor shall contribute
Fifty One (51) shares of HAYES common stock (which shall constitute 51% of
the outstanding common stock of HAYES) in exchange for Nine Hundred Sixty One
(961) shares of MPLC common stock, (which shall constitute 19.2% of the
outstanding stock of MPLC). In addition to the 51 shares of common stock of
Hayes so contributed, Transferor shall contribute an additional 24 shares of
HAYES in an escrow to be held by the attorneys for Transferor and Champion
jointly, which shall be instructed to exchange up to an additional 453 shares
of MPLC (344,000 shares of Champion post-merger), subject to certain conditions
as outlined in subparagraph 4D hereinbelow. Simultaneously with Transferor's
contribution of HAYES common stock to MPLC, Infoplan, Bryant Miller and Risk
Resolution Group shall contribute all of their right, title and interest in
this acquisition agreement, and all due diligence costs associated with
locating, evaluating and investigating all acquisition opportunities to MPLC in
exchange for Three Thousand Five
<PAGE> 2
Hundred Eighty Six (3586) shares of MPLC common stock, as follows: Infoplan
(329 shares), Bryant (199 shares), Miller (1644 shares), and Risk Resolution
Group (1414 shares). Immediately after the contributions by Transferor,
Infoplan, Bryant, Miller and Risk Resolution Group, Transferor, Infoplan,
Bryant, Miller and Risk Resolution Group in the aggregate will own at least 80%
of the common stock of MPLC. The contribution of stock pursuant to this
subparagraph 2A, is intended to be treated as a transfer with respect to which
no gain or loss is recognized pursuant to Section 351 of the Internal Revenue
Code of 1986, as amended (the "Code") and the parties hereto agree to take any
steps necessary in order to effect the contribution in such a manner as to
comply with the requirements of Code Section 351.
B. Merger. Subsequent to the contributions to MPLC set forth in
Subparagraph 2A above, MPLC will be merged with and into Champion in a
statutory merger. Pursuant to such merger, Transferor shall receive 731,000
shares of Champion common stock, in exchange for 961 shares of MPLC common
stock and Infoplan, Bryant, Miller and Risk Resolution Group shall receive
2,726,000 shares of Champion common stock, for their 3,586 shares of MPLC
common stock. It is intended that the merger of MPLC with and into Champion
shall constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and the parties hereto agree to take the necessary
actions to structure the merger in a manner which will not result in the
recognition of any gain by the shareholders of MPLC.
3. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The transfer of HAYES stock to MPLC and its successor in interest is
conditioned upon the following:
A. Champion shall obtain permission from its shareholders to merge with
MPLC, and a new Board of Directors shall be elected, with Dr. Winifred Hayes
and Dr. Lawrence G. Miller appointed as member of a seven member Board of
Directors of Champion.
B. The name of Champion shall be changed to Health Tek Holdings, Inc.
C. Prior to the contributions of stock described in paragraph 2A above
and the merger of MPLC and Champion, described in paragraph 2B above,
Champion shall conduct a private placement offering of its common stock at a
price of $3.00 per share with a minimum sales level necessary to break escrow
of $700,000 plus transaction costs, and a maximum offering of $2,100,000.
The closing of the Merger (the "Closing"), will occur simultaneously with the
initial closing of the private placement offering. Upon the initial closing of
the private placement offering, Champion will contribute $700,000 of the
proceeds of the offering to the capital of HAYES. In the event that the
initial closing of the private placement does not occur within six months from
the date hereof, Transferor shall have the right to terminate this Agreement
upon notice to Champion and MPLC, and upon such termination no party shall have
any obligation to any other party hereunder.
2
<PAGE> 3
E. There shall be no material adverse change in the business or
condition (financial or otherwise) of Champion, since the execution of the
letter of intent by the parties on November 7, 1995.
F. The satisfactory completion of its due diligence investigation of
Champion, MPLC, and their respective businesses, operations and officers and
directors by Transferor.
G. Approval of Harleysville National Bank & Trust Company, with the
understanding that its SBA loan will be repaid in full upon the Closing.
H. Champion and Dr. Winifred S. Hayes and HAYES and Dr. Winifred S.
Hayes shall enter into mutually satisfactory written employment agreements.
This acquisition agreement is contingent upon the execution of said employment
agreements.
4. ADJUSTMENTS TO COMMON STOCK AND ESCROW PROVISIONS
A. In the event that Champion fails to raise in the private
offering any capital above and beyond the initial minimum $700,000 plus
transaction costs within a period of nine (9) months from the date of this
agreement, Transferor shall have the right to reacquire at par value (or at
$1.00, if no par stock) two (2) shares of stock of HAYES (representing 2% of
the stock of HAYES). In such event the escrow of shares of HAYES and Champion
established pursuant to Section 2A above shall be terminated, the 24 shares of
HAYES shall be returned to Transferor and the 344,000 shares of Champion shall
be canceled.
B. In the event that Champion is able to raise an aggregate total
capital of $2,000,000 within nine months of the date of this agreement, the
escrow shall close and the 24 shares of Hayes shall be delivered to Champion
and the 344,000 shares of Champion shall be delivered to Transferor. This
shall result in Champion owning 75% of the outstanding stock of Hayes.
C. It is intended by the parties hereto that any adjustments to the
common stock of Champion and Hayes made pursuant to this paragraph 4 be made in
such a manner as to not give rise to taxable income for either Transferor,
HAYES or Champion. The parties agree to take all necessary steps to assure
that no taxable income results from such adjustments.
D. Concurrently with the Closing, Champion shall deliver
certificate(s) representing the 344,000 shares of its stock to its attorney,
Kenneth G. Eade ("Eade"), who shall hold and administer such shares in
accordance with subsections 4A and 4B hereof. Concurrently with the Closing,
Transferor shall deliver certificate(s) representing the 24 shares of its stock
to its attorney, Louis Rosner, Esq. ("Rosner"), who shall hold and administer
such shares in accordance with subsections 4A and 4B hereof.
E. Neither Eade nor Rosner shall incur any liability for the
holding of the
3
<PAGE> 4
the certificates or for the delivery, release or cancellation of the shares in
accordance with the provisions hereof. In the event of a dispute between the
parties with respect to their rights hereunder or in the shares, Eade and/or
Rosner shall be entitled to deliver the shares to a court of competent
jurisdiction and interplead.
F. The parties shall indemnify and hold harmless Eade and Rosner
from any and all liability, costs, fees, awards, or judgments which they may
incur as a result of the holding, distribution, and/or cancellation of the
shares. The fact that Eade and Rosner are acting as escrow agents with respect
to the holding, transfer and/or cancellation of shares shall not preclude them
from acting as the attorneys for the parties hereto.
5. POST CLOSING COVENANTS
A. From the $700,000 invested in HAYES, a total of $125,000, net of
tax, shall be paid to Dr. Winifred S. Hayes, as and for compensation for future
services as President of Hayes. This amount shall be paid as follows: $50,000
during the calendar year 1995, and $75,000 during the calendar year 1996, or at
the election of Transferor, prior to the Closing, Transferor may elect to sell
shares of HAYES to Champion for a total purchase price of $125,000, net of
tax, in which event the number of shares of HAYES contributed by Transferor to
MPLC pursuant to section 2A shall be reduced by the number of shares so sold,
and the $700,000 contribution shall be reduced by the gross amount so paid to
Transferor. In either event, such $125,000 shall be paid in full to Transferor
within 45 days of the Closing.
B. At Closing, from the capital contributed to HAYES pursuant to
Section 3C, HAYES' SBA Loan from Harleysville National Bank & Trust Company
shall be paid in full.
C. At Closing, from the capital contributed to HAYES pursuant to
Section 3C, John York shall be paid the sum of $35,000.00.
6. CONDITIONS PRECEDENT TO MPLC AND CHAMPION'S PERFORMANCE
The exchange of MPLC stock (and Champion stock) for Seller's stock in
HAYES is conditioned on the following:
A. There shall have been no material adverse change in the business or
conditions (financial or otherwise) of HAYES since the execution of the letter
of intent by the parties on November 7, 1995.
B. The satisfactory completion of its due diligence investigation of
HAYES and its business, operations and officers and directors by MPLC and
Champion.
4
<PAGE> 5
7. REPRESENTATIONS AND WARRANTIES OF MPLC AND CHAMPION
MPLC and Champion represent and warrant the following:
A. That Champion is a corporation duly formed and validly existing
and in good standing under the laws of the state of Utah, and that MPLC is a
corporation duly formed and existing under the laws of the state of Maryland,
and that each has all necessary corporate powers to own its properties and
carry on its business as now owed and operated by it.
B. Champion and MPLC each have the full corporate power, right and
authority to make, execute, deliver and perform this Agreement and all other
instruments and documents required or contemplated hereunder, and to take all
steps and to do all things necessary and appropriate to consummate the
transactions contemplated herein. Such execution, delivery and performance of
this Agreement and all other instruments and documents to be delivered
hereunder have been duly authorized by all necessary corporate action on the
part of both Champion and MPLC, and will not contravene or violate or
constitute a breach of the terms of either of their Articles of Incorporation
or By-Laws or conflict with, result in a breach of, or entitle any party to
terminate or call a default with respect to any instrument or decree to which
either is bound or any contract or any instrument, judgment, order, decree,
law, rule or regulation applicable to either of them. Neither Champion nor
MPLC is a party to, or subject to, or bound by any judgment, injunction, or
decree of any court or governmental authority or agreement which may restrict
or interfere with its performance of this Agreement. This Agreement has been
duly executed and delivered and constitutes, and the other instruments and
documents to be delivered by Champion and MPLC hereunder will constitute, the
valid and binding obligations of both of them, enforceable against each of them
in accordance with their respective terms.
C. Except as otherwise set forth herein, no consent of any party to
any contract or arrangement to which either Champion or MPLC is a party or by
which either is bound is required for the execution, performance, or
consummation of this Agreement and such other documents and instruments by
Champion and MPLC.
D. There are no actions, suits, proceedings, orders, investigations
or claims pending or, to Champion's or MPLC's knowledge, threatened against
either of them, at law or in equity, which may restrict or interfere with the
ability of either of them to perform this Agreement.
E. Champion's and MPLC's representations and warranties contained
in this Section will be accurate, true and correct, in all respects, on and as
of the date of Closing as though made at such date in Identical language.
F. All of Champion's assets are free and clear of security
interests, liens, pledges, charge and encumbrances, equities or claims, except
those obligations to shareholders and others as reported on its financial
statements.
5
<PAGE> 6
G. The shares of MPLC and Champion being transferred pursuant to
this agreement will be validly and legally issued and not subject to any
security interests, liens, pledges, charges, encumbrances or proxies of any
kind, with the exception that they will bear a legend that they are "restricted
stock", which stock may only be sold in conformance with SEC Rule 144 or
pursuant to a registered public offering.
H. Neither MPLC or Champion, nor either of their officers and
directors has ever been convicted of any felony or misdemeanor offense
involving moral turpitude; nor have they been the subject of any temporary or
permanent restraining order resulting from unlawful transactions in securities;
nor are they now, or have they ever been, a defendant in any lawsuit alleging
unlawful business practices or the unlawful sale of securities; nor have they
been the debtor in any proceedings, whether voluntary or involuntary, filed in
the U.S. Bankruptcy Court.
8. REPRESENTATIONS AND WARRANTIES OF TRANSFEROR
Transferor hereby represents and warrants as follows:
A. That HAYES is a corporation duly formed and validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania, and has
all necessary corporate powers to own its properties and carry on its business
as now owed and operated by it.
B. Transferor has the full personal power, right and authority to
make, execute, deliver and perform this Agreement and all other instruments and
documents required or contemplated hereunder, and to take all steps and to do
all things necessary and appropriate to consummate the transactions
contemplated herein. Such execution, delivery and performance of this
Agreement and all other instruments and documents to be delivered hereunder,
will not contravene or violate or constitute a breach of the terms of HAYES'
Articles of Incorporation or By-Laws or conflict with, result in a breach of,
or entitle any party to terminate or call a default with respect to any
instrument or decree to which HAYES is bound or any contract or any
instrument, judgment, order, decree, law, rule or regulation applicable to it.
HAYES is not a party to, or subject to, or bound by any judgment, injunction,
or decree of any court or governmental authority or agreement which may
restrict or interfere with Transferor's performance of this Agreement. This
Agreement has been duly executed and delivered and constitutes, and the other
instruments and documents to be delivered by Transferor hereunder will
constitute, the valid and binding obligations of Transferor, enforceable
against Transferor in accordance with their respective terms.
C. Except as otherwise set forth herein, no consent of any party to
any contract or arrangement to which HAYES is a party or by which either is
bound is required for the execution, performance, or consummation of this
Agreement.
D. There are no actions, Suits, proceedings, orders, investigations
or claims
6
<PAGE> 7
pending or, to Transferor's knowledge, threatened against HAYES, at law or in
equity, which may restrict or interfere with the ability of Transferor to
perform this Agreement.
E. Transferor's representations and warranties contained in this
Section will be accurate, true and correct, in all respects, on and as of the
date of Closing as though made at such date in identical language.
F. To the best of Transferor's knowledge, HAYES has not infringed
and is not now infringing, on any trade name, trademark, servicemark or
copyright belonging to any other person, firm or corporation. Neither
Transferor nor HAYES is a party to any license, agreement, or arrangement,
whether as licensor, licensee, or otherwise, with respect to any trademarks,
servicemarks, trade names, copyrights of HAYES, or applications for them.
G. HAYES is the publisher, owner, and holder of the copyright on
"The HAYES Directory of New Medical Technologies' Status" and "The HAYES
Directory Legal Precedent Reports"
H. The shares of HAYES being transferred pursuant to this agreement
will be validly and legally issued and not subject to any security interests,
liens, pledges, charges, encumbrances or proxies of any kind.
I. Neither Transferor nor HAYES has ever been convicted of any
felony or misdemeanor offense involving moral turpitude; nor have they been
the subject of any temporary or permanent restraining order resulting from
unlawful transactions in securities; nor are they now, or have they ever been,
a defendant in any lawsuit alleging unlawful business practices or the unlawful
sale of securities; nor have they been the debtor in any proceedings, whether
voluntary or involuntary, filed in the U.S. Bankruptcy Court.
9. BOTH PARTIES' OBLIGATIONS BEFORE CLOSING
A. ACCESS TO INFORMATION: Transferor, MPLC and Champion, and their
authorized representatives shall have full access to all books, accounts,
records, contract, tax returns and other documents as may be reasonably
requested by the parties to conduct a thorough due diligence review necessary
for each party to determine if all conditions and warranties contained in this
agreement have been complied with.
B. CONFIDENTIAL INFORMATION: All parties hereto mutually agree
that, during the course of negotiations, the parties have exchanged certain
confidential information, including, without limitation, financial records,
names of customers and employees, pricing information, employee compensation,
merchandising or sales techniques, computer programs, and other confidential
information (collectively "confidential information"). As to any such
confidential information, each of the parties agrees that it, its officers,
directors and employees, agents and representatives will
7
<PAGE> 8
1) Make no use Whatsoever Of such confidential
information except for the purpose of negotiating for and carrying out the
transactions set forth in this agreement;
2) Accept and hold such confidential information as
secret and confidential and not disclose, divulge or communicate such
confidential information, the fact that it has been disclosed to them, or the
circumstances under which it has been disclosed to them, to any third person
or entity, and
3) Take all necessary and appropriate steps to insure
the secrecy of such confidential information in possession of each of them,
including, but not limited to, revealing the confidential information only to
such of its officers, directors, employees, agents, and representatives who
need to know the confidential information for the purposes of investigating,
negotiating, and effecting the transactions described above, and who are
informed by it of the confidential nature of the confidential information.
10. NOTICES
Any notices called for in this agreement shall be effective upon
personal service or upon service by first class mail, postage prepaid, to the
parties at such addresses to be designated by the parties in writing
11. MISCELLANEOUS PROVISIONS:
This agreement shall be construed in accordance with the laws
of the State of Maryland.
This agreement shall be binding upon and shall inure to the benefit
of the parties hereto, their beneficiaries, heirs, representatives, assigns,
and all other successors in interest.
Each of the parties shall execute any and all documents required to be
executed and perform all acts required to be performed in order to effectuate
the terms of this agreement.
This agreement contains all of the agreements and understandings of
the parties hereto with respect to the matters referred to herein, and no prior
agreement or understanding pertaining to any such matters shall be effective
for any purpose.
Each of the parties hereto has agreed to the use of the particular
language of the provisions of this Agreement, and any question of doubtful
interpretation shall not be resolved by any rule of interpretation against the
party who causes the uncertainty to exist or against the draftsman.
This agreement may not be superseded, amended or added to except by an
agreement in writing, signed by the parties hereto, or their respective
successors-in-interest.
8
<PAGE> 9
Any waiver of any provision of this agreement shall not be deemed a
waiver of such provision as to any prior or subsequent breach of the same
provision or any other breach of any other provision of this agreement.
If any provision of this agreement is held, by a Court of competent
jurisdiction, to be invalid, or unenforceable, said provisions shall be deemed
deleted, and neither such provision, its severance or deletion shall affect the
validity of the remaining provisions of this agreement, which shall,
nevertheless, continue in full force and effect.
The parties may execute this agreement in two or more counterparts,
each of which shall be signed by all of the parties; and each such counterpart
shall be deemed an original instrument as against any party who has signed it.
The parties shall use their reasonable best efforts to obtain the
consent of all necessary persons and agencies to the transfer of shares
provided for in this agreement.
Although not parties to this Agreement, Harleysville National Bank &
Trust Company and John York shall have the right to enforce the provisions of
Sections 5B and 5C, respectively, against the parties hereto.
IN WITNESS WHEREOF, tile parties have executed this agreement as of
the day and year first above written.
CHAMPION FINANCIAL CORPORATION
By /s/ MARCY M. ENGELBRECHT
--------------------------------
MARCY M. ENGELBRECHT,
President
MPLC, INC.
By /s/ LAWRENCE G. MILLER
--------------------------------
LAWRENCE G. MILLER,
President
9
<PAGE> 10
INFOPLAN, INC.
By /s/ ZIRK ENGELBRECHT
--------------------------------
RISK RESOLUTION GROUP
By /s/ MARCY M. ENGELBRECHT
--------------------------------
/s/ GARY BRYANT
----------------------------------
GARY BRYANT
/s/ DR. WINIFRED S. HAYES
----------------------------------
DR. WINIFRED S. HAYES
/s/ ROBERT E. HAYES, JR.
----------------------------------
ROBERT E. HAYES, JR.
AS TO SECTION 4 ONLY:
/s/ KENNETH G. EADE
----------------------------------
KENNETH G. EADE
/s/ LOUIS ROSNER
----------------------------------
LOUIS ROSNER, ESQ.
10
<PAGE> 1
Exhibit 10(iii)
AMENDED AND RESTATED
ACQUISITION AGREEMENT
THIS AMENDED AND RESTATED ACQUISITION AGREEMENT (hereinafter "the
agreement"), is made and entered into as of the______day of July, 1996, by and
between DR. WINIFRED S. HAYES and ROBERT E. HAYES, JR. (hereinafter
collectively "Transferor"), and MPLCACQ Corp., a Delaware corporation
("NEWCO"), CHAMPION FINANCIAL CORPORATION, a publicly held Utah corporation,
registered pursuant to the Securities Exchange Act of 1934, as amended
(hereinafter "Champion"), MPLC, INC., a Maryland corporation (hereinafter
"MPLC"), INFOPLAN, INC., a Delaware corporation (hereinafter "Infoplan"), GARY
BRYANT (hereinafter "Bryant"), DR. LAWRENCE G. MILLER ("Miller"), and RISK
RESOLUTION GROUP, a partnership formed under the, laws of the state of Maryland
("Risk Resolution"), who agree as follows:
1. RECITALS:
This agreement is made and entered into with reference to the
following facts and circumstances:
A. NEWCO is a wholly-owned subsidiary of Champion.
B. There are currently outstanding One Hundred (100) shares of
common stock of Winifred S. Hayes, Inc. d/b/a HAYES, Incorporated ("HAYES"),
Six Hundred Nineteen Thousand Three Hundred Two (619,302) shares of common
stock of Champion and One Hundred (100) shares of common stock of NEWCO. MPLC
is authorized to issue Five Thousand (5,000) shares of its common stock.
C. Marcy M. Engelbrecht is a partner of Risk Resolution Group.
Marcy M. Engelbrecht currently beneficially controls 330,000 shares of
Champion.
D. This Amended and Restated Acquisition Agreement amends.
restates in its entirety and supersedes and replaces the Acquisition Agreement
dated as of December 4, 1995 between Transferor, Champion, MPLC, Infoplan,
Bryant, Miller and Risk Resolution.
2. CONTRIBUTION OF STOCK AND MERGER
A. Contribution of Stock. Immediately prior to the Closing of
the Merger (as such terms are hereinafter defined), Transferor shall contribute
Fifty One (51) shares of HAYES common stock (which shall constitute 51% of the
outstanding common stock of HAYES) in exchange for Nine Hundred Sixty One (961)
shares of MPLC common stock, (which shall constitute 19.2% of the outstanding
stock of MPLC). In addition to the 51 shares of common stock of HAYES so
contributed, Transferor shall contribute an additional 24 shares of HAYES in an
escrow to be held by the attorneys for Transferor and NEWCO
<PAGE> 2
jointly (the "Share Escrow"), who shall be instructed to exchange up to an
additional 452.235 shares of MPLC subject to certain conditions as outlined in
subparagraph 4D hereinbelow, Simultaneously with Transferor's contribution of
HAYES common stock to MPLC, Infoplan, Bryant, Miller and Risk Resolution shall
contribute all of their right, title and interest in this agreement and all due
diligence costs associated with locating, evaluating and investigation all
acquisition opportunities to MPLC in exchange for an aggregate of 3,586 shares
of MPLC common stock, as follows: Infoplan (329 shares), Bryant (199 shares),
Miller (1,644 shares) and Risk Resolution (1,414 shares). The contribution of
stock pursuant to this subparagraph 2A, is intended to be treated as a transfer
with respect to which no gain or loss is recognized pursuant to Section 351 of
the Internal Revenue Code of 1986, as amended (the "Code") and the parties
hereto agree to take any steps necessary in order to effect the contribution in
such a manner as to comply with the requirements of Code Section 351.
B. Merger. Subsequent to the contributions to MPLC set forth in
Subparagraph 2A above, MPLC will be merged with and into NEWCO in a statutory
merger (the "Merger"). In the Merger, each share of MPLC's common stock will
be exchanged for 760.666 shares of Champion common stock being held by NEWCO
for a total of 3,801,000 shares of Champion common stock being exchanged for
all of the MPLC common stock (731,000 of such shares of Champion to Transferor
and 344,000 of such shares to the Share Escrow). It is intended that the
Merger constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and the parties hereto agree to take the necessary
actions to structure the merger in a manner which will not result in the
recognition of any gain by the shareholders of MPLC.
3. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The transfer of HAYES stock to MPLC and its successor in interest is
conditioned upon the following:
A. All requisite corporate approvals being obtained.
B. Prior to the contributions of stock described in paragraph 2A
above and the Merger, Champion shall conduct a private placement offering of
its common stock at a price of at least $3.00 per share with a minimum sales
level necessary to break escrow of $700,000 plus transaction costs, and a
maximum offering of 700,000 shares. The closing of the Merger (the "Closing"),
will occur simultaneously with the initial closing of the private placement
offering. Upon the initial closing of the private placement offering,
Champion will contribute $700,000 of the proceeds of the offering to NEWCO
which will contribute it to the capital of HAYES. In the event that the
initial closing of the private placement does not occur within 120 days from
the date hereof, Transferor shall have the right to terminate this Agreement
upon notice to Champion and MPLC, and upon such termination no party shall have
any obligation to any other party hereunder.
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<PAGE> 3
C. There being no material adverse change in the business or
condition (financial or otherwise) of Champion, since the execution of the
letter of intent by the parties on November 7, 1995.
D. Satisfactory completion of its due diligence investigation of
Champion, MPLC, and their respective businesses, operations, officers and
directors by Transferor.
E. Approval of Harleysville National Bank & Trust Company, with
the understanding that its SBA loan will be repaid in full upon the Closing.
F. Champion and Dr. Winifred S. Hayes and HAYES and Dr. Winifred
S. Hayes shall enter into mutually satisfactory written employment agreements.
This acquisition agreement is contingent upon the execution of said employment
agreements.
4. ADJUSTMENTS TO COMMON STOCK AND ESCROW PROVISIONS
A. In the event that Champion fails to raise in the private
offering any capital above and beyond the initial minimum $700,000 plus
transaction costs within a period of 180 days from the date of this
agreement, Transferor shall have the right to reacquire from NEWCO at a par
value (or at $1.00, if no par stock) two (2) shares of stock of HAYES
(representing 2% of the stock of HAYES). In such event the Share Escrow shall
be terminated, the 24 shares of HAYES shall be returned to Transferor and the
344,000 shares of Champion shall be canceled.
B. In the event that Champion is able to raise an aggregate total
capital of $2,000,000 within 180 days of the date of this agreement, the Share
Escrow shall close and the 24 shares of Hayes shall be delivered to NEWCO and
the 344,000 shares of Champion shall be delivered to Transferor. This shall
result in NEWCO owning 75% of the outstanding stock of HAYES.
C. It is intended by the parties hereto that any adjustments to
the common stock of Champion and HAYES made pursuant to this paragraph 4 be
made in such a manner as to not give rise to taxable income for either
Transferor, HAYES or NEWCO. The parties agree to take all necessary steps to
assure that no taxable income results from such adjustments.
D. Concurrently with the Closing, NEWCO shall deliver
certificate(s) representing the 344,000 shares of the Champion common stock
being held by it to its attorney, Kenneth G. Eade ("Eade"), who shall hold and
administer such shares in accordance with subsections 4A and 4B hereof.
Concurrently with the Closing, Transferor shall deliver certificate(s)
representing the 24 shares of its stock to its attorney, Louis
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<PAGE> 4
Rosner, Esq. ("Rosner"), who shall hold and administer such shares in
accordance with subsections 4A and 4B hereof.
E. Neither Eade nor Rosner shall incur any liability for the
holding of the certificates or for the delivery, release or cancellation of the
shares in accordance with the provisions hereof. In the event of a dispute
between the parties with respect to their rights hereunder or in the shares,
Eade and/or Rosner shall be entitled to deliver the shares to a court of
competent jurisdiction and interplead.
F. The parties shall indemnify and hold harmless Eade and Rosner
from any and all liability, costs, fees, awards, or judgments which they may
incur as a result of the holding, distribution, and/or cancellation of the
shares. The fact that Eade and Rosner are acting as escrow agents with respect
to the holding, transfer and/or cancellation of shares shall not preclude them
from acting as the attorneys for the parties hereto.
5. POST CLOSING COVENANTS
A. From the $700,000 invested in HAYES, a total of $125,000, net
of tax, shall be paid to Dr. Winifred S. HAYES, as and for compensation for
future services as President of HAYES, or at the election of Transferor, prior
to the Closing, Transferor may elect to sell shares of HAYES to NEWCO for a
total purchase price of $125,000, net of tax, in which event the number of
shares of HAYES contributed by Transferor to MPLC pursuant to section 2A shall
be reduced by the number of shares so sold, and the $700,000 contribution shall
be reduced by the gross amount so paid to Transferor. In either event, such
$125,000 shall be paid in full to Transferor within 45 days of the Closing.
B. At Closing, from the capital contributed to HAYES pursuant to
section 3C, HAYES' SBA Loan from Harleysville National Bank & Trust Company
shall be paid in full.
C. At Closing, from the capital contributed to HAYES pursuant to
Section 3C, John York shall be paid the sum of $35,000.00.
D. As soon as practicable after the Closing, Champion shall elect
a new Board of Directors of Champion with Dr. Winifred Hayes and Dr. Lawrence
G. Miller appointed as members of a five member Board of Directors of Champion.
E. Champion's name, shall be changed to, or Champion shall
register to business under the name of, "Health Tek Holdings, Inc."
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<PAGE> 5
6. CONDITIONS PRECEDENT TO MPLC'S AND NEWCO'S PERFORMANCE
The exchange of MPLC stock (and Champion stock) for Transferor's stock
in HAYES is conditioned on the following:
A. There shall have been no material adverse change in the
business or conditions (financial or otherwise) of HAYES since the execution of
the letter of in tent by the parties on November 7, 1995.
B. The satisfactory completion of its due diligence investigation
of HAYES and its business operations and officers and directors by MPLC and
Champion.
7. REPRESENTATIONS AND WARRANTIES OF MPLC, CHAMPION AND NEWCO
MPLC, Champion and NEWCO represent and warrant the following:
A. NEWCO is a corporation duly formed, validly existing and in
good standing under the laws of the state of Delaware; MPLC is a corporation
duly formed, validly existing and in good standing under the laws of the State
of Maryland and Champion is a corporation duly formed, validly existing and in
good standing under the laws of the state of Utah. Each has all necessary
corporate powers to own its properties and carry on its business as now owed
and operated by it.
B. Champion, NEWCO and MPLC each have the full corporate power,
right and authority to make, execute, deliver and perform this agreement and
all other instruments and documents required or contemplated hereunder, and to
take all steps and to do all things necessary and appropriate to consummate the
transactions contemplated herein. Such execution, delivery and performance of
this agreement and all other instruments and documents to be delivered
hereunder have been duly authorized by all necessary corporate action on the
part of Champion, NEWCO and MPLC, and will not contravene or violate or
constitute a breach of the terms of either of their Articles of Incorporation
or By-Laws or conflict with, result in a breach of, or entitle any party to
terminate or call a default with respect to any instrument or decree to which
either is bound or any contract or any instrument, judgment, order, decree,
law, rule or regulation applicable to either of them. Neither Champion or
NEWCO nor MPLC is a party to, or subject to, or bound by any judgment,
injunction, or decree of any court or governmental authority or agreement
which may restrict or interfere with its performance of this agreement. This
Agreement has been duly executed and delivered and constitutes, and the other
instruments and documents to be delivered by Champion, NEWCO and MPLC hereunder
will constitute, the valid and binding obligations of all of them, enforceable
against each of them in accordance with their respective terms.
-5-
<PAGE> 6
C. Except as otherwise set forth herein, no consent of any party
to any contract or arrangement to which Champion, NEWCO or MPLC is a party or
by which any of them is bound is required for the execution, performance, or
consummation of this Agreement and such other documents and instruments by
Champion, NEWCO and MPLC.
D. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to Champion's, NEWCO's or MPLC's
knowledge, threatened against either of them, at law or in equity, which may
restrict or interfere with the ability of either of them to perform this
Agreement.
E. Champion's, NEWCO's and MPLC's representations and warranties
contained in this Section will be accurate, true and correct in all respects on
and as of the date of Closing as though made at such date in identical
language.
F. All of Champion's, NEWCO's and MPLC's assets are free and
clear of security interests, liens, pledges, charge and encumbrances, equities
or claims, except those, obligations to shareholders and others as reported on
its financial statements.
G. The shares of MPLC and Champion being transferred pursuant to
this agreement will be validly and legally issued and not subject to any
security interests, liens, pledges, charges, encumbrances or proxies of any
kind, with the exception that they will bear a legend that they are "restricted
stock", which stock may only be sold in conformance with SEC Rule 144 or
pursuant to a registered public offering.
H. Neither NEWCO, MPLC or Champion, nor any of their officers and
directors has even been convicted of any felony or misdemeanor offense
involving moral turpitude, nor have they been the subject of any temporary or
permanent restraining order resulting from unlawful transactions in securities;
nor are they now, or have they ever been, a defendant in any lawsuit alleging
unlawful business practices or the unlawful sale of securities; nor have they
been the debtor in any proceedings, whether voluntary or involuntary, filed in
the U.S. Bankruptcy Court.
8. REPRESENTATIONS AND WARRANTIES OF TRANSFEROR
Transferor hereby represents and warrants as follows:
A. HAYES is a corporation duly formed, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, and has all
necessary corporate powers to own its properties and carry on its business as
now owed and operated by it.
B. Transferor has the full personal power, right and authority to
make, execute, deliver and perform this agreement and all other instruments and
documents
-6-
<PAGE> 7
required or contemplated hereunder, and to take all steps and to do all things
necessary and appropriate to consummate the transactions contemplated herein.
Such execution, delivery and performance of this agreement and all other
instruments and documents to be delivered hereunder, will not contravene or
violate or constitute a breach of the terms of HAYES' Articles of Incorporation
or By-Laws or conflict with, result in a breach of, or entitle any party to
terminate or call a default with respect to any instrument or decree to which
HAYES is bound or any contract or any instrument, judgment, order, decree, law,
rule or regulation applicable to it. HAYES is not a party to, or subject to,
or bound by any judgment, injunction, or decree of any court of governmental
authority or agreement which may restrict or interfere with Transferor's
performance of this Agreement. This Agreement has been duly executed and
delivered and constitutes, and the other instruments and documents to be
delivered by Transferor hereunder will constitute, the valid and binding
obligations of Transferor, enforceable against Transferor in accordance with
their respective terms.
C. Except as otherwise set forth herein, no consent of any party
to any contract or arrangement to which HAYES is as party or by which either is
bound is required for the execution, performance, or consummation of this
Agreement.
D. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to Transferor's knowledge, threatened
against HAYES, at law or in equity, which may restrict or interfere with the
ability of Transferor to perform this Agreement.
E. Transferor's representations and warranties contained in this
Section will be accurate, true and correct, in all respects, on and as of the
date of Closing as though made at such date in identical language.
F. To the best of Transferor's knowledge, HAYES has not infringed
and is not now infringing, on any trade name, trademark, servicemark or
copyright belonging to any other person, firm or corporation. Neither
Transferor nor HAYES is a party to any license, agreement, or arrangement,
whether as licensor, licensee, or otherwise, with respect to any trademarks,
servicemarks, trade names, copyright of HAYES, or applications for them.
G. HAYES is the publisher, owner, and holder of the copyright on
"The HAYES Directory of New Medical Technologies' Status" and "The HAYES
Directory Legal Precedent Reports."
H. The, shares of HAYES being transferred pursuant to this
agreement will be validly and legally issued and not subject to any security
interests, liens, pledges, charges, encumbrances or proxies of any kind.
I. Neither Transferor nor HAYES has ever been convicted of any
felony
-7-
<PAGE> 8
or misdemeanor offense involving moral turpitude; nor have they been the
subject of any temporary or permanent restraining order resulting from unlawful
transactions in securities; nor are they now, or have they ever been, a
defendant in any lawsuit alleging unlawful business practices or the unlawful
sale of securities; nor have they been the debtor in any proceedings, whether
voluntary or involuntary, filed in the U.S. Bankruptcy Court.
9. BOTH PARTIES' OBLIGATIONS BEFORE CLOSING
A. Access to Information: Transferor, MPLC, NEWCO and Champion,
and their authorized representatives shall have full access to all books,
accounts, records, contract, tax returns and other documents as may be
reasonably requested by the parties to conduct a thorough due diligence review
necessary for each party to determine if all conditions and warranties
contained in this agreement have been complied with.
B. Confidential Information: All parties hereto mutually agree
that, during the course of negotiations, the parties have exchanged certain
confidential information, including, without limitation, financial records,
names of customers and employees, pricing information, employee compensation,
merchandising or sales techniques, computer programs, and other confidential
information (collectively "confidential information"). As to any such
confidential information, each of the parties agrees that it, its officers,
directors and employees, agents and representatives will:
1) Make no use whatsoever of such confidential information except
for the purpose of negotiating for and carrying out the transactions set forth
in this agreement;
2) Accept and hold such confidential information as secret and
confidential and not disclose, divulge or communicate such confidential
information, the fact that it has been disclosed to them, or the circumstances
under which it has been disclosed to them, to any third person or entity; and
3) Take all necessary and appropriate steps to insure the secrecy
of such confidential information in possession of each of them, including, but
not limited to, revealing the confidential information only to such of its
officers, directors, employees, agents, and representatives who need to know
the confidential information for the purposes of investigating, negotiating,
and effecting the transactions described above, and who are informed by it of
the confidential nature of the confidential information.
10. NOTICES
Any notices called for in this agreement shall be effective upon
personal service or upon service by first class mail, postage prepaid, to the
parties at such addresses to be designated by the parties in writing.
-8-
<PAGE> 9
11. MISCELLANEOUS PROVISIONS:
This agreement shall be construed in accordance with the laws of
Maryland.
This agreement shall be binding upon and shall inure to the benefit of
the parties hereto, their beneficiaries, heirs, representatives, assigns, and
all other successors in interest.
Each of the parties shall execute any and all documents required to be
executed and perform all acts required to be performed in order to effectuate
the terms of this agreement.
This agreement contains all of the agreements and understandings of
the parties hereto with respect to the matters referred to herein, and no prior
agreement or understanding pertaining to any such matters shall be effective
for any purpose.
Each of the parties hereto has agreed to the use of the particular
language of the provisions of this Agreement, and any question of doubtful
interpretation shall not be resolved by any rule of interpretation against the
party who causes the uncertainty to exist or against the draftsman.
This agreement may not be superseded, amended or added to except by an
agreement in writing, signed by the parties hereto, or their respective
successors-in-interest.
Any waiver of any provision of this agreement shall not be deemed a
waiver of such provision as to any prior or subsequent breach of the same
provision or any other breach of any other provision of this agreement.
If any provision of this agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, said provisions shall be deemed
deleted, and neither such provision, its severance or deletion shall affect the
validity of the remaining provisions of this agreement, which shall,
nevertheless, continue in full force and effect.
The parties may execute this agreement in two or more counterparts,
and each such counterpart shall be deemed an original instrument as against any
party who has signed it.
The parties shall use their reasonable best efforts to obtain the
consent of all necessary persons and agencies to the transfer of shares
provided for in this agreement.
Although not parties to this Agreement, Harleysville Nationals Bank &
Trust Company and John York shall have the right to enforce the provisions of
Sections 5B and 5C, respectively, against the parties hereto.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written,
CHAMPION FINANCIAL CORPORATION
By:
-----------------------------
MARCY M. ENGELBRECHT,
President
MPLCACQ CORP.
By:
-----------------------------
MPLC, INC.
By:
-----------------------------
LAWRENCE G. MILLER,
President
INFOPLAN,INC.
By:
-----------------------------
RISK RESOLUTION GROUP
By:
-----------------------------
--------------------------------
GARY BRYANT
-10-
<PAGE> 11
--------------------------------
DR. WINIFRED S. HAYES
--------------------------------
ROBERT E, HAYES, JR.
AS TO SECTION 4 ONLY
--------------------------------
KENNETH G. EADE
--------------------------------
LOUIS ROSNER, ESQ.
-11-
<PAGE> 1
ROGER G. CASTRO
CERTIFIED PUBLIC ACCOUNTANT
================================================================================
Member: American Institute of Certified 463 West Fifth Street
Public Accountants/California Society of Oxnard, California 93030
Certified Public Accountants (805) 486-5630
August 4, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Champion Financial Corporation/Commission File No. 0-19499
Ladies and Gentlemen:
The undersigned has served as the independent public accountant to the
referenced corporation prior to the corporation's change of accountants,
described in the enclosed copy of the corporation's Form 8-k. The undersigned
does not disagree with any statements made by the corporation in its Form 8-K
in response to Item 304(a) of Regulation S-K.
Very truly yours,
/s/ ROGER G. CASTRO
---------------------
Roger G. Castro
cc: Champion Financial Corporation
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