AGREEMENT AND PLAN OF
REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (hereinafter
referred to as this
"Agreement"), is entered into this 19th day of January,
1996, by and among
CUSA TECHNOLOGIES, INC., a Nevada corporation ("CTI"), NEW
ADVANCED SOLUTIONS
OF NEVADA, INC., a Nevada corporation and a wholly-owned
subsidiary of CTI
("NewCo"), AUTOMATED SOLUTIONS., INC., a Nevada corporation
("Solutions"),
and the shareholder of Solutions, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
("Shareholder"), based
on the following:
Premises
A. CTI is a publicly-held corporation involved, among
other things, in the
business of providing proprietary software systems to credit
unions and
healthcare institutions.
B. Solutions is a privately-held corporations involved in
the marketing and
servicing of computer software and hardware in the
commercial and medical
markets.
C. NewCo is a newly formed, wholly-owned subsidiary of
CTI.
D. Shareholder owns 97% of the issued and outstanding
shares of Solutions.
E. The parties have agreed that Solutions will be merged
with and into
NewCo as a wholly-owned subsidiary of CTI, on the terms, and
subject to the
conditions, set forth in this Agreement.
F. The acquisition of Solutions by CTI shall be effected
through the
reorganization of Solutions with NewCo, with NewCo as the
surviving entity.
In connection with the transaction, the outstanding shares
of common stock of
Solutions will be canceled in exchange for shares of
restricted common voting
stock of CTI and cash, all for the purposes of accomplishing
a
"reorganization" pursuant to sections 368(a)(1)(A) and
368(a)(2)(D) of the
Code. After consummation of the transaction, NewCo shall
succeed to the
business, assets, and liabilities of Solutions and shall
thereafter continue
such business as a wholly-owned subsidiary of CTI.
G. Shareholder also owns 40% of a company known as
Automated Solutions of
California, Inc., a California corporation, sometimes
referred to as
"California", which he will sell to CTI in exchange for the
consideration set
forth in section 6.08.
H. Solutions owes ▇▇▇ ▇▇▇▇▇▇ and related entities $132,000
which shall be
paid by CTI at closing.
I. The acquisition by CTI of Solutions and the part
ownership in California
are interdependent steps and both transactions are required
to be completed in
order to effectuate the acquisition.
Agreement
NOW, THEREFORE, based on the stated premises, which are
incorporated herein by
this reference, and for and in consideration of the mutual
covenants and
agreements hereinafter set forth and the mutual benefits to
the parties to be
derived herefrom, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the
meanings indicated:
Section 1.01 Solutions. Automated Solutions, Inc., is a
Nevada
corporation.
Section 1.02 Closing. The consummation of the
transactions contemplated
by this Agreement.
Section 1.03 Closing Date. The date on which the Closing
occurs.
Section 1.04 Code. The Internal Revenue Code of 1986, as
amended.
Section 1.05 CTI Common Stock. The authorized common
stock, par value
$0.001 per share, of CTI.
Section 1.06 CTI Preferred Stock. The authorized
preferred stock, par
value $0.001 per share, of CTI.
Section 1.07 Effective Date. The date, as defined in the
articles of
merger or plan of merger, on which the merger of Solutions
with and into NewCo
shall become effective in accordance with the laws of the
state of
organization.
Section 1.08 Exchange Act. The Securities Exchange Act of
1934, as
amended.
Section 1.09 Exchanged CTI Stock. The shares of CTI
Common Stock to be
issued and delivered by CTI pursuant to this Agreement in
exchange for the
shares of Solutions issued and outstanding on the Closing
Date in order to
consummate the merger of Solutions with and into NewCo.
Section 1.10 GAAP. Generally accepted accounting
principles, as in
effect on the date of determination, applied on a consistent
basis.
▇▇▇▇▇▇▇ ▇.▇▇ ▇▇▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Securities and
Exchange Commission.
Section 1.12 Securities Act. The Securities Act of 1933,
as amended.
Section 1.13 Shareholder. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF
SOLUTIONS AND ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
As an inducement to, and to obtain the reliance of, CTI and
NewCo, Solutions
and ▇▇▇▇▇ represent and warrant as follows:
Section 2.01 Organization. Solutions is a corporation
duly organized,
validly existing, and in good standing under the laws of the
state of Nevada
and has the corporate power to own all of its properties and
assets and to
carry on its business in all material respects as it is now
being conducted,
and there is no jurisdiction in which it is not so qualified
in which the
character and location of the assets owned by it or the
nature of the business
transacted by it requires qualification, except where
failure to do so would
not have a material adverse effect on the business or
properties of Solutions.
Included in the Solutions Schedules (as hereinafter
defined) are complete and
correct copies of the articles of incorporation and bylaws
of Solutions as in
effect on the date hereof. The execution and delivery of
this Agreement does
not, and the consummation of the transactions contemplated
by this Agreement
in accordance with the terms hereof will not, violate any
provision of
Solutions' articles of incorporation or bylaws.
Section 2.02 Approval of Agreement. The board of
directors and the
Shareholder have authorized the execution and delivery of
this Agreement by
Solutions and have approved the consummation of the
transactions contemplated
hereby. Included in the Solutions Schedules is a signed
copy of a consent
duly adopted by the board of directors and the shareholders
of Solutions
evidencing such approval. Solutions has full power,
authority, and legal
right, and has taken all action required by law, its
articles of
incorporation, its bylaws, or otherwise, to execute and
deliver this Agreement
and to consummate the transactions contemplated hereby.
Section 2.03 Authority of the Shareholder. Except as set
forth in
Solutions Schedule 2.03, the Shareholder has the right and
authority, without
the prior consent of any other person or entity, to enter
into this Agreement
and consummate the transactions contemplated hereby. Except
as set forth in
Solutions Schedule 2.03, there is no lien, encumbrance, or
claim by any third
person with respect to shares of Solutions held by the
Shareholder.
Section 2.04 Capitalization. The authorized
capitalization of Solutions
consists of 25,000 shares of common stock, par value $1.00
per share, of which
23,750 shares are currently issued and outstanding. 97% of
the issued and
outstanding stock of Solutions is held by the Shareholder.
No shares of
Solutions are reserved for issuance on the exercise of
warrants or the
conversion of other securities, or the exercise of any other
call, commitment,
or right to which Solutions or the Shareholder are a party
or to which they
are subject. All issued and outstanding shares of Solutions
are validly
authorized, legally issued, fully paid, and nonassessable
and not issued in
violation of the preemptive or other right of any person.
Section 2.05 Subsidiaries and Predecessor. Solutions has
no subsidiaries
or any predecessor corporation as that term is defined by
generally accepted
accounting principles. Solutions acquired all of the
business of a sister
operation in the state of Arizona pursuant to an agreement,
a copy of which is
attached hereto as Special Exhibit 1.
Section 2.06 Financial Statements.
(a) Included in the Solutions Schedules are the unaudited
balance sheets of
Solutions as of December 31, 1994 and 1993, and the related
unaudited
statements of income and retained earnings for the years
then ended, and the
unaudited balance sheets as of September 30, 1995, and the
unaudited
statements of income and retained earnings for the year then
ended.
(b) Such financial statements have been prepared in
accordance with GAAP,
except as disclosed in the Solutions Schedules. Solutions
did not have, as of
the date of any of such balance sheets, except as and to the
extent reflected
or reserved against therein, any liabilities or obligations
(absolute or
contingent) which should be reflected in a combined balance
sheet prepared in
accordance with GAAP and all assets reflected therein
present fairly the
assets of Solutions, as if such statements were prepared in
accordance with
GAAP. The statements of income present fairly the
information required to be
set forth therein as if such statements were prepared in
accordance with
GAAP. Solutions maintains a standard system of accounting
established and
maintained in a manner permitting the preparation of
financial statements in
accordance with GAAP.
(c) The books and records of Solutions and its accounting
practices are
sufficient to permit the preparation of audited financial
statements for the
periods subsequent to December 31, 1992, in accordance with
GAAP and
regulation S-B adopted under the Exchange Act. Solutions
will maintain and
preserve its books and records in such a fashion so as to
permit the
preparation of historical audited financial statements as
may be required by
the Exchange Act and the rules and regulations adopted
thereunder. Solutions
and the Shareholder will cooperate fully and assist in the
preparation of any
such financial statements, at the cost of CTI.
(d) Solutions has filed all tax returns and, except as set
forth in the
Solutions Schedules, all reports as required by law. All
such returns and
reports are accurate and correct in all material respects.
There are no
income taxes currently due to the federal or state
governments that have not
been paid. Solutions does not have any liabilities with
respect to the
payment of any federal, state, county, local, or other taxes
(including any
deficiencies, interest, or penalties) accrued for or
applicable to the period
ended on the date of the most recent balance sheet included
in the Solutions
Schedules and all such dates and years and periods prior
thereto and for which
Solutions may at said date have been liable in their own
right or as
transferee of the assets of, or as successor to, any other
corporation or
other entity, except for taxes accrued but not yet due and
payable. None of
such federal income tax returns has been audited or is
currently being audited
by the Internal Revenue Service. Solutions has not made any
election pursuant
to the Code (other than elections which relate solely to
methods of
accounting, depreciation, or amortization) which would have
a material adverse
effect on Solutions, its financial condition, its business
as presently
conducted or as proposed to be conducted, or any of its
properties or material
assets. There are no outstanding agreements or waivers
extending the
statutory period of limitation applicable to any tax return
of Solutions.
(e) The books and records, financial and otherwise, of
Solutions are in all
material respects complete and correct and have been made
and maintained in
accordance with sound business and bookkeeping practices
and, in reasonable
detail, accurately and fairly reflect the transactions
involving the assets of
Solutions. Solutions has maintained a system of internal
accounting controls
sufficient to provide reasonable assurances that (i)
transactions have been
and are executed in accordance with management's general or
specific
authorization; (ii) transactions are recorded as necessary
to permit the
preparation of financial statements in conformity with GAAP
or any other
criteria applicable to such statements and to maintain
accountability for
assets; (iii) access to assets is permitted only in
accordance with
management's general or specific authorization; and (iv) the
recorded
accountability for assets is compared with the existing
assets at reasonable
intervals, and appropriate action is taken with respect to
any differences.
(f) Except as set forth in the Solutions Schedules, the
latest of the
balance sheets included in the Solutions Schedules, or in
the notes thereto,
Solutions (i) has good and marketable title to its accounts
receivable, and
other debts due or recorded in the records and books of
account of Solutions,
free of any security interests or liens and free of any
material defenses,
counterclaims, and set-offs, and all of such accounts
receivable, invoices,
and debts are actual and bona fide amounts due Solutions for
the total dollar
amount thereof shown on the books of Solutions and resulted
from the regular
course of its business; and (ii) the accounts receivable,
invoices, and debts
set forth on the Solutions balance sheets arose in the
ordinary course of
business and are, net of any reserves shown on the balance
sheet, collectible
in full in all material respects on the continuation of
reasonable collection
efforts by Solutions or successor personnel and without
resorting to
litigation and in any event not later than 180 days after
the date billed.
Section 2.07 Information. The information concerning
Solutions set forth
in this Agreement and in the Solutions Schedules is complete
and accurate in
all material respects and does not contain any untrue
statement of a material
fact or omit to state a material fact required to make the
statements made, in
light of the circumstances under which they were made, not
misleading.
Section 2.08 Options or Warrants. Except as set forth in
the Solutions
Schedules, there are no existing warrants, calls,
commitments, or other rights
of any character relating to authorized and unissued
Solutions Stock or other
securities of Solutions, except options, warrants, calls,
commitments, or
other rights, if any, to which Solutions is not a party and
by which it is not
bound.
Section 2.09 Absence of Certain Changes or Events. Except
as set forth
in this Agreement or in the Solutions Schedules, since the
date of the most
recent balance sheet included in the Solutions Schedules:
(a) There has not been (i) any material adverse change in
the business,
operations, assets, or condition of Solutions or (ii) any
damage, destruction,
or loss to Solutions (whether or not covered by insurance)
materially and
adversely affecting the business, operations, assets, or
condition of
Solutions;
(b) Solutions has not (i) amended its articles of
incorporation or bylaws;
(ii) declared or made, or agreed to declare or make, any
payment of dividends
or distributions of any assets of any kind whatsoever to
stockholders or
purchased or redeemed, or agreed to purchase or redeem, any
of its capital
stock; (iii) waived any rights of value which in the
aggregate are
extraordinary or material considering the business of
Solutions; (iv) made any
material change in its method of management, operation, or
accounting; (v)
entered into any other material transactions, (vi) made any
accrual or
arrangement for or payment of bonuses or special
compensation of any kind or
any severance or termination pay to any present or former
officer, employee,
or shareholder; (vii) increased the rate of compensation
payable or to become
payable by it to any of its officers or directors or any of
its employees
whose monthly compensation exceeds $5,000; or (viii) made
any increase in any
profit sharing, bonus, deferred compensation, insurance,
pension, retirement,
or other employee benefit plan, payment, or arrangement made
to, for, or with
its officers, directors, or employees;
(c) Solutions has not (i) granted or agreed to grant any
options, warrants,
or other rights for its stocks, bonds, or other corporate
securities calling
for the issuance thereof; (ii) borrowed or agreed to borrow
any funds or
incurred, or become subject to, any material obligation or
liability (absolute
or contingent) except liabilities incurred in the ordinary
course of business;
(iii) paid any material obligation or liability (absolute or
contingent) other
than current liabilities reflected in or shown on the most
recent balance
sheet included in the Solutions Schedules and current
liabilities incurred
since that date in the ordinary course of business; (iv)
sold or transferred,
or agreed to sell or transfer, any of its assets,
properties, or rights
(except assets, properties, or rights not used or useful in
its business
which, in the aggregate have a value of less than $10,000 or
assets,
properties, or rights disposed of in the ordinary course of
business); (v)
made or permitted any amendment or termination of any
contract, agreement, or
license to which it is a party if such amendment or
termination is material,
considering the business of Solutions; or (vi) issued,
delivered, or agreed to
issue or deliver any stock, bonds, or other corporate
securities including
debentures (whether authorized and unissued or held as
treasury stock); and
(d) Solutions has not become subject to any law or
regulation which
materially and adversely affects the business, operations,
properties, assets,
or condition of Solutions.
Section 2.10 Title to Personal and Real Property.
(a) Except as disclosed in the most recent balance sheet
included in the
Solutions Schedules, Solutions has good and marketable title
to all its
properties, inventory, know-how, interests in properties,
and assets, which
are reflected in the most recent balance sheet included in
the Solutions
Schedules or acquired after that date (except those sold or
otherwise disposed
of since such date in the ordinary course of business) or
are used in
Solutions' business, free and clear of all material
mortgages, security
interests, royalties, liens, pledges, charges, or
encumbrances, except (i)
statutory liens or claims not yet delinquent; (ii) such
imperfections of title
and easements as do not and will not materially detract from
or interfere with
the present or proposed use of the properties subject
thereto or affected
thereby or otherwise materially impair present business
operations on such
properties; and (iii) as described in the Solutions
Schedules. All personal
property held by Solutions is in a state of good maintenance
and repair,
excepting reasonable wear and tear, and is adequate and
suitable for the
purposes for which it is presently being used.
(b) Solutions does not own any real property in fee simple.
(c) Included in the Solutions Schedules is an accurate and
complete list of
all personal property owned by Solutions or used in its
business and having a
purchase price of over $10,000, together with a description
of any mortgages,
financing instruments, or other encumbrances to the title to
such properties.
Also included in the Solutions Schedules are copies of all
leases for real
and personal property to which Solutions is a party. Except
as disclosed in
the Solutions Schedules, each such lease is in full force
and effect; all
rents and additional fees due to date on each such lease
have been paid; in
each case, the lessee has been in peaceable possession since
the commencement
of the original term of such lease and is not in default
thereunder and no
waiver, indulgence, or postponement of the lessee's
obligation thereunder has
been granted by the lessor; and there exists no event of
default or event,
occurrence, condition, or act, which, with the giving of
notice, the lapse of
time, or the happening of any further event or condition,
would become a
default under such lease, the occurrence of which would have
a material
adverse affect on Solutions. Except as set forth in the
Solutions Schedules,
Solutions has not violated any of the terms or conditions
under any such lease
in any material respect, and all of the material covenants
to be performed by
any other party under any such lease have been fully
performed. The property
leased by Solutions is in a state of good maintenance and
repair, except
reasonable wear and tear, and is adequate and suitable for
the purposes for
which it is presently being used.
Section 2.11 Intellectual Property. Solutions owns the
entire right,
title, and interest in and to its proprietary software
listed in the Solutions
Schedules and, except as listed in the Solutions Schedules,
to all of the
trade secrets, technology, know-how, tradenames, trademarks,
servicemarks, and
other proprietary information owned by or used in connection
with the business
of Solutions, including all copyrights, patents, patent
applications,
registrations, and applications with respect thereto
(collectively the
"Intellectual Property"). Except as set forth in the
Solutions Schedules,
such Intellectual Property is not subject to the payment of
royalties or any
other obligation to any other person or entity. Neither the
Shareholder nor
any other employee or former employee of Solutions owns,
directly or
indirectly, any right, title, or interest in or to the
Intellectual Property.
None of the Intellectual Property is subject to any
material order, decree,
judgment, stipulation, settlement, encumbrance, or
attachment. Except as set
forth in the Solutions Schedules, there are no pending or
threatened in
writing proceedings, litigation, or other adverse claims of
which Solutions is
aware affecting or with respect to the Intellectual
Property. The
Intellectual Property does not infringe on the copyright,
patent, trade
secret, know-how, or other proprietary right of any other
person or entity and
comprises all such rights necessary to permit the operation
of the business of
Solutions as now being conducted and as proposed to be
conducted.
Section 2.12 Litigation and Proceedings. Except as set
forth in the
Solutions Schedules, there are no actions, suits, or
proceedings pending or,
to the knowledge of Solutions, threatened by or against
Solutions or affecting
Solutions or its properties, at law or in equity, before any
court or other
governmental agency or instrumentality, domestic or foreign,
or before any
arbitrator of any kind. Solutions is not in material
default with respect to
any judgment, order, writ, injunction, decree, award, rule,
or regulation of
any court, arbitrator, or governmental agency or
instrumentality.
Section 2.13 Contracts.
(a) Included in the Solutions Schedules is a description of
every contract,
agreement, distributorship, franchise, license, or other
agreement,
arrangement, or commitment to which Solutions is a party or
by which its
assets or properties are bound, which calls for the payment
by Solutions of
more than $2,000 a month, or $24,000 in the aggregate;
(b) Except as described in this Agreement or in the
Solutions Schedules,
Solutions is not a party to or bound by, and the properties
of Solutions are
not subject to, any contract, agreement, other commitment or
instrument or any
charter or other corporate restriction or any judgment,
order, writ,
injunction, decree, or award which materially and adversely
affects, or in the
future may (as far as Solutions can now reasonably foresee)
materially and
adversely affect, the business operations, properties,
assets, or financial
condition of Solutions; and
(c) Except as included or described in the Solutions
Schedules or reflected
in the most recent Solutions balance sheet, Solutions is not
a party to any
oral or written (i) contract for the employment of any
officer, director, or
employee, whose compensation is greater than $5,000 per
month, which is not
terminable on 30 days (or less) notice; (ii) profit sharing,
bonus, deferred
compensation, stock option, severance pay, pension benefit
or retirement plan,
agreement, or arrangement covered by title IV of the
Employee Retirement
Income Security Act, as amended; (iii) agreement, contract,
or indenture
relating to the borrowing of money in amounts greater than
$1,000 in the
aggregate; (iv) guarantee of any obligation for the
borrowing of money or
otherwise, excluding endorsements made for collection and
other guarantees of
obligations, which, in the aggregate do not exceed $1,000;
(v) consulting or
other similar contract with an unexpired term of more than
one year or
providing for payments in excess of $1,000 in the aggregate;
(vi) collective
bargaining agreement; (vii) agreement with any present or
former officer or
director of Solutions whose compensation was or is greater
than $5,000 per
month; or (viii) other contract, agreement, or other
commitment, except normal
ongoing monthly operating expenses, involving payments by it
in the future of
more than $20,000 in the aggregate per contract.
Section 2.14 Material Contract Defaults. Except as set
forth in the
Solutions Schedules, Solutions is not in default in any
material respect under
the terms of any outstanding contract, agreement, lease, or
other commitment
which is material to the business, operations, properties,
assets, or
financial condition of Solutions, and there is no event of
default or other
event which, with notice or lapse of time or both, would
constitute a default
in any material respect under any such contract, agreement,
lease, or other
commitment in respect of which Solutions has not taken
adequate steps to
prevent such a default from occurring.
Section 2.15 Insurance Claims. Except as set forth in the
Solutions
Schedules, during the last three years, Solutions has not
received, or
informed its insurance carriers of, any claims for damages,
whether or not
covered by insurance, for amounts greater than $5,000.
Solutions is not
currently aware of any pending or unasserted claims.
Section 2.16 No Conflict With Other Instruments. The
execution of this
Agreement and the consummation of the transactions
contemplated by this
Agreement will not result in the breach of any term or
provision of, or
constitute an event of default under, any material
indenture, mortgage, deed
of trust, or other material contract, agreement, or
instrument to which
Solutions is a party or to which any of its properties or
operations are
subject, which would have a material adverse affect on
Solutions.
Section 2.17 Governmental Authorizations. Solutions has
all licenses,
franchises, permits, and other governmental authorizations
that are legally
required to enable it to conduct its business in all
material respects as
conducted on the date hereof. Except for compliance with
federal and state
securities and corporation laws, as hereinafter provided, no
authorization,
approval, consent, or order of, or registration,
declaration, or filing with,
any court or other governmental body is required in
connection with the
execution and delivery by Solutions of this Agreement and
the consummation by
Solutions of the transactions contemplated hereby.
Section 2.18 Compliance With Laws and Regulations.
Solutions has
complied with all applicable statutes and regulations of any
federal, state,
or other governmental entity or agency thereof, except to
the extent that
noncompliance would not materially and adversely affect the
business,
operations, properties, assets, or financial condition of
Solutions or except
to the extent that noncompliance would not result in the
incurrence of any
material liability for Solutions. Included in the Solutions
Schedules is a
copy of each letter of inquiry, review, or investigation or
other writing from
or to any governmental authority subsequent to December 31,
1991, evidencing a
violation or possible or alleged violation of any of the
foregoing.
Section 2.19 Insurance. Included in the Solutions
Schedules is a
complete list of all business liability, casualty,
automobile, extended
coverage, and other insurance policies which Solutions
maintains respecting
its products, services, business, properties, and employees,
showing for each
type of coverage the policy limits, principal exclusions,
deductibles,
insurer, and other relevant information. Such policies are
in full force and
effect and are free from any right of termination by the
insurance carriers.
All of the insurable properties of Solutions are insured for
its benefit in
the amount of their full replacement value (subject to
reasonable deductibles)
against losses due to fire and other casualty, with extended
coverage, and
other risks customarily insured against by persons operating
similar
properties in the localities where such properties are
located and under valid
and enforceable policies issued by insurers of recognized
responsibility.
Section 2.20 Transactions With Affiliates. Set forth in
the Solutions
Schedules is a description of every contract, agreement, or
arrangement
between Solutions and any person who is or has ever been
during the previous
three (3) years an officer or director of Solutions or
person owning of
record, or known by Solutions to own beneficially, 5% or
more of the issued
and outstanding common stock of Solutions and which is to be
performed in
whole or in part after the date hereof. In all of such
circumstances, the
contract, agreement, or arrangement was for a bona fide
business purpose of
Solutions and the amount paid or received, whether in cash,
in services, or in
kind, was, has been during the full term thereof, and is
required to be during
the unexpired portion of the term thereof, no less favorable
to Solutions than
terms available from otherwise unrelated parties in arm's
length transactions.
Except as disclosed in the Solutions Schedules or otherwise
disclosed herein,
no officer or director of Solutions or 5% shareholder of
Solutions has, or has
had during the preceding three years, any interest, directly
or indirectly, in
any material transaction with Solutions. The Solutions
Schedules also include
a description of any commitment by Solutions, whether
written or oral, to lend
any funds to, borrow any money from, or enter into any other
material
transaction with, any such affiliated person.
Section 2.21 Labor Agreements and Actions. Solutions is
not bound by or
subject to (and none of its assets or properties is bound by
or subject to)
any written or oral, express or implied, contract,
commitment, or arrangement
with any labor union, and no labor union has requested or
sought to represent
any of the employees, representatives, or agents of
Solutions. There is no
strike or other labor dispute involving Solutions pending or
threatened, which
could have a material adverse effect on the assets,
properties, financial
condition, operating results, or business of Solutions or
(as such business is
presently conducted and as it is proposed to be conducted),
and Solutions is
not aware of any labor organization activity involving its
employees.
Solutions is not aware that any officer or key employee, or
that any group of
key employees, intends to terminate their employment with
Solutions, nor does
Solutions have a present intention to terminate the
employment of any of the
foregoing. Except as set forth in the Solutions Schedules,
the employment of
each officer and employee of Solutions is terminable at the
will of Solutions.
Section 2.22 Pension Reform Act of 1974. Except as set
forth in the
Solutions Schedules, Solutions does not have any unfunded
pension liability to
the Pension Benefit Guaranty Corporation or any other person
or entity in
connection with any retirement, pension plan, or similar
arrangement.
Section 2.23 Hazardous Substances.
(a) The following words and phrases shall have the meanings
indicated:
(i) "Current Actual Knowledge" shall mean that no
information that would
give Solutions current actual knowledge of the inaccuracy of
any statements
has come to the attention of Solutions and/or its directors
and officers;
however, no special or independent investigation has been
undertaken to
determine the accuracy of such statements.
(ii) "Environment" shall mean soil, surface waters,
groundwaters, land,
stream sediments, surface or subsurface strata, ambient air,
and any
environmental medium.
(iii) "Environmental Law" shall mean any environmental
related law,
regulation, rule, ordinance, or bylaw at the federal, state,
or local level
existing as of the date hereof.
(iv) "Hazardous Material" shall mean any pollutant, toxic
substance,
hazardous waste, hazardous material, hazardous substance, or
oil as currently
defined in the Resource Conservation and Recovery Act, as
amended; the
Comprehensive Environmental Response, Compensation, and
Liability Act, as
amended; the Federal Clean Water Act, as amended; or any
other federal, state,
or local environmental law, regulation, ordinance, rule, or
bylaw, existing as
of the date hereof.
(v) "Permit" shall mean environmental permit, license,
approval, consent, or
authorization issued by a federal, state, or local
governmental entity.
(vi) "Release" shall mean any releasing, spilling, leaking,
pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
leaching, disposing, or
dumping into the Environment.
(vii) "Threat of Release" shall mean a substantial
likelihood of a Release
which requires action to prevent or mitigate damage to the
environment which
may result from such Release.
(b) To Solutions' Current Actual Knowledge, Solutions does
not have any
material liability under any Environmental Law applicable to
its operations.
(c) Solutions has not violated any Environmental Laws
applicable to its
operations, the violation or noncompliance with which would
have a material
adverse effect on Solutions.
(d) Solutions has not:
(i) Entered into or been subject to any consent decree,
compliance order, or
administrative order with respect to its properties or any
facilities or
operations thereon;
(ii) Received written notice under the citizen suit
provision of any
violation of any Environmental Law in connection with its
properties or any
facilities or operations thereon;
(iii) Received any written request for information,
notice, demand letter,
administrative inquiry, or claim with respect to a violation
of any
Environmental Law relating to its properties or any
facilities or operations
thereon; or
(iv) Been subject to or threatened in writing with any
governmental or
citizen enforcement action with respect to a violation of
any Environmental
Law on its properties or at any facilities or operations
thereon.
Section 2.24 Solutions Schedules. Solutions has delivered
to CTI the
following schedules, which are collectively referred to as
the "Solutions
Schedules." The Solutions Schedules shall be updated
through the date of
Closing and shall be certified by the chief executive
officer of Solutions as
complete, true, and accurate:
(a) A schedule including copies of the articles of
incorporation and bylaws
of Solutions in effect as of the date of this Agreement as
referred to in
section 2.01;
(b) A schedule containing copies of resolutions adopted by
the board of
directors and shareholders of Solutions approving this
Agreement and the
transactions herein contemplated as referred to in section
2.02;
(c) A schedule including the financial statements
identified in
section 2.06;
(d) A schedule including copies of all federal income tax
returns filed for
the years ended December 31, 1994 and 1993, identified in
section 2.06;
(e) A schedule listing the accounts receivable and notes
and other
obligations receivable of Solutions as of the date of the
most recent balance
sheet included in the Solutions Schedules or that arose
thereafter other than
in their ordinary course of business, indicating the debtor
and amount,
classifying the accounts to show in reasonable detail the
length of time, if
any, overdue, and stating the nature and amount of any
refunds, setoffs,
reimbursements, discounts, or other adjustments, which in
the aggregate are
greater than $1,000, due to or claimed by such debtors;
(f) A schedule listing the accounts payable and notes and
other obligations
payable of Solutions as of the date of the most recent
balance sheet included
in the Solutions Schedules or that arose thereafter other
than in the ordinary
course of the business of Solutions, indicating the creditor
and amount,
classifying the accounts to show in reasonable detail the
length of time, if
any, overdue, and stating the nature and amount of any
refunds, setoffs,
reimbursements, discounts, or other adjustments, which in
the aggregate are
greater than $1,000, payable to Solutions from any one such
creditor;
(g) A schedule setting forth a description of any material
adverse change in
the business, operations, property, inventory, assets, or
financial condition
of Solutions since the most recent balance sheet included in
the Solutions
Schedules, required to be provided pursuant to section 2.09
hereof;
(h) Copies of all agreements or arrangements and all
written statements of
practice followed with regard to the payment of
compensation, bonuses,
deferred compensation, profit sharing, pension, vacation,
retirement, or other
compensation benefits to officers, directors, or employees
whose monthly
compensation exceeds $5,000 (and descriptions of any such
agreements,
arrangements, or practices which are not in writing),
together with a schedule
setting forth the name or identification of each officer,
director, or
employee whose monthly compensation exceeds $5,000 and of
each former officer
or former employee of Solutions who is currently being paid
or who is entitled
to, or may become entitled to, compensation in amounts
greater than $5,000 per
month of any of such compensation benefits and the rate or
amounts thereof and
showing the nature of any family relationship of such person
to each
stockholder owning 5% or more of the common stock of
Solutions;
(i) A schedule containing a description of all personal
property owned by
Solutions or used in its business and having a purchase
price of over $10,000,
including a description of every material mortgage,
financing instrument, or
encumbrance to which such personal property of Solutions is
subject (except
statutory liens or claims not yet delinquent and except
liens, claims,
encumbrances, or equities which do not or in the future will
not materially
detract from or interfere with the present or proposed use
of the property
subject thereto or affected thereby);
(j) A schedule containing a description of each lease,
rental agreement, or
similar instrument, including a description of each oral
arrangement;
(k) A schedule setting forth the litigation and proceedings
as referred to
in section 2.12;
(l) A schedule listing all material contracts, agreements,
franchises,
license agreements, or other commitments to which Solutions
is a party or by
which their properties are bound, as referred to in section
2.14, but
excluding those with affiliates which are described in
section 2.21;
(m) A schedule of any insurance claims as referenced in
section 2.15;
(n) Copies of all licenses, permits, and other governmental
authorizations
(or requests or applications therefor) pursuant to which
Solutions carries on
or proposes to carry on its business (except those which are
immaterial to the
present or proposed business of Solutions), as referred to
in section 2.17;
(o) A schedule describing the matters regarding compliance
with laws and
regulations, as referred to in section 2.18;
(p) A schedule showing details of all insurance coverage as
referred to in
section 2.19;
(q) A schedule containing a description of all material
contracts, leases,
agreements, and other instruments between Solutions and any
affiliates, as
referred to in section 2.20;
(r) A schedule showing the name and location of each bank
or other
institution in which Solutions has an account or safe
deposit box, and the
names of all persons authorized to draw thereon or to have
access thereto;
(s) Copies of all powers of attorney given by Solutions now
in effect or to
be in effect;
(t) A schedule setting forth any other information,
together with any
required copies of documents, required to be disclosed in
the Solutions
Schedules by sections 2.01 through 2.23.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF
SHAREHOLDER FOR CALIFORNIA
As an inducement to, and to obtain the reliance of, CTI and
NewCo, Shareholder
represents and warrants with respect to California as
follows:
Section 3.01 Organization. California is a corporation
duly organized,
validly existing, and in good standing under the laws of the
state of
California and has the corporate power to own all of its
properties and assets
and to carry on its business in all material respects as it
is now being
conducted, and there is no jurisdiction in which it is not
so qualified in
which the character and location of the assets owned by it
or the nature of
the business transacted by it requires qualification, except
where failure to
do so would not have a material adverse effect on the
business or properties
of California. Included in the California Schedules (as
hereinafter defined)
are complete and correct copies of the articles of
incorporation and bylaws of
California as in effect on the date hereof. The execution
and delivery of
this Agreement does not, and the consummation of the
transactions contemplated
by this Agreement in accordance with the terms hereof will
not, violate any
provision of California's articles of incorporation or
bylaws.
Section 3.02 Capitalization. Shareholder owns 40% of the
issued and
outstanding stock of California.
Section 3.03 Financial Statements. To the best of
Shareholder's
knowledge:
(a) Included in the California Schedules are the unaudited
balance sheets of
California as of December 31, 1994 and 1993, and the related
unaudited
statements of income and retained earnings for the years
then ended, together
with the accompanying notes, and the audited balance sheets
as of September
30, 1995, and the unaudited statements of income and
retained earnings for the
year then ended, together with the accompanying notes.
(b) Such financial statements have been prepared in
accordance with GAAP,
except as disclosed in the California Schedules. California
did not have, as
of the date of any of such balance sheets, except as and to
the extent
reflected or reserved against therein, any liabilities or
obligations
(absolute or contingent) which should be reflected in a
combined balance sheet
prepared in accordance with GAAP and all assets reflected
therein present
fairly the assets of California, as if such statements were
prepared in
accordance with GAAP. The statements of income present
fairly the information
required to be set forth therein as if such statements were
prepared in
accordance with GAAP. California maintains a standard
system of accounting
established and maintained in a manner permitting the
preparation of financial
statements in accordance with GAAP.
(c) The books and records of California and its accounting
practices are
sufficient to permit the preparation of audited financial
statements for the
periods subsequent to December 31, 1992, in accordance with
GAAP and
regulation S-B adopted under the Exchange Act. California
will maintain and
preserve its books and records in such a fashion so as to
permit the
preparation of historical audited financial statements as
may be required by
the Exchange Act and the rules and regulations adopted
thereunder. California
and the Shareholder will cooperate fully and assist in the
preparation of any
such financial statements, at the cost of CTI.
(d) California has filed all tax returns and, except as set
forth in the
California Schedules, all reports as required by law. All
such returns and
reports are accurate and correct in all material respects.
There are no
income taxes currently due to the federal or state
governments that have not
been paid. California does not have any liabilities with
respect to the
payment of any federal, state, county, local, or other taxes
(including any
deficiencies, interest, or penalties) accrued for or
applicable to the period
ended on the date of the most recent balance sheet included
in the California
Schedules and all such dates and years and periods prior
thereto and for which
California may at said date have been liable in their own
right or as
transferee of the assets of, or as successor to, any other
corporation or
other entity, except for taxes accrued but not yet due and
payable. None of
such federal income tax returns has been audited or is
currently being audited
by the Internal Revenue Service. California has not made
any election
pursuant to the Code (other than elections which relate
solely to methods of
accounting, depreciation, or amortization) which would have
a material adverse
effect on California, its financial condition, its business
as presently
conducted or as proposed to be conducted, or any of its
properties or material
assets. There are no outstanding agreements or waivers
extending the
statutory period of limitation applicable to any tax return
of California.
(e) The books and records, financial and otherwise, of
California are in all
material respects complete and correct and have been made
and maintained in
accordance with sound business and bookkeeping practices
and, in reasonable
detail, accurately and fairly reflect the transactions
involving the assets of
California. California has maintained a system of internal
accounting
controls sufficient to provide reasonable assurances that
(i) transactions
have been and are executed in accordance with management's
general or specific
authorization; (ii) transactions are recorded as necessary
to permit the
preparation of financial statements in conformity with GAAP
or any other
criteria applicable to such statements and to maintain
accountability for
assets; (iii) access to assets is permitted only in
accordance with
management's general or specific authorization; and (iv) the
recorded
accountability for assets is compared with the existing
assets at reasonable
intervals, and appropriate action is taken with respect to
any differences.
(f) Except as set forth in the California Schedules, the
latest of the
balance sheets included in the California Schedules, or in
the notes thereto,
California (i) has good and marketable title to its accounts
receivable, and
other debts due or recorded in the records and books of
account of California,
free of any security interests or liens and free of any
material defenses,
counterclaims, and set-offs, and all of such accounts
receivable, invoices,
and debts are actual and bona fide amounts due California
for the total dollar
amount thereof shown on the books of California and resulted
from the regular
course of its business; and (ii) the accounts receivable,
invoices, and debts
set forth on the California balance sheets arose in the
ordinary course of
business and are, net of any reserves shown on the balance
sheet, collectible
in full in all material respects on the continuation of
reasonable collection
efforts by California or successor personnel and without
resorting to
litigation and in any event not later than 180 days after
the date billed.
Section 3.04 Other Information. After reasonable
investigation and to
Shareholder's best knowledge:
(a) California owes Shareholder, and Solutions $81,151 for
services
rendered;
(b) There have not been any adverse material changes in
California's
business or assets or any loss to its property not covered
by insurance
during the last twelve (12) months;
(c) There are no suits or proceedings pending or threatened
in writing by or
against California or affecting California's properties at
law or in
equity before any court or other governmental agency or
instrumentality,
domestic or foreign, or before any arbiter of any kind;
(d) California is not in default with respect to any of the
terms of any
outstanding contract, lease or other commitment which is
material to the
business operation, property, assets or financial situation
of
California. There is no other event of default which will
with notice
of lapse of time constitute a default in any material
respect under any
such contract, agreement, lease, or other commitment;
(e) California has complied with all applicable statutes of
any regulations
of any federal, state, or other governmental agency, except
to the
extent that non-compliance would not materially adversely
affect the
business, operations, property, assets or financial
condition of
California or to the extent that non-compliance would not
result in the
occurrence of any material liability for California.
Section 3.05 No Lien. There is no lien or other
encumbrance on the
shares of California held by Shareholder and such shares may
be freely
transferred to CTI.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES
OF CTI
AND NEWCO
As an inducement to, and to obtain the reliance of,
Solutions and the
Shareholder, CTI and NewCo represent and warrant as follows:
Section 4.01 Organization. CTI and NewCo are corporations
duly
organized, validly existing, and in good standing under the
laws of the state
of Nevada, and have the corporate power to own all of their
properties and
assets and to carry on their business in all material
respects as it is now
being conducted, and there is no jurisdiction in which they
are not so
qualified in which either the character and location of the
assets owned by
them or the nature of the business transacted by them
requires qualification,
except where failure to do so would not have a material
adverse effect on the
business or properties of CTI and NewCo, respectively.
Included in the CTI
Schedules (as hereinafter defined) are complete and correct
copies of the
articles of incorporation and bylaws of CTI and NewCo in
effect on the date
hereof. The execution and delivery of this Agreement does
not, and the
consummation of the transactions contemplated by this
Agreement in accordance
with the terms hereof will not, violate any provision of the
articles of
incorporation or bylaws of CTI or NewCo. CTI and NewCo have
full power,
authority, and legal right and have taken all action
required by law, their
articles of incorporation, bylaws, and otherwise to
consummate the
transactions herein contemplated.
Section 4.02 Approval of Agreements. The board of
directors of CTI and
NewCo, respectively, have authorized the execution and
delivery of this
Agreement by CTI and NewCo, respectively, and have approved
the consummation
of the transactions contemplated hereby. Included in the
CTI Schedules are
copies of resolutions duly adopted by the boards of
directors of CTI and NewCo
evidencing such approval. CTI and NewCo, respectively, have
full power,
authority, and legal right, and have taken all action
required by law, their
articles of incorporation, their bylaws, or otherwise, to
execute this
Agreement and consummate the transactions contemplated
hereby.
Section 4.03 Authority of CTI and NewCo. CTI and NewCo
have the right
and authority, without the prior written consent of any
other person or
entity, to enter into this Agreement and consummate the
transactions
contemplated hereby.
Section 4.04 Capitalization. The authorized
capitalization of CTI
consists of 5,000,000 shares of preferred stock, par value
$0.001 per share,
of which 1,000,000 shares are issued and outstanding, and
25,000,000 shares of
common stock, par value $0.001 per share, of which 8,584,846
shares are issued
and outstanding. In addition, CTI has reserved 3,008,573
shares of common
stock for issuance on the exercise of outstanding and
committed options,
delivery of shares on a relocation agreement, the conversion
of the issued and
outstanding CTI Preferred Stock, and exercise of options
pursuant to the
Employee Stock Purchase Plan. All issued and outstanding
shares of CTI Common
Stock are validly authorized, legally issued, fully paid,
and nonassessable
and not issued in violation of the preemptive or other right
of any person.
All shares of Exchanged CTI Stock to be issued pursuant to
this Agreement are
validly authorized and will be, when issued, legally issued,
fully paid, and
nonassessable and not issued in violation of the preemptive
or other right of
any person. NewCo has 1,000 shares of common stock, par
value $0.001 per
share authorized, 1,000 shares of which are issued and
outstanding and held
solely by CTI (the "NewCo Common Stock").
Section 4.05 Subsidiaries or Predecessor. CTI was
formerly known as
Mountain Surgical Centers, Inc., which was formerly known as
Dimension
Capital. CTI has 13 wholly-owned subsidiaries, some of
which also have
second-tier subsidiaries: CTI, Inc., RK&DR Concepts, Inc.
dba VERSYSS Data
Systems, New Outside Force, Inc., New Benchmark Computer
Systems, Inc.,
Computer Ease, Inc., Medical Computer Management, Inc.,
Benchmark Computer
Systems of VA., Inc., Benchmark Computer Systems, Inc.
(Wisconsin), Ford
Center for Foot Surgery, Inc., Sierra Surgery Center, Inc.,
CTI Resources,
Inc., Preferred Health Systems, Inc., and Workgroup Design,
Inc. All
references to CTI herein shall be deemed to include its
subsidiaries and
predecessor entities.
Section 4.06 Financial Statements. NewCo has no assets or
liabilities.
(a) Included in the CTI Schedules is the audited balance
sheet of CTI as of
June 30, 1995, and the related audited statements of income,
stockholders'
equity, and cash flows for each of the two fiscal years
ended June 30, 1995,
and 1994, including the notes thereto, together with the
related opinions of
the independent certified public accountants of CTI. Also
included are the
unaudited balance sheets as of September 30, 1995, and the
related unaudited
statements of earnings and cash flows for the three months
ended September 30,
1995, and 1994.
(b) All such financial statements have been prepared in
accordance with GAAP
consistently applied throughout the periods involved. The
balance sheets of
CTI present fairly, as of their respective dates, the
financial position of
CTI. CTI did not have, as of the date of any of such CTI
balance sheets,
except as and to the extent reflected or reserved against
therein, any
liabilities or obligations (absolute or contingent) which
should be reflected
in a balance sheet or the notes thereto prepared in
accordance with GAAP, and
all assets reflected therein present fairly the assets of
CTI, in accordance
with GAAP. The statements of operations, stockholders'
equity, and cash flows
present fairly the information required to be set forth
therein under GAAP.
CTI has maintained and will continue to maintain a standard
system of
accounting in a manner permitting the preparation of
financial statements in
accordance with GAAP.
(c) All such financial statements have been prepared in
accordance with
regulation S-B promulgated by the SEC regarding the form and
content of and
requirements for financial statements to be filed with the
SEC.
(d) CTI has filed all tax returns and reports as required
by law. All such
returns and reports are accurate and correct in all material
respects. CTI
has no material liabilities with respect to the payment of
any federal, state,
county, local, or other taxes (including any deficiencies,
interest, or
penalties) accrued for or applicable to the period ended on
the date of the
most recent CTI balance sheets and all such dates and years
and periods prior
thereto and for which CTI may at said date have been liable
in its own right
or as transferee of the assets of, or as successor to, any
other corporation
or other entity, except for taxes accrued but not yet due
and payable. None
of the federal income tax returns of CTI has been audited or
is currently
being audited by the Internal Revenue Service. CTI has not
elected pursuant
to the Code to be treated as an S corporation pursuant to
section 1362(a) of
the Code or a collapsible corporation pursuant to section
341(f) of the Code,
nor has CTI made any other elections pursuant to the Code
(other than
elections which relate solely to methods of accounting,
depreciation, or
amortization) which would have a material adverse effect on
CTI, its financial
condition, its business as presently conducted or as
proposed to be conducted,
or any of its properties or material assets. There are no
outstanding
agreements or waivers extending the statutory period of
limitation applicable
to any tax return of CTI.
(e) The books and records, financial and otherwise, of CTI
are in all
material respects complete and correct and have been made
and maintained in
accordance with sound business and bookkeeping practices
and, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the
assets of CTI. CTI has maintained a system of internal
accounting controls
sufficient to provide reasonable assurances that (i)
transactions have been
and are executed in accordance with management's general or
specific
authorization; (ii) transactions are recorded as necessary
to permit
preparation of financial statements in conformity with GAAP
or any other
criteria applicable to such statements and to maintain
accountability for
assets; (iii) access to assets is permitted only in
accordance with
management's general or specific authorization; and (iv) the
recorded
accountability for assets is compared with the existing
assets at reasonable
intervals and appropriate action is taken with respect to
any differences.
(f) Except as set forth in the latest balance sheets of CTI
or in the notes
thereto, CTI (i) has good and marketable title to its
receivables, and other
debts due or recorded in the records and books of CTI, free
of any security
interests or liens and free of any material defenses,
counterclaims, and set-
offs, and all of such receivables are actual and bona fide
receivables
representing obligations for the total dollar amount thereof
shown on the
books of CTI and resulted from the regular course of its
business; and (ii)
the accounts receivable set forth on the balance sheet of
CTI arose in the
ordinary course of business and are collectible in all
material respects on
the continuation of reasonable collection efforts by
personnel of CTI and
without resorting to litigation and in any event not later
than 180 days after
the date billed.
Section 4.07 Information. The information concerning CTI
and NewCo set
forth in this Agreement and in the CTI Schedules and in all
filings and
reports made by CTI with and to the SEC is complete and
accurate in all
material respects and, as of the date of such information,
does not contain
any untrue statement of a material fact or omit to state a
material fact
required to make the statements made, in light of the
circumstances under
which they were made, not misleading.
Section 4.08 Options or Warrants. There are no existing
options,
warrants, calls, commitments, or other rights of any
character relating to the
authorized and unissued NewCo stock or CTI Common Stock,
except (a) options,
warrants, calls, or commitment, if any, to which CTI is not
a party and by
which it is not bound; (b) options to acquire an aggregate
of 2,525,240 shares
of CTI Common Stock; (c) conversion rights held by the
holders of CTI
Preferred Stock to convert such stock into an aggregate of
667,000 shares of
CTI Common Stock; and (d) other commitments to issue an
aggregate of 483,333
shares of CTI Common Stock.
Section 4.09 Absence of Certain Changes or Events. Except
as set forth
in this Agreement or in the CTI Schedules, since the date of
the most recent
CTI balance sheet described in section 4.05 and included in
the CTI
Schedules:
(a) There has not been (i) any material adverse change in
the business,
operations, assets, or condition of CTI or NewCo or (ii) any
damage,
destruction, or loss to CTI or NewCo (whether or not covered
by insurance)
materially and adversely affecting the business, operations,
assets, or
condition of CTI or NewCo;
(b) CTI and NewCo have not (i) amended their articles of
incorporation or
bylaws; (ii) declared or made, or agreed to declare or make,
any payment of
dividends or distributions of any assets of any kind
whatsoever to
stockholders or purchased or redeemed, or agreed to purchase
or redeem, any of
their capital stock; (iii) waived any rights of value which
in the aggregate
are extraordinary or material; (iv) made any change in its
method of
management, operation, or accounting which is material to
CTI or NewCo; (v)
entered into any other transaction which is material to CTI
or NewCo; (vi)
made any accrual or arrangement for or payment of bonuses or
special
compensation of any kind or any severance or termination pay
to any present or
former officer, employee, or shareholder of CTI; (vii)
increased the rate of
compensation payable or to become payable by it to any of
their officers or
directors or any of their employees; or (viii) entered into
any or made any
increase in any profit sharing, bonus, deferred
compensation, insurance,
pension, retirement, or other employee benefit plan,
payment, or arrangement
made to, for, or with their respective officers, directors,
or employees;
(c) CTI and NewCo have not (i) granted or agreed to grant
any options,
warrants, or other rights for their respective stocks,
bonds, or other
corporate securities calling for the issuance thereof; (ii)
borrowed or agreed
to borrow any funds or incurred, or become subject to, any
material obligation
or liability (absolute or contingent), except liabilities
incurred in the
ordinary course of business; (iii) paid any material
obligation or liability
(absolute or contingent) other than current liabilities
reflected in or shown
on the most recent CTI balance sheet and current liabilities
incurred since
that date in the ordinary course of business; (iv) sold or
transferred, or
agreed to sell or transfer, any of their respective assets,
properties, or
rights (except assets, properties, or rights not used or
useful in its
business which, in the aggregate have a value of less than
$10,000 or assets,
properties, or rights disposed of in the ordinary course of
business); (v)
made or permitted any amendment or termination of any
contract, agreement, or
license to which they are a party if such amendment or
termination is
material, considering the business of CTI and NewCo; or (vi)
issued,
delivered, or agreed to issue or deliver any stock, bonds,
or other corporate
securities including debentures (whether authorized and
unissued or held as
treasury stock); and
(d) To the best knowledge of CTI and NewCo, CTI and NewCo
have not become
subject to any law or regulation which materially and
adversely affects, or in
the future may materially and adversely affect, the
business, operations,
properties, assets, or financial condition of CTI or NewCo.
Section 4.10 Litigation and Proceedings. There are no
actions, suits, or
proceedings pending or, to the best knowledge of CTI or
NewCo, threatened by
or against CTI or NewCo or affecting them or their
properties, at law or in
equity, before any court or other governmental agency or
instrumentality,
domestic or foreign, or before any arbitrator of any kind.
Neither CTI nor
NewCo has any knowledge of any material default on its part
with respect to
any judgment, order, writ, injunction, decree, award, rule,
or regulation of
any court, arbitrator, or governmental agency or
instrumentality.
Section 4.11 No Conflict With Other Instruments. The
execution of this
Agreement and the consummation of the transactions
contemplated by this
Agreement will not result in the breach of any term or
provision of, or
constitute an event of default under, any material
indenture, mortgage, deed
of trust, or other material contract, agreement, or
instrument to which CTI or
NewCo is a party or to which any of their properties or
operations are subject
which would have a material adverse affect on CTI or NewCo.
Section 4.12 Material Contract Defaults. CTI and NewCo
are not in
default in any material respect under the terms of any
outstanding contract,
agreement, lease, or other commitment which is material to
the business,
operations, properties, assets, or condition of CTI or
NewCo, and there is no
event of default or other event which, with notice or lapse
of time or both,
would constitute a default in any material respect under any
such contract,
agreement, lease, or other commitment in respect of which
CTI or NewCo has not
taken adequate steps to prevent such a default from
occurring.
Section 4.13 Governmental Authorizations. Except as set
forth in the CTI
Schedules, to the best knowledge of CTI and NewCo, they have
all licenses,
franchises, permits, and other governmental authorizations
that are legally
required to enable them to conduct their business in all
material respects as
conducted on the date hereof or as presently contemplated.
Except for
compliance with federal and state securities and corporation
laws, as
hereinafter provided, to the best of their knowledge, no
authorization,
approval, consent, or order of, or registration,
declaration, or filing with,
any court or other governmental body is required in
connection with the
execution and delivery by CTI or NewCo of this Agreement and
the consummation
by CTI and NewCo of the transactions contemplated hereby.
Section 4.14 Compliance With Laws and Regulations. CTI
and NewCo have
complied with all applicable statutes and regulations of any
federal, state,
or other governmental entity or agency thereof, except to
the extent that
noncompliance would not materially and adversely affect the
business,
operations, properties, assets, or condition of CTI or NewCo
or except to the
extent that noncompliance would not result in the incurrence
of any material
liability for CTI or NewCo. Included in the CTI Schedules
is a copy of each
letter of inquiry, review, or investigation or other writing
from or to any
governmental authority subsequent to December 31, 1991,
evidencing a violation
or possible or alleged violation of any of the foregoing.
Section 4.15 Labor Agreements and Actions. CTI and NewCo
are not bound
by or subject to (and none of their assets or properties are
bound by or
subject to) any written or oral, express or implied,
contract, commitment, or
arrangement with any labor union, and no labor union has
requested or, to the
best knowledge of CTI or NewCo, has sought to represent any
of the employees,
representatives, or agents of CTI or NewCo. There is no
strike or other labor
dispute involving CTI or NewCo pending, or to the best
knowledge of CTI or
NewCo threatened, which could have a material adverse effect
on the assets,
properties, financial condition, operating results, or
business of CTI or
NewCo (as such business is presently conducted and as it is
proposed to be
conducted), nor is CTI or NewCo aware of any labor
organization activity
involving its employees. CTI and NewCo are not aware that
any officer or key
employee, or that any group of key employees, intends to
terminate their
employment with CTI or NewCo, nor does CTI or NewCo have a
present intention
to terminate the employment of any of the foregoing. Except
as set forth in
the CTI Schedules, the employment of each officer and
employee of CTI and
NewCo is terminable at the will of CTI or NewCo.
Section 4.16 Pension Reform Act of 1974. Neither CTI nor
NewCo have any
unfunded pension liability to the Pension Benefit Guaranty
Corporation or any
other person or entity in connection with any retirement,
pension plan, or
similar arrangement.
Section 4.17 Hazardous Substances.
(a) The following words and phrases shall have the meanings
indicated:
(i) "Current Actual Knowledge" shall mean that no
information that would
give CTI or NewCo current actual knowledge of the inaccuracy
of any statements
has come to the attention of CTI or NewCo and/or their
directors and officers;
however, no special or independent investigation has been
undertaken to
determine the accuracy of such statements.
(ii) "Environment" shall mean soil, surface waters,
groundwaters, land,
stream sediments, surface or subsurface strata, ambient air,
and any
environmental medium.
(iii) "Environmental Law" shall mean any environmental
related law,
regulation, rule, ordinance, or bylaw at the federal, state,
or local level
existing as of the date hereof.
(iv) "Hazardous Material" shall mean any pollutant, toxic
substance,
hazardous waste, hazardous material, hazardous substance, or
oil as currently
defined in the Resource Conservation and Recovery Act, as
amended; the
Comprehensive Environmental Response, Compensation, and
Liability Act, as
amended; the Federal Clean Water Act, as amended; or any
other federal, state,
or local environmental law, regulation, ordinance, rule, or
bylaw, existing as
of the date hereof.
(v) "Permit" shall mean environmental permit, license,
approval, consent, or
authorization issued by a federal, state, or local
governmental entity.
(vi) "Release" shall mean any releasing, spilling, leaking,
pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
leaching, disposing, or
dumping into the Environment.
(vii) "Threat of Release" shall mean a substantial
likelihood of a Release
which requires action to prevent or mitigate damage to the
environment which
may result from such Release.
(b) To CTI's and NewCo's Current Actual Knowledge, neither
CTI nor NewCo has
any material liability under any Environmental Law
applicable to their
operations.
(c) Neither CTI nor NewCo has violated and both are in
compliance with all
Environmental Laws applicable to their operations.
(d) Neither CTI nor NewCo have:
(i) Entered into or been subject to any consent decree,
compliance, order,
or administrative order with respect to its properties or
any facilities or
operations thereon;
(ii) Received written notice under the citizen suit
provision of any
violation of any Environmental Law in connection with its
properties or any
facilities or operations thereon;
(iii) Received any written request for information,
notice, demand letter,
administrative inquiry, or claim with respect to a violation
of any
Environmental Law relating to their properties or any
facilities or operations
thereon; or
(iv) Been subject to or threatened in writing with any
governmental or
citizen enforcement action with respect to a violation of
any Environmental
Law on its properties or at any facilities or operations
thereon.
Section 4.18 Intellectual Property. NewCo owns no
intellectual property.
Except as listed in the CTI Schedules, CTI owns the entire
right, title, and
interest in and to the PracticeCare practice management
software, the MCare
managed car software, the Carepoint for Clinics patient
records system,
certain physician credentialing software, the CUSA System
and Reliance credit
union management software, the ComputerEase equipment rental
company
management software, and other software solutions for the
medical, credit
union, and equipment rental industries and to all of the
trade secret,
technology, know-how, tradenames, trademarks, servicemarks,
and other
proprietary information owned by or used in connection to
the business of CTI,
including all copyrights, patents, patent applications,
registrations, and
applications with respect thereto (collectively, the
"Intellectual Property").
Section 4.19 CTI Schedules. CTI has delivered to
Solutions and
Shareholder the following schedules, which are collectively
referred to as the
"CTI Schedules" and which consist of separate schedules
dated as of the date
of execution of this Agreement and updated through the date
of Closing, and
instruments and data as of such date, or the date indicated
on such schedules,
all certified by the chief executive officer of CTI as
complete, true, and
accurate:
(a) A schedule including copies of the articles of
incorporation and bylaws
of CTI and NewCo in effect as of the date of this Agreement,
as referred to in
section 34.01;
(b) A schedule containing copies of resolutions adopted by
the boards of
directors of CTI and NewCo approving this Agreement and the
transactions
herein contemplated as referred to in section 4.02;
(c) A schedule containing the annual report of CTI on form
10-KSB for the
year ended June 30, 1995, and the quarterly report on form
10-QSB for the
quarter ended September 30, 1995;
(d) A schedule setting forth a description of any material
change in the
business, operations, assets, or condition of CTI or NewCo
since December 31,
1994, required to be provided pursuant to section 4.09
hereof; and
(e) A schedule setting forth any other information,
together with any
required copies of documents, required to be disclosed in
the CTI Schedules by
sections 4.01 through 4.18.
ARTICLE VI
PLAN OF REORGANIZATION
Section 5.01 Terms of the Reorganization. The
consideration for the
reorganization as contemplated herein and the acquisition of
Solutions as a
wholly-owned subsidiary of CTI, subject to all of the terms,
covenants, and
conditions set forth in this Agreement, shall be exchange of
250,000 shares of
restricted common stock of CTI for all of the issued and
outstanding shares of
Solutions.
Section 5.02 The Merger. The articles of merger and plan
of merger shall
provide for the mergers of Solutions with and into NewCo,
with NewCo as the
surviving entity. The merger shall result in the following:
(a) The Solutions Stock shall be converted into an
aggregate of 50,000
shares of CTI Common Stock. The shares of CTI Common Stock
to be issued shall
not be registered under the Securities Act or applicable
state securities laws
and the certificates representing such shares shall contain
the legend set
forth in section 6.07.
(b) Upon the Effective Date of the merger, the Shareholder
shall, on the
surrender of the certificate or certificates representing
the Solutions Stock,
receive a certificate or certificates evidencing shares of
the Exchanged CTI
Stock as provided herein.
(c) On the Effective Date of the merger, the Solutions
Stock shall be
canceled, and all rights in respect thereof shall cease.
(d) On the Effective Date of the Merger, the issued and
outstanding stock of
NewCo, the surviving corporation, shall remain issued and
outstanding and
owned by CTI. NewCo shall continue as a wholly-owned
subsidiary of CTI and
the successor to the assets, liabilities, and business of
Solutions. NewCo
shall do business as "New Advanced Solutions of Nevada,
Inc." immediately
subsequent to the merger.
Section 5.03 Tax Obligations. The Shareholder shall be
solely
responsible for any tax due from the Shareholder with
respect to the receipt
by the Shareholder of the consideration set forth in section
5.01 of this
Agreement.
Section 5.04 Closing Events. At the Closing,
(a) NewCo and Solutions shall execute and deliver multiple
copies of the
articles of merger and related plan of merger in the forms
attached hereto as
Exhibit "C" and incorporated herein by reference and all
other documents
necessary to effectuate the merger herein contemplated, all
in such form as
shall be acceptable to the parties hereto and their
respective legal counsel
and shall file such articles of merger and related plan of
merger with various
states;
(b) Each of the respective parties hereto shall execute,
acknowledge, and
deliver (or shall cause to be executed, acknowledged, and
delivered) any and
all articles of merger, plans of merger, certificates,
financial statements,
schedules, agreements, resolutions, or other instruments
required by this
Agreement to be so delivered at or prior to the Closing
together with such
other items as may be reasonably requested by the parties
hereto and their
respective legal counsel in order to effectuate or evidence
the transactions
contemplated hereby; and
(c) In addition to the foregoing, each of the parties shall
execute and
deliver such additional documents as may reasonably be
required in order to
effectuate the transactions herein contemplated in
accordance with the
requirements of the Code and shall treat such transactions
for all tax
purposes consistently with the other parties' treatment
thereof and with such
characterization as a reorganization under Code sections
368(a)(1)(A) and
368(a)(2)(D).
Section 5.05 Effective Date. For corporate law purposes,
the Effective
Date of the merger shall be the date, as defined in the
articles of merger or
plan of merger, on which the merger of Solutions with and
into NewCo shall
become effective in accordance with the laws of the states
of Nevada. To the
extent permitted by GAAP, the effective date for financial
reporting purposes
shall be January 1, 1996.
Section 5.06 Effect of Merger. On the Effective Date of
the merger,
NewCo and Solutions shall cease to exist separately, and
Solutions shall be
merged with and into NewCo, the surviving corporation, in
accordance with the
provisions of this Agreement, the articles of merger, and
the plan of merger,
and in accordance with the provisions of and with the effect
provided in the
corporation laws of the state of Nevada. NewCo, as the
surviving corporation,
shall possess all the rights, privileges, franchises, and
trust and fiduciary
duties, powers, and obligations, of a private as well as of
a public nature,
and be subject to all the restrictions, obligations, and
duties of each of
NewCo and Solutions; all property, real, personal, and
mixed, and all debts
due to either of NewCo or Solutions on whatever account and
all other things
belonging to each of NewCo and Solutions and all property,
rights, privileges,
powers, and franchises, and all and every other interest
shall be thereafter
the property of NewCo as they were of NewCo and Solutions;
the title to any
real estate, whether vested by deed or otherwise, in either
NewCo or Solutions
shall not revert or be in any way impaired by reason of the
merger; provided,
however, that all rights of creditors and all liens on any
property of either
NewCo or Solutions shall be preserved unimpaired, and all
debts, liabilities,
and duties of NewCo and Solutions shall thenceforth attach
to NewCo and may be
enforced against it to the same extent as if such debts,
liabilities, and
duties had been incurred or contracted by NewCo.
Section 5.07 Termination of Merger.
(a) This Agreement and the merger contemplated hereby may
be terminated at
any time prior to the Effective Date by the consent of the
Shareholder and by
both CTI and Solutions through action of their respective
boards of directors.
In the event of termination pursuant to this paragraph (a)
of section 54.07,
no obligation, right, remedy, or liability shall arise
hereunder, and the
parties shall bear their own costs incurred in connection
with the preparation
and execution of this Agreement, the preparation and review
of financial
statements required to be delivered pursuant hereto, and the
negotiation of
the transactions contemplated hereby.
(b) This Agreement and the merger may be terminated at any
time prior to the
Effective Date by action of CTI's board of directors if
Solutions shall fail
to comply in any material respect with any of its covenants
or agreements
contained in this Agreement or if any of the representations
or warranties of
Solutions contained herein shall be inaccurate in any
material respect. In
the event of termination pursuant to this paragraph (b) of
section 54.07,
Solutions shall reimburse CTI for its costs and obligations
with respect to
the negotiation and documentation of this Agreement and the
transactions
contemplated hereby.
(c) This Agreement and the merger may be terminated at any
time prior to the
Effective Date by action of Solutions board of directors if
CTI or NewCo shall
fail to comply in any material respect with any of their
covenants or
agreements contained in this Agreement or if any of the
representations or
warranties of CTI or NewCo contained herein shall be
inaccurate in any
material respect. In the event of termination pursuant to
this paragraph (c)
of section 54.07, CTI shall reimburse Solutions for its
costs and obligations
with respect to the negotiation and documentation of this
Agreement and the
transactions contemplated hereby.
Section 5.08. Transaction for California Shares.
Concurrently with the
completion of the merger transaction described above,
Shareholder shall sell
to CTI all of the shares of California held by Shareholder,
representing 40%
of the issued and outstanding stock of California, in
exchange for a special
one time payment equal to the greater of 6% of the first
$600,000 of total net
revenue of the business of Solutions, California and the
business of the
Shareholder d/b/a Automated Systems of Arizona actually
collected for the
months of November and December 1995 or $6,000 plus 7% of
the total net
revenue actually collected for the months of November and
December 1995 in
excess of $600,000.
Section 5.09 Post-Closing Covenants of CTI and NewCo.
Subsequent to the
Closing of the transactions contemplated by this Agreement,
CTI and NewCo,
jointly and severally, covenant to do as follows:
(a) CTI and NewCo shall take all actions necessary or
reasonably requested
by the Shareholder to enable the Shareholder to sell the
Exchanged CTI Stock
without registration under the Securities Act within the
limitation of the
exemption provided by Rule 144 under the Securities Act, as
such rule may be
amended from time to time, and any similar rules or
regulations hereafter
adopted by the SEC, including, without limiting the
generality of the
foregoing, filing on a timely basis all reports required to
be filed by the
Exchange Act (or, if CTI is not required to file such
reports, making publicly
available, at the request of the Shareholder, other
information necessary to
enable the Shareholder to sell the Exchanged CTI Stock
pursuant to such rule).
Upon the request of the Shareholder, CTI will deliver to
the Shareholder a
written statement as to whether it has complied with such
requirements.
ARTICLE VI
THE ACQUISITION OF THE EXCHANGED CTI
STOCK
Section 6.01 Sale of Securities. The consummation of this
Agreement and
the issuance of the Exchanged CTI Stock as contemplated
herein, constitutes
the offer and sale of securities as those terms are defined
under the
Securities Act and applicable state statutes. Such
transactions shall be
consummated in reliance on certain exemptions from the
registration
requirements of the Securities Act and applicable state
statutes which depend,
among other items, on the circumstances under which such
securities are
acquired.
Section 6.02 Representations by the Shareholder. In order
to provide
documentation for reliance upon such exemptions, the
approval by Solutions and
the Shareholder of this Agreement and the transactions
contemplated hereby
shall constitute the parties' acceptance of, and concurrence
in, the following
representations and warranties:
(a) Solutions and the Shareholder acknowledge that neither
the Securities
Exchange Commission nor the securities commission of any
state or other
federal agency has made any determination as to the merits
of acquiring the
Exchanged CTI Stock, and that the acquisition and ownership
of the Exchanged
CTI Stock involves certain risks.
(b) Solutions and the Shareholder have received and read
this Agreement and
the annual report of CTI on form 10-K for the year ended
June 30, 1995, the
quarterly report on form 10-Q for the quarter ended
September 30, 1995, and
understand the risks related to the consummation of the
transactions herein
contemplated. Solutions and the Shareholder have been given
an opportunity to
meet with and ask questions of management of CTI concerning
the business,
operations, and assets of CTI and the transactions
contemplated by this
Agreement.
(c) The Shareholder have such knowledge and experience in
business and
financial matters that they are capable of evaluating CTI
and its business
operations.
(d) The Shareholder are acquiring the Exchanged CTI Stock
for their own
account and not with a view for resale to others.
Section 6.03 Investment Intent. The Shareholder have not
offered or sold
any securities of CTI or interest in this Agreement and have
no present
intention of dividing the Exchanged CTI Stock to be received
or the rights
under this Agreement with others or of reselling or
otherwise disposing of any
portion of such stock or rights, either currently or after
the passage of a
fixed or determinable period of time or on the occurrence or
nonoccurrence of
any predetermined event or circumstance.
Section 6.04 No Public Solicitation. Solutions and the
Shareholder were
at no time solicited by any leaflet, public promotional
meeting, circular,
newspaper or magazine article, radio or television
advertisement, or any other
form of general advertising or solicitation in connection
with the offer,
sale, or purchase of the Exchanged CTI Stock through this
Agreement.
Section 6.05 Ability to Bear Risk of Investment. The
Shareholder has
adequate means of providing for their current needs and
possible contingencies
and have no need now, and anticipate no need in the
foreseeable future, to
sell the Exchanged CTI Stock. The Shareholder are able to
bear the economic
risks of this investment, and consequently, without limiting
the generality of
the foregoing, are able to hold the Exchanged CTI Stock to
be received for an
indefinite period of time and have a sufficient net worth to
sustain a loss of
the entire investment, in the event such loss should occur.
Section 6.06 No Registration. The Shareholder understands
that the
Exchanged CTI Stock has not been registered, but is being
acquired by reason
of a specific exemption under the Securities Act as well as
under certain
state statutes for transactions by an issuer not involving
any public offering
and that any disposition of the subject Exchanged CTI Stock
may, under certain
circumstances, be inconsistent with this exemption and may
make the
Shareholder "underwriters" within the meaning of the
Securities Act. It is
understood that the definition of "underwriter" focuses upon
the concept of
"distribution" and that any subsequent disposition of the
subject Exchanged
CTI Stock can only be effected in transactions which are not
considered
synonymous with "public offering" or any other offer or sale
involving general
solicitation or general advertising. Under present law, in
determining
whether a distribution occurs when securities are sold into
the public market,
under certain circumstances one must consider the
availability of public
information regarding the issuer, a holding period for the
securities
sufficient to assure that the persons desiring to sell the
securities without
registration first bear the economic risk of their
investment, and a
limitation on the number of securities which the shareholder
is permitted to
sell and on the manner of sale, thereby reducing the
potential impact of the
sale on the trading markets. These criteria are set forth
specifically in
rule 144 promulgated under the Securities Act, and, after
two years after the
date the Exchanged CTI Stock is fully paid for, as
calculated in accordance
with rule 144(d), sales of securities in reliance upon rule
144 can only be
made in limited amounts in accordance with the terms and
conditions of that
rule. After three years from the date the securities are
fully paid for, as
calculated in accordance with rule 144(d), they can
generally be sold without
meeting those conditions, provided the holder is not (and
has not been for the
preceding three months) an affiliate of the issuer.
Section 6.07 Restrictions on Transfer. The Shareholder
acknowledges that
the shares of Exchanged CTI Stock must be held and may not
be sold,
transferred, or otherwise disposed of for value unless they
are subsequently
registered under the Securities Act or an exemption from
such registration is
available. CTI is under no obligation to register the
Exchanged CTI Stock
under the Securities Act, except as may be expressly agreed
to by it in
writing. If rule 144 is available (and no assurance is
given that it will be,
except as provided in section 5.09 of this Agreement, after
two years and
prior to three years following the date the shares are fully
paid for, only
sales of such Exchanged CTI Stock in limited amounts can be
made in reliance
upon rule 144 in accordance with the terms and conditions of
that rule. CTI
is under no obligation to the undersigned to make rule 144
available, except
as may be expressly agreed to by it in writing in this
Agreement, and in the
event rule 144 is not available, compliance with regulation
A or some other
disclosure exemption may be required before the Shareholder
can sell,
transfer, or otherwise dispose of such Exchanged CTI Stock
without
registration under the Securities Act. CTI's registrar and
transfer agent
will maintain a stop transfer order against the registration
of transfer of
the Exchanged CTI Stock, and the certificate representing
the Exchanged CTI
Stock will bear a legend in substantially the following form
so restricting
the sale of such securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND
ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144
PROMULGATED
UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED
FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH
RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR
OTHER COMPLIANCE
UNDER THE SECURITIES ACT.
Section 6.08 Stop Order. CTI may refuse to register
transfer of the
Exchanged CTI Stock in the absence of compliance with rule
144 unless the
Shareholder furnish the issuer with an opinion of counsel
reasonably
acceptable to CTI stating that the transfer is permitted
under applicable law.
Section 6.09 Additional Documentation. In order to more
fully document
reliance on the exemptions as provided herein, the
Shareholder agree to
execute and deliver to CTI such further letters of
representation,
acknowledgment, suitability, or the like, as CTI and its
counsel may
reasonably request in connection with reliance on exemptions
from registration
under such securities laws.
Section 6.10 No Legal Opinion. Solutions, the
Shareholder, and CTI
acknowledge that the basis for relying on exemptions from
registration or
qualifications are factual, depending on the conduct of the
various parties,
and that no legal opinion or other assurance will be
required or given to the
effect that the transactions contemplated hereby are in fact
exempt from
registration or qualification.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTI
AND NEWCO
The obligations of CTI and NewCo under this Agreement are
subject to the
satisfaction, at or before the Closing Date, of the
following conditions:
Section 7.01 Accuracy of Representations. The
representations and
warranties made by Solutions in this Agreement shall be true
as of the
Closing, and Solutions shall have performed or complied with
all material
covenants and conditions required by this Agreement to be
performed or
complied with by Solutions prior to or at the Closing. CTI
and NewCo shall be
furnished with certificates, signed by the chief executive
officer of
Solutions and dated the Closing Date, to the foregoing
effect.
Section 7.02 Officer's Certificate. CTI and NewCo shall
have been
furnished with a certificate dated the Closing Date and
signed by the duly
authorized chief executive officer of Solutions to the
effect that:
(a) This Agreement has been duly approved by Solutions
board of directors
and stockholders and has been duly executed and delivered in
the name and on
behalf of Solutions by its duly authorized officers pursuant
to, and in
compliance with, authority granted by Solutions board of
directors;
(b) The representations and warranties of Solutions set
forth in this
Agreement are true and correct as of the date of the
certificate;
(c) There has been no material adverse change since the
date of the balance
sheet included in the Solutions Schedules in the financial
condition,
business, or operations of Solutions nor has any event
occurred which, with
the lapse of time or giving of notice, may cause or create
any material
adverse change in the financial condition, business, or
operations of
Solutions up to and including the date of the certificate,
except as
authorized by this Agreement;
(d) All material conditions required by this Agreement to
have been met,
satisfied, or performed by Solutions and have been met;
(e) The consummation of the transactions contemplated by
this Agreement does
not violate any material law, regulation, order, writ,
injunction, or decree
of any court or governmental body or result in the creation
or imposition of
any material mortgage, lien, charge, or encumbrance of any
nature upon any of
the properties of Solutions, pursuant to any mortgage,
resolution, agreement,
or instrument to which Solutions is a party;
(f) All material authorizations, consents, approvals,
registrations, and/or
filings with any governmental body, agency, or court
required in connection
with the execution and delivery of the documents
contemplated by this
Agreement by Solutions and have been obtained and are in
full force and effect
or, if not required to have been obtained will be in full
force and effect by
such time as may be required; and
(g) There is no action, suit, proceeding, inquiry, or
investigation at law
or in equity by any public board or body pending or
threatened in writing
against Solutions, wherein an unfavorable decision, ruling,
or finding would
have a material adverse effect on the financial condition of
Solutions, the
operations or business of Solutions, the acquisition and
reorganization
contemplated herein, or any material agreement or instrument
by which
Solutions is bound or would in any way contest the existence
of Solutions.
Section 7.03 Employment Agreements With ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
III. CTI and
NewCo shall have entered into Employment Agreements with
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III.
Section 7.04 Options. 20,000 options or 85% of fair
market value to be
distributed among Solutions employees.
Section 7.05 Good Standing. CTI and NewCo shall have
received a
certificate of good standing with respect to Solutions,
dated as of a date
within ten days prior to the Closing Date, certifying that
Solutions is in
good standing.
Section 7.06 UCC Certificate. CTI and NewCo shall have
received
certificates dated as of a date within five days of the
Closing Date to the
effect that there are no encumbrances of record on the
assets of Solutions,
other than those disclosed in the Solutions Schedules.
Section 7.07 Other Items. CTI shall have received such
further
documents, certificates, or instruments relating to the
transactions
contemplated hereby as CTI may reasonably request.
Section 7.08 Jordan Payment. CTI has paid the obligation
to ▇▇▇ ▇▇▇▇▇▇
and related entities.
Section 7.09 Dissenters. Arrangements have been made to
deliver shares
or comply with any dissenters' rights exercised by the other
shareholders of
Solutions.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF
SOLUTIONS, AND CALIFORNIA
AND THE SHAREHOLDER
The obligations of Solutions and the Shareholder under this
Agreement are
subject to the satisfaction, at or before the Closing Date,
of the following
conditions:
Section 8.01 Accuracy of Representations. The
representations and
warranties made by CTI and NewCo in this Agreement shall be
true as of the
Closing and CTI and NewCo shall have performed and complied
with all material
covenants and conditions required by this Agreement to be
performed or
complied with by CTI and NewCo prior to or at the Closing.
Solutions shall
have been furnished with a certificate, signed by the duly
authorized chief
executive and principal financial or accounting officer or
officers of CTI and
NewCo and dated the Closing Date, to the foregoing effect.
Section 8.02 Officer's Certificate. Solutions and the
Shareholder shall
have been furnished with certificates dated the Closing Date
and signed by the
duly authorized officer or officers of CTI and NewCo to the
effect that:
(a) This Agreement has been duly approved by CTI's and
NewCo's boards of
directors and has been duly executed and delivered in the
name and on behalf
of CTI and NewCo by duly authorized officers pursuant to,
and in compliance
with, authority granted by CTI's and NewCo's boards of
directors;
(b) The representations and warranties of CTI and NewCo set
forth in this
Agreement are true and correct as of the date of the
certificate;
(c) There has been no material adverse change since the
date of the balance
sheet included in the CTI Schedules in the financial
condition, business, or
operations of CTI and NewCo nor has any event occurred
which, with the lapse
of time or giving of notice, may cause or create any
material adverse change
in the financial condition, business, or operations of CTI
and NewCo, up to
and including the date of the certificate;
(d) All material conditions required by this Agreement to
have been met,
satisfied, or performed by CTI and NewCo have been met;
(e) The consummation of the transactions contemplated by
this Agreement does
not violate any material law, regulation, order, writ,
injunction, or decree
of any court or governmental body or result in the creation
or imposition of
any material mortgage, lien, charge, or encumbrance of any
nature upon any of
the properties of CTI and NewCo, pursuant to any mortgage,
resolution,
agreement, or instrument to which CTI and NewCo is a party;
(f) All material authorizations, consents, approvals,
registrations, and/or
filings with any governmental body, agency, or court
required in connection
with the execution and delivery of the documents
contemplated by this
Agreement by CTI and NewCo have been obtained and are in
full force and effect
or, if not required to have been obtained, will be in full
force and effect by
such time as may be required; and
(g) There is no action, suit, proceeding, inquiry, or
investigation at law
or in equity by any public board or body pending or
threatened in writing
against CTI and NewCo, wherein an unfavorable decision,
ruling, or finding
would have a material adverse effect on the financial
condition or operation
of CTI or NewCo, or the acquisition and reorganization
contemplated herein, or
any material agreement or instrument by which CTI or NewCo
is bound or would
in any way contest the existence of CTI or NewCo.
Section 8.03 Good Standing. Solutions and the Shareholder
shall have
received a certificate of good standing from the Secretary
of State of Nevada
with respect to CTI and NewCo, dated as of a date within ten
days prior to the
date of this Agreement, certifying that CTI is in good
standing as a
corporation in the state of Nevada and NewCo is in good
standing as a
corporation in the state of Nevada.
Section 8.04 Jordan Payment. CTI has paid the obligation
to ▇▇▇ ▇▇▇▇▇▇
and related entities.
Section 8.05 Dissenters. Arrangements have been made to
deliver shares
or comply with any dissenters' rights exercised by the other
shareholders of
Solutions.
Section 8.06 Other Items. Solutions and the Shareholder
shall have
received such further documents, certificates, or
instruments relating to the
transactions contemplated hereby as Solutions and the
Shareholder may
reasonably request.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Brokers. CTI and Solutions agree that there
were no finders
or brokers involved in bringing the parties together or who
were instrumental
in the negotiation, execution, or consummation of this
Agreement. Further,
CTI and Solutions each agree to indemnify the other against
any claim by any
third person for any commission, brokerage, or finder's fee
or other payment
with respect to this Agreement or the transactions
contemplated hereby based
on any alleged agreement or understanding between such party
and such third
person, whether express or implied, resulting from the
actions of such party.
The covenants set forth in this section 9.01 shall survive
the Closing and
the consummation of the transactions herein contemplated.
Section 9.02 Indemnification by the Shareholder. The
Shareholder agrees
to indemnify and hold harmless CTI and NewCo each of their
respective
directors and officers, and each person, if any, who
controls CTI or NewCo
within the meaning of the Securities Act, from and against
any and all losses,
claims, damages, expenses, liabilities, or actions and will
reimburse them for
any legal or other expenses reasonably incurred by them in
connection with
investigating or defending any claims or actions, resulting
in liability,
insofar as such losses, claims, damages, expenses,
liabilities, or actions
arise out of or are based upon any breach of any
representation, warranty,
covenant, or agreement in this Agreement by the Shareholder
or Solutions. The
indemnity agreement contained in this section 9.02 shall
remain operative and
in full force and effect, regardless of any investigation
made by or on behalf
of CTI and shall survive the consummation of the
transactions contemplated by
this Agreement for a period of three (3) years after the
Closing Date. The
Shareholder shall only be liable for any indemnity provided
under this section
109.02 related to loss in excess of $25,000 (in the
aggregate) and up to a
maximum equal to the consideration received by the
Shareholder under Article
VI hereof (in the aggregate).
Section 9.03 Indemnification by CTI. CTI agrees to
indemnify and hold
harmless the Shareholder from and against any and all
losses, claims, damages,
expenses, liabilities, or actions and will reimburse them
for any legal or
other expenses reasonably incurred by them in connection
with investigating or
defending any claims or actions, resulting in liability,
insofar as such
losses, claims, damages, expenses, liabilities, or actions
arise out of or are
based upon any breach of any representation, warranty,
covenant, or agreement
in this Agreement by CTI or NewCo. The indemnity agreement
contained in this
section 109.03 shall remain operative and in full force and
effect, regardless
of any investigation made by or on behalf of the Shareholder
and shall survive
the consummation of the transactions contemplated by this
Agreement for a
period of three (3) years after the Closing Date. CTI shall
only be liable
for any indemnity provided under this section 9.03 related
to loss in excess
of $25,000 (in the aggregate) and up to a maximum equal to
the consideration
received by the Shareholder under Article VI in the
aggregate.
Section 9.04 Tax Treatment. No representation or warranty
is being made
or legal opinion given by any party to any other regarding
the treatment of
this transaction for federal or state income taxation.
Except for the
acquisition of the shares of California, all parties intend
for the
transaction to be treated as a "tax-free" reorganization
under the provisions
of the Code and agree to take all corporate action
necessary, to file all tax
returns and reports, and prepare financial statements
consistent with the
treatment of the transaction as a reorganization under
sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code. Although this transaction has
been structured
in an effort to qualify for treatment under sections
368(a)(1)(A) and
368(a)(2)(D) of the Code, there is no assurance that any
part of this
transaction in fact meets the requirements for such
qualification. Each party
has relied exclusively on its own legal, accounting, and
other tax advisers
regarding the treatment of this transaction for federal and
state income
taxes.
Section 9.05 Governing Law. This Agreement shall be
governed by,
enforced, and construed under and in accordance with the
laws of the United
States of America and, with respect to matters of state law,
with the laws of
the state of Nevada.
Section 9.06 Notices. Any notices or other communications
required or
permitted hereunder shall be in writing and shall be deemed
sufficiently given
if personally delivered, if sent by facsimile or telecopy
transmission or
other electronic communication confirmed by registered or
certified mail,
postage prepaid, or if sent by prepaid overnight courier
addressed as follows:
If to CTI or NewCo, to:
CTI Technologies, Inc.
New Advanced Solutions of Nevada, Inc.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C.
Eighth Floor, Bank ▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation (▇▇▇) ▇▇▇-▇▇▇▇
If to Solutions:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (___) _______
Confirmation (___) _______
If to Shareholder:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (___) _______
Confirmation (___) _______
With copies to:
▇▇▇ ▇. ▇▇▇▇▇▇
Raleigh, ▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation (▇▇▇) ▇▇▇-▇▇▇▇
or such other addresses as shall be furnished in writing by
any party in the
manner for giving notices hereunder, and any such notice or
communication
shall be deemed to have been given as of the date so
delivered or sent by
facsimile or telecopy transmission or other electronic
communication, or one
day after the date so sent by overnight courier.
Section 9.07 Attorneys' Fees. In the event that any party
institutes any
action or suit to enforce this Agreement or to secure relief
from any default
hereunder or breach hereof, the breaching party or parties
shall reimburse the
nonbreaching party or parties for all costs, including
reasonable attorneys'
fees, incurred in connection therewith and in enforcing or
collecting any
judgment rendered therein.
Section 9.08 Costs. Each of the parties shall bear its
respective costs
associated with this Agreement and the transactions
contemplated hereby,
including legal fees, accounting fees, and other costs and
expenses.
Section 9.09 Schedules; Knowledge. Whenever in any
section of this
Agreement reference is made to information set forth in the
CTI Schedules or
Solutions Schedules such reference is to information
specifically set forth in
such schedules and clearly referenced to identify the
section of this
Agreement to which the information relates. Whenever any
representation is
made to the "knowledge" of any party, it shall be deemed to
be a
representation that such officer or director has made a
reasonable
investigation of such matters.
Section 9.10 Third-Party Beneficiaries. This Agreement is
solely between
CTI and Solutions and the Shareholder, and no director,
officer, stockholder,
employee, agent, independent contractor, or any other person
or entity shall
be deemed to be a third party beneficiary of this Agreement.
Section 9.11 Entire Agreement. This Agreement, together
with the other
agreements entered into between the parties
contemporaneously with this
Agreement (this Agreement and such other documents
collectively referred to as
the "Transaction Documents"), represent the entire agreement
between the
parties relating to the subject matter hereof. All previous
agreements
between the parties, whether written or oral, have been
merged into the
Transaction Documents. The Transaction Documents fully and
completely express
the agreement of the parties relating to the subject matter
hereof. There are
no other courses of dealing, understandings, agreements,
representations, or
warranties, written or oral, except as set forth in the
Transaction Documents.
Section 9.12 Survival. The representations, warranties,
and covenants of
the respective parties shall survive the Closing of the
transactions
contemplated hereby.
Section 9.13 Counterparts. This Agreement may be executed
in multiple
counterparts, each of which shall be deemed an original and
all of which taken
together shall be but a single instrument.
Section 9.14 Amendment or Waiver. Every right and remedy
provided herein
shall be cumulative with every other right and remedy,
whether conferred
herein, at law, or in equity, and may be enforced
concurrently herewith, and
no waiver by any party of the performance of any obligation
by the other shall
be construed as a waiver of the same or any other default
then, theretofore,
or thereafter occurring or existing. This Agreement shall
only be amended by
a writing signed by all parties hereto, with respect to any
of the terms
contained herein, and any term or condition of this
Agreement may be waived or
the time for performance thereof may be extended by a
writing signed by the
party or parties for whose benefit the provision is
intended.
Section 9.15 Severability. If and to the extent that any
court of
competent jurisdiction holds any provision, or any part
thereof, of this
Agreement to be invalid or unenforceable, such holding shall
in no way affect
the validity of the remainder of this Agreement which shall
continue in full
force and effect.
Section 9.16 Successors and Assigns. This Agreement shall
insure to the
benefit of and be binding on the parties and their
successors, assigns, heirs,
executors, and administrators.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be
executed by their respective officers, hereunto duly
authorized, as of the
date first above written.
CTI:
CTI TECHNOLOGIES, INC.
By
Duly Authorized Officer
NEWCO:
NEW ADVANCED SOLUTIONS OF NEVADA, INC.
By
Duly Authorized Officer
SOLUTIONS:
AUTOMATED SOLUTIONS, INC.
By
Duly Authorized Officer
SHAREHOLDER:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III