AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter referred to
as the "Agreement")
is entered into this ___ day of February, 1996 by and among
CUSA
Technologies, Inc., a Nevada corporation ("CTI"), New Source
Computing, Inc.,
a Utah corporation ("NewCo"), Source Computing, Inc., an
Arizona corporation
("Source"), and Xxxxxxx X. Brothers, Xxxxxxx X. XxXxxxx, and
Xxxxxx X.
Xxxxxxxxx (collectively, the "Shareholders") 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 the
health care industry. Source is a privately-held
corporation that develops
and markets software systems for the health care industry.
B. The Shareholders own one hundred percent (100%) of the
issued and
outstanding stock of Source.
C. The parties have agreed that Source will be acquired as
a wholly-owned
subsidiary of CTI, on the terms and conditions set forth in
this Agreement.
D. The acquisition of Source by CTI shall be effected
through the merger of
Source with and into NewCo, a newly formed, wholly-owned
subsidiary of CTI,
with NewCo as the surviving entity. In connection with the
transaction, the
outstanding shares of common stock of Source will be
canceled in exchange for
shares of restricted common voting stock of CTI, cash, and a
note, 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
Source and shall
thereafter continue business as a wholly-owned subsidiary of
CTI.
AGREEMENT
NOW, THEREFORE, based on the stated premises, and for and in
consideration of
the mutual covenants and agreements hereinafter set forth
and the mutual
benefits to the parties to be derived therefrom, it is
hereby agreed as
follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the
meanings indicated:
Section 1.01 Agreement. This Agreement and Plan of
Merger, all Schedules
and Exhibits hereto and all amendments, modifications, and
supplements hereto.
Section 1.02 Closing. The consummation of the transactions
contemplated by
this Agreement.
Section 1.03 Closing Date. The date on which 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 set forth in the
closing memorandum
between the parties.
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 to the Shareholders pursuant to
this Agreement.
Section 1.10 GAAP. Generally accepted accounting
principles, as in effect on
the Effective Date, applied on a consistent basis.
Xxxxxxx 0.00 XXX. Xxx Xxxxxx Xxxxxx Securities and
Exchange Commission.
Section 1.12 Securities Act. The Securities Act of 1933,
as amended.
Section 1.13 Source Stock. The 1,255 shares of common
stock of Source, owned
by the shareholders, no par value, currently issued and
outstanding, which are
to be converted into shares of Exchanged CTI Stock pursuant
to the terms of
this Agreement.
Section 1.14 Shareholders. Xxxxxxx X. Brothers, Xxxxxxx X.
XxXxxxx, and
Xxxxxx X. Xxxxxxxxx, who own one hundred percent (100%) of
the issued and
outstanding shares of Source Stock that will be converted
into shares of
Exchanged CTI Stock pursuant to the terms of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
SOURCE
AND THE SHAREHOLDERS
As an inducement to, and to obtain the reliance of CTI and
NewCo, Source and
the Shareholders each represent and warrant that the
following are true to
the best of their knowledge:
Section 2.01. Organization. Source is a corporation duly
organized, validly
existing, and in good standing under the laws of the State
of Arizona 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 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
Source. Included in
the Source Schedules (as hereinafter defined) are complete
and correct copies
of the articles of incorporation and bylaws of Source 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
Source's articles of
incorporation or bylaws.
Section 2.02 Approval of Agreement. The board of directors
of Source and the
Shareholders have authorized the execution and delivery of
this Agreement by
Source and have approved the consummation of the
transactions contemplated
hereby. Included in the Source Schedules is a copy of the
resolutions duly
adopted by the board of directors of Source and the
Shareholders evidencing
such approval. Such consent has not been amended, modified,
rescinded or
superseded and remains in full force and effect. Source has
full power,
authority, and legal right, and has taken all action
required by law, its
articles of incorporation and bylaws, and otherwise, to
execute and deliver
this Agreement and to consummate the transactions
contemplated hereby.
Section 2.03 Authority of Shareholders. Each of the
Shareholders 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. There is no lien, encumbrance or claim by any third
person with
respect to the Source Stock owned by the Shareholders.
Section 2.04 Capitalization of Source. The entire
authorized capital stock
of Source consists of 100,000 shares of common stock, no par
value, of which
1,255 shares are validly issued and outstanding. All of
the issued and
outstanding Source Stock is owned by the Shareholders. No
shares of Source
Stock 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 Source or any of the Shareholders are a party or to
which any of them
are subject. All issued and outstanding shares have been
duly authorized and
validly issued, are fully paid, and nonassessable, and have
not been issued in
violation of any preemptive or other right of any person.
Section 2.05 Subsidiaries and Predecessor. Source has no
subsidiaries or any
predecessor corporation as that term is defined by GAAP.
Section 2.06 Financial Statements.
(a) Included in the Source Schedules are the unaudited
balance sheets of
Source as of January 31, 1995, 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 unaudited balance sheet
as of September
30, 1995, and the unaudited statements of income and
retained earnings for the
period then ended, together with the accompanying notes.
(b) Such financial statements have been prepared in
accordance with GAAP,
except as disclosed in the Source Schedules. Source 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 labilities or obligations
(absolute or
contingent) which should have been reflected in a combined
balance sheet
prepared in accordance with GAAP and all assets reflected
therein present
fairly the assets of Source, in accordance with GAAP. The
statements of
income fairly present the information required to be set
forth therein in
accordance with GAAP. Source 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 Source and its accounting
practices are
sufficient to permit the preparation of audited financial
statements for the
periods subsequent to January 31, 1993, in accordance with
GAAP and Regulation
S-B adopted under the Exchange Act. Source 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. Source
and the Shareholders
will each cooperate fully and assist in the preparation of
any such financial
statements, at the cost of CTI.
(d) Source has filed all tax returns and all reports
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. Source 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 Source
Schedules and all such dates and years and periods prior
thereto and for which
Source may at said date have been liable in its own right or
as transferee of
the assets of, or as a successor to, any other corporation
or other entity,
except for taxes accrued but not yet due and payable. None
of such federal
income returns have been audited or is currently being
audited by the Internal
Revenue Service. Source 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
Source, its
financial conditions, 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
limitations applicable to any tax returns of Source.
(e) The books and records, financial and otherwise, of
Source 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
Source. Source has maintained a system of internal
accounting controls
sufficient to provide reasonable assurance 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 Source Schedules, the latest
of the balance
sheets included in the Source Schedules or in the notes
thereto, Source (i)
has good and marketable title to its accounts receivable,
and other debts due
or recorded in the records and books of account of Source,
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 Source for the total dollar
amount thereof
shown on the books of Source and resulted from the regular
course of business;
and (ii) the accounts receivable, invoices, and debts set
forth on the Source
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 Source or
successor personnel and without resorting to litigation and
in any event not
later than one hundred eighty (180) days after the date
billed.
Section 2.07 Information. The information concerning
Source set forth in
this Agreement and in the Source Schedules is 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. There are no existing
warrants, calls,
commitments or other rights of any character relating to
authorized and
unissued Source Stock or other securities of Source.
Section 2.09 Absence of Certain Changes or Events. Except
as set forth in
this Agreement or in the Source Schedules, since the date of
the most recent
balance sheet included in the Source Schedules:
(a) There has not been (i) any material adverse change in
the business,
operation, assets or financial condition of Source; or (ii)
any damage,
destruction or loss to Source (whether or not covered by
insurance) materially
and adversely affecting the business, operations, assets or
financial
condition of Source;
(b) Source has not (i) amended its article of incorporation
or bylaws; (ii)
declared or made, or agreed to declare and make, any payment
of dividends or
distributions of any assets of any kind whatsoever to
shareholders 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
Source; (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 Five Thousand Dollars
($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) Source 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; (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 Five Thousand Dollars ($5,000) 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 Source; 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) Source has not become subject to any law or regulation
which materially
and adversely affects the business, operation, properties,
assets or financial
condition of Source.
Section 2.10 Title to Personal and Real Property.
(a) Except as disclosed in the most recent balance sheet
included in the
Source Schedules, Source has title to all of its properties,
inventory, know-
how, interests in properties, and assets, which are
reflected in such balance
sheet 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 Source's
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 on the Source Schedules. All
personal property held by
Source 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) Source does not own any real property in fee simple.
(c) Included in the Source Schedules is an accurate and
complete list of all
personal property owned by Source or used in its business
and having a
purchase price of over Five Thousand Dollars ($5,000),
together with a
description of any mortgages, financing instruments or other
encumbrances to
the title to such properties. Also included in the Source
Schedules are
copies of all leases for real and personal property to which
Source is a
party. Except as disclosed in the Source 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 of
postponement of the
lessee's obligations 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 Source. Except as
set forth in the
Source Schedules, Source 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 Source is in a state of
good maintenance
and repair, excepting reasonable wear and tear, and is
suitable for the
purposes for which it is presently being used.
Section 2.11 Intellectual Property. Source owns the entire
right, title and
interest in and to its proprietary intellectual property
listed in the Source
Schedules, including all of the trade secrets, technology,
know-how, trade
names, trademarks, service marks, copyrights, patents,
patent applications,
registrations, and applications with respect thereto, and
other proprietary
information owned or used in connection with its
business(collectively, the
("Intellectual Property"). Except as set forth in the
Source Schedules, such
Intellectual Property is not subject to the payment of
royalties or the
performance of any other obligation owed to any person or
entity. Neither the
Shareholders nor any other employee or former employee of
Source 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. There
are no pending or threatened proceedings, litigation or
other adverse claims
of which Source 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 Source as now being conducted and as
proposed to be conducted.
Section 2.12 Litigation and Proceedings. There are no
actions, suits or
proceedings pending or, to the knowledge of Source and the
Shareholders,
threatened by or against Source or affecting Source 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.
Source is not in material default with respect to any
judgment, order, writ,
injunction, decree, award, rule or regulation of any court,
arbitrator,
governmental agency or instrumentality.
Section 2.13 Contracts.
(a) Included in the Source Schedules is a description of
every contract,
agreement, distributorship, franchise, license or other
agreement, arrangement
or commitment to which Source is a party or by which its
assets or properties
are bound, which calls for the payment by Source of more
than Two Thousand
Dollars ($2,000) per month, or Twenty-Four Thousand Dollars
($24,000) in the
aggregate;
(b) Except as described in this Agreement or the Source
Schedules, Source is
not a party to or bound by, and the properties of Source are
not subject to,
any contract, agreement, other commitment or instrument 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 Source can
now reasonably foresee) materially and adversely affect, the
business
operations, properties, assets or financial condition of
Source; and
(c) Except as included or described in the Source Schedules
or reflected in
the most recent Source balance sheet, Source 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 Five Thousand Dollars
($5,000) per month,
which is not terminable on thirty (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 One Thousand Dollars ($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 One Thousand Dollars ($1,000); (v)
consulting or
other similar contracts with an unexpired term of more than
one (1) year or
providing for payments in excess of One Thousand Dollars
($1,000) in the
aggregate; (vi) collective bargaining agreement; (vii)
agreement with any
present or former officer or director of Source whose
compensation was or is
greater that Five Thousand Dollars ($5,000) per month; or
(viii) other
contract, agreement or other commitment involving payments
by it in the future
of more than Ten Thousand Dollars ($10,000) in the aggregate
per agreement.
Section 2.14 Material Contract Defaults. Source 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 Source, and there is no
event of default or
other event which, with notice or the 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 Source has not taken
adequate steps to
prevent such default occurring.
Section 2.15 Insurance Claims. During the last (3) three
years, Source has
not filed any claims for damages, whether or not covered by
insurance, for
amounts greater than Five Thousand Dollars ($5,000). Source
and the
Shareholders are 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 Source
is a party or to which any of its properties or operations
are subject, which
would have a material adverse affect on Source.
Section 2.17 Governmental Authorizations. Source 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 or as presently contemplated.
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
Source of this
Agreement and the consummation by Source of the transactions
contemplated
hereby.
Section 2.18 Compliance with Laws and Regulations. Source
has complied with
all applicable statutes and regulations of all 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 Source or
except to the extent
that noncompliance would not result in the incurrence of any
material
liability of Source. Included in the Source Schedules is a
copy of each
letter of inquiry, review or investigation or other writing
from or to any
governmental authority, evidencing a violation or possible
or alleged
violation of any of the foregoing.
Section 2.19 Insurance. Included in the Source Schedules
is a complete list
of all business liability, casualty, automobile, extended
coverage, and other
insurance policies which Source maintains respecting its
products, services,
business, properties, and employees, showing for each type
of coverage the
policy limits, principal exclusions, deductibles, insurer,
premiums, term, 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 Source 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 Source Schedules
is a description of every contract, agreement or arrangement
between Source
and any person who is or has ever been during the previous
three (3) years an
officer or director of Source or person owning of record, or
known to Source
to own beneficially, five percent (5%) or more of the issued
and outstanding
common stock of Source 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 Source
and the amount paid
or received, whether in cash, 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 Source than terms
available from otherwise
unrelated parties in arms' length transactions. Except as
set forth in the
Source Schedules or otherwise disclosed herein, no officer
or director of
Source or five percent (5%) shareholder of Source has, or
has had during the
preceding three (3) years, any interest, directly or
indirectly, in any
material transaction with Source. The Source Schedules also
include a
description of any commitment by Source, 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. Source 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 Source.
There is no strike or
other labor dispute involving Source pending or threatened,
which could have a
material adverse effect on the assets, properties, financial
condition,
operating results or business of Source or (as such business
is presently
conducted and it is proposed to be conducted), and Source is
not aware of any
labor organization activity involving its employees. Source
is not aware that
any officer or key employee, or that any group of key
employees, intends to
terminate their employment with Source, nor does Source have
a present
intention to terminate the employment of any of the
foregoing. Except as set
forth in the Source Schedules, the employment of each
officer and employee of
Source is terminable at the will of Source.
Section 2.22 Pension Reform Act of 1974. Except as set
forth in
the Source Schedules, Source 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
Source actual knowledge of the inaccuracy of any statements
has come to the
attention of Source 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, ground
waters, 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, and any
other federal, state
or local environmental law, regulation, ordinance, rule or
bylaw existing as
of the date hereof.
(v) "Permit" shall mean any environmental permit, license,
approval, consent
or authorization issued by a federal, state or local
governmental authority.
(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 Source's Current Actual Knowledge, Source:
(i) Does not have any material liability under any
Environmental Laws
applicable to its operations;
(ii) Possesses all Permits that are applicable to its
operations; and
(iii) Has not been involved in a Release or Threat of
Release involving any
Hazardous Material.
(c) Source has not violated any Environmental Laws
applicable to its
operation, the violation or noncompliance with which would
have a material
adverse effect on Source.
(d) Source 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
operation 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 of operation 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 operation
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 operation
thereon.
Section 2.24 Source Schedules. Source has delivered to CTI
the following
schedules, which are collectively referred to as the "Source
Schedules." The
Source Schedules shall be updated through the Closing Date
and shall be
certified by the chief executive officer of Source as
complete, true, and
accurate:
(a) A schedule including copies of the articles of
incorporation and bylaws
of Source in effect as of the date of this Agreement
referred to in Section
2.01;
(b) A schedule containing copies of resolutions adopted by
the board of
directors of Source and the Shareholders 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 January 31, 1995 and 1994, identified in
Section 2.06;
(e) A schedule listing the accounts receivable and notes
and other
obligations receivable of Source as of the date of the most
recent balance
sheet included in the Source Schedules or that arose
thereafter other than in
the 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, set-offs,
reimbursements,
discounts or other adjustments, which in the aggregate are
greater that
$1,000, due to or claimed by such debtors;
(f) A schedule listing the accounts payable and notes and
other obligations
payable of Source as of the date of the most recent balance
sheet included in
the Source Schedules or that arose thereafter other than in
the ordinary
course of business of Source, 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, set-offs,
reimbursements,
discounts or other adjustments, which in the aggregate are
greater than One
Thousand Dollars ($1,000), payable by Source to any one such
creditor;
(g) A schedule setting forth a description of any material
adverse change in
the business, operations, property, assets or financial
condition of Source
since the most recent balance sheet included in the Source
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 Five Thousand Dollars ($5,000) ( and
descriptions of any
such agreements, arrangements or practices which are not in
writing), together
with a schedule setting forth the name and identification of
each officer,
director or employee whose monthly compensation exceeds Five
Thousand Dollars
($5,000) and of each former officer or former employee of
Source who is
currently being paid or who is entitled to, or may become
entitled to,
compensation in amounts greater than Five Thousand Dollars
($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
Shareholder;
(i) A schedule containing a description of all personal
property owned by
Source and used in its business and having a purchase price
of over Ten
Thousand Dollars ($10,000), including a description of every
material
mortgage, financing instrument or encumbrance to which such
personal property
of Source 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 Source is a
party or by which
its 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 referred to in
Section 2.15;
(n) Copies of all licenses, permits, and other governmental
authorizations
(or requests or applications therefor) pursuant to which
Source carries on or
proposes to carry on its business (except those which are
immaterial to the
present or proposed business of Source), 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 Source 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 Source 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 Source now in
effect or to be
in effect; and
(t) A schedule setting forth any other information,
together with any
required copies of documents, required to be disclosed in
the Source Schedules
by Sections 2.01 through 2.23.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF CTI AND NEWCO
As an inducement to, and to obtain the reliance of Source
and the
Shareholders, CTI and NewCo each represent and warrant as
follows:
Section 3.01. Organization. CTI and NewCo are corporations
duly organized,
validly existing, and in good standing under the laws of the
States of Nevada
and Utah, respectively, and each 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 either is not
qualified in which the character and location of the assets
owned by either of
them or the nature of the business transacted by either of
them requires
qualification, except where failure to do so would not have
a material adverse
effect on the business or properties of CTI. Included in
the CTI Schedules
(as hereinafter defined) are complete and correct copies of
the articles of
incorporation and bylaws of CTI and NewCo 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 CTI's or NewCo's
articles of
incorporation or bylaws.
Section 3.02 Approval of Agreement. The boards of
directors of CTI and NewCo
have authorized the execution and delivery of this Agreement
by CTI and NewCo
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. Such
resolutions have not been amended, modified, rescinded or
superseded and
remains in full force and effect. Each of CTI and NewCo has
full power,
authority, and legal right, and has taken all action
required by law, its
articles of incorporation, its bylaws, and otherwise, to
execute and deliver
this Agreement and to consummate the transactions
contemplated hereby.
Section 3.03 Authority of CTI and NewCo. Except as set
forth in the CTI
Schedules, each of NewCo and CTI 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.
Section 3.04 Capitalization of CTI 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 8,654,846
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 its
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 any preemptive or other right
of any person.
All shares of Exchanged CTI Common 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
any preemptive or
other right of any person.
Section 3.05 Subsidiaries and Predecessor. CTI was
formerly known as
Mountain Surgical Centers, Inc., which was formerly known as
Dimension
Capital. CTI has sixteen (16) wholly-owned subsidiaries,
some of which have
second-tier subsidiaries.
Section 3.06 Financial Statements.
(a) Included in the CTI Schedules is the audited balance
sheet of CTI as of
June 30, 1995, and the related audited statements of
earnings, stockholders'
equity, and cash flows for each of the two (2) 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 sheet 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 said CTI
balance sheets,
except as and to the extent reflected or reserved against
therein, any
liabilities or obligations (absolute or contingent) which
should have been
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 established and maintained 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
requirements for financial statements to be filed with the
SEC.
Section 3.07 Information. The information concerning CTI
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 3.08 Options or Warrants. There are no existing
warrants, calls,
commitments or other rights of any character relating to
authorized and
unissued CTI stock, except (a) options, warrants, calls or
commitments, if
any, to which CTI is not a party and by which it is not
bound; (b) options to
acquire an aggregate of not more than 2,000,000 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) an
aggregate of 483,333 shares of CTI Common Stock for
convertible debt.
Section 3.09 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 3.06 and included in the
CTI Schedules:
(a) There has not been (i) any material adverse change in
the business,
operation, assets or condition of CTI; or (ii) any damage,
destruction or loss
to CTI (whether or not covered by insurance) materially and
adversely
affecting the business, operations, assets or conditions of
CTI;
(b) CTI has not (i) amended its article of incorporation or
bylaws; (ii)
declared or made, or agreed to declare and make, any payment
of dividends or
distributions of any assets of any kind whatsoever to
shareholders or
purchased or redeemed, or agreed to purchase or redeem, more
than 50,000
shares any of its capital stock; (iii) waived any rights of
value which in the
aggregate are extraordinary or material considering the
business of CTI; or
(iv) made any material change in its method of management,
operation or
accounting which is material to CTI;
(c) CTI 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 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
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
Ten Thousand Dollars ($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 CTI; 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, CTI has not become
subject to any law or
regulation which materially and adversely affects, or in the
future may
materially and adversely affect, the business, operation,
properties, assets
or financial condition of CTI.
Section 3.10 Litigation and Proceedings. There are no
actions, suits or
proceedings pending or, to the best knowledge of CTI,
threatened in writing by
or against CTI or affecting CTI 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. CTI is not
in material default
with respect to any judgment, order, writ, injunction,
decree, award, rule or
regulation of any court, arbitrator, governmental agency or
instrumentality.
Section 3.11 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 is a
party or to which any of its properties or operations are
subject, which would
have a material adverse affect on CTI.
Section 3.12 Material Contract Defaults. CTI 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 CTI, and there is no event
of default or
other event which, with notice or the 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 has not taken
adequate steps to
prevent such default occurring.
Section 3.13 Governmental Authorizations. Except as set
forth in the CTI
Schedules, to the best knowledge of CTI, it 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 or as presently contemplated. 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 CTI of this Agreement and
the consummation
by CTI of the transactions contemplated hereby.
Section 3.14 Compliance with Laws and Regulations. Except
as set forth in
the CTI Schedules, CTI 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 CTI or except to the extent that noncompliance
would not result
in the incurrence of any material liability of CTI.
Section 3.15 CTI Schedules. CTI has delivered to Source
and the Shareholders
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 3.01;
(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 3.02.
(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 since
September 30, 1995,
required to be provided pursuant to Section 3.09 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 3.01 through 3.14.
ARTICLE IV
PLAN OF REORGANIZATION
Section 4.01 Terms of Reorganization. The consideration
for the merger of
Source into NewCo as a wholly-owned subsidiary of CTI,
subject to all of the
terms, covenants, and conditions set forth in this
Agreement, shall be:
(a) 103,500 shares of CTI's restricted voting common stock;
(b) Sixty-Seven Thousand Five Hundred Dollars ($67,500)
payable at Closing;
and
(c) A promissory note in the amount of One Hundred Fifty-
Seven Thousand Five
Hundred Dollars ($157,500), payable to the Shareholders and
delivered at
Closing, substantially in the form of the promissory note
attached hereto as
Exhibit "A" (the "Note"). The Note will be secured by the
grant of a security
interest in the accounts receivable, customer contracts, and
intellectual
property of NewCo, substantially in the form of the security
agreement
attached hereto as Exhibit "B" (the "Security Agreement").
The consideration will be distributed to the Shareholders as
follows:
Shareholders' Distribution
Shareholder Shares of Cash at Cash
CTI Stock Closing from Note
Xxxxxxx X.
Brothers 51,957 $33,885 $79,065
Xxxxxxx X.
XxXxxxx 41,234 $26,892 $62,748
Xxxxxx X.
Xxxxxxxxx 10,309 $6,723 $15,687
Section 4.02 The Merger. The articles of merger and plan
of merger shall
provide for the merger of Source with and into NewCo, with
NewCo as the
surviving entity. The merger shall result in the following:
(a) The Source Stock shall be converted into an aggregate
of One Hundred
Three Thousand Five Hundred (103,500) shares of CTI Common
Stock. All shares
of common stock held by Source as treasury shares shall be
canceled. 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 5.07.
(b) Upon the Closing Date of the merger, the Shareholders
shall, on the
surrender of the certificate or certificates representing
the Source 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 Source Stock
shall be canceled,
and all rights in respect thereof shall cease.
Section 4.03 Tax Obligations. The Shareholders shall be
solely responsible
for any tax due from the Shareholders with respect to the
receipt by the
Shareholders of the consideration set forth in Section 4.01
of the Agreement
and any tax obligation incurred or accrued by Source or the
Shareholders.
Section 4.04 Closing Events.
(a) The Closing shall take place at the offices of Source
located at 000
Xxxxx 00xx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 on or
before February 10,
1996, or at such other place or at such other time or on
such other date as
the parties hereto may mutually agree.
(b) Subject to the terms and conditions of this Agreement,
at the Closing on
the Closing Date:
(i) The Shareholders shall deliver to CTI share
certificates representing all
of the Source Stock duly endorsed in blank or accompanied by
duly executed
stock powers (in blank).
(ii) Source and the Shareholders shall deliver to CTI the
certificates,
Source Schedules, and other documents and instruments to be
delivered under
Section 2.24 and Article VI hereof, 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.
(iii) CTI shall pay to the Shareholders the amount of cash
which the
Shareholders have the right to receive in respect of the
surrendered Source
Stock pursuant to Section 4.01(b) and shall deliver the Note
and Pledge, along
with the shares of NewCo stock to perfect the security
interest granted under
the Pledge, pursuant to Section 4.01(c).
(iv) CTI shall deliver to the Shareholders share
certificates representing
the Exchanged CTI Stock which the Shareholders have the
right to receive in
respect of the surrendered Source Stock pursuant to Section
4.01(a), issued in
such names and in such denominations as are designated by
the Shareholders not
less than five days before the Closing Date.
(v) CTI shall deliver to Source and the Shareholders the
certificates, CTI
Schedules, and other documents and instruments to be
delivered under Section
3.15 and Article VII hereof, 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.
(c) CTI, NewCo, and Source, respectively, each shall use
its reasonable
efforts to take all such action as may be necessary or
appropriate to
effectuate the merger as provided herein. If, at any time
after the Closing
Date, any further action is necessary or desirable to carry
out the purposes
of this Agreement and to vest NewCo with full right, title
and possession to
all properties, interests, assets, rights, privileges,
immunities, powers and
franchises of Source, the officers of NewCo are fully
authorized in the name
of Source and NewCo or otherwise to take, and shall take,
all such lawful and
necessary action.
Section 4.05 Effective Date. 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 Source with and into NewCo shall become effective
in accordance with
the laws of the State of Utah.
Section 4.06 Effect of Merger. On the Effective Date of
the merger, NewCo
and Source shall cease to exist separately, and Source 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 Utah. 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 Source; all property, real, personal, and mixed,
and all debts due
to either of NewCo or Source on whatever account and all
other things
belonging to each of NewCo and Source 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 Source; the
title to any real
estate, whether vested by deed or otherwise, in either NewCo
or Source 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 Source shall be preserved unimpaired, and all
debts, liabilities, and
duties of NewCo and Source 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 4.07 Termination.
(a) This Agreement and the merger contemplated hereby may
be terminated at
any time prior to the Effective Date by the mutual consent
of both CTI and
Source through action of their respective boards of
directors. In the event
of termination pursuant to this Section 4.07(a), 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
Source 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
Source contained herein shall be inaccurate in any material
respect. In the
event of termination pursuant to this Section 4.07(b), 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.
(c) This Agreement and the merger may be terminated at any
time prior to the
Effective Date by action of Source's 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 Section
4.07(c), 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.
Section 4.08 Source Profit Sharing Plan.
Source has a profit sharing plan in which the Shareholders
and certain
employees participate. Source intends to terminate this
profit sharing plan
prior to the merger. In the event it is unable to do so for
whatever reason,
the Shareholders shall maintain control of the profit
sharing plan and its
assets.
ARTICLE V
THE ACQUISITION OF THE EXCHANGED CTI STOCK
Section 5.01 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 5.02 Representations by the Shareholders. In order
to provide
documentation for reliance upon such exemptions, the
approval by Source and
the Shareholders of this Agreement and the transactions
contemplated hereby
shall constitute the parties' acceptance of, and concurrence
in, the following
representations and warranties:
(a) Source and the Shareholders acknowledge that neither
the SEC 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) Source and the Shareholders have received and read this
Agreement and 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, and
understand the risks related to the consummation of the
transactions herein
contemplated. Source and the Shareholders have been given
an opportunity to
meet with and ask questions or management of CTI concerning
the business,
operations, and assets of CTI and the transactions
contemplated by this
Agreement.
(c) The Shareholders have such knowledge and experience in
business and
financial matters that they are capable of evaluating CTI
and its business
operations.
(d) The Shareholders are acquiring the Exchanged CTI Stock
for their own
account and not with a view for resale to others.
Section 5.03 Investment Intent. The Shareholders 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 5.04 No Public Solicitation. Source and the
Shareholders 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 5.05 Ability to Bear Risk of Investment. The
Shareholders have
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 obtained through this
Agreement. The
Shareholders 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 5.06 No Registration. The Shareholders understand
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
Shareholders "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 or the
preceding three months) an affiliate of the issuer.
Section 5.07 Restrictions on Transfer. The Shareholders
acknowledge 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. If Rule 144 is available (and no assurance
is given that it
will be), 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, and in the event Rule 144 is not available,
compliance with
Regulation A or some other disclosure exemption may be
required before the
Shareholders 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 5.08 Stop Order. CTI may refuse to register
transfer of the
Exchanged CTI Stock in the absence of compliance with Rule
144 unless the
Shareholders furnish the issuer with an opinion of counsel
reasonably
acceptable to CTI stating that the transfer is permitted
under applicable law.
Section 5.09 Additional Documentation. In order to more
fully document
reliance on the exemptions as provided herein, the
Shareholders 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 5.10 No Legal Opinion. Source, the Shareholders,
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.
Section 5.11 SEC Filings. CTI agrees that it will file all
reports required
to be filed with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act,
such that the current public information requirement of Rule
144(c)(1),
promulgated under the Securities Act, shall be met.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTI
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 6.01 Accuracy of Representations. The
representations and warranties
made by Source and the Shareholders in this Agreement shall
be true as of the
Closing, and Source and the Shareholders shall have
performed or complied with
all material covenants and conditions required by this
Agreement to be
performed or complied with by Source or the Shareholders,
respectively, prior
to or at the Closing. CTI and NewCo shall be furnished with
a certificate,
signed by the chief executive officer of Source and dated
the Closing Date, to
the foregoing effect.
Section 6.02 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 Source to the effect that:
(a) This Agreement has been duly approved by Source board
of directors and
the Shareholders and has been duly executed and delivered in
the name and on
behalf of Source by its duly authorized officer is pursuant
to, and in
compliance with, authority granted by Source's board of
directors;
(b) The representations and warranties of Source 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 Source Schedules in the financial
condition, business,
or operations of Source 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 Source
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 Source and the Shareholders 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 Source, pursuant to any mortgage,
resolution, agreement, or
instrument to which Source 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 Source 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
so, wherein an unfavorable decision, ruling, or finding
would have a material
adverse effect on the financial condition of Source, the
operations or
business of Source, the acquisition and reorganization
contemplated herein, or
any material agreement or instrument by which Source is
bound or would in any
way contest the existence of Source.
Section 6.03 Good Standing. CTI and NewCo shall have
received a certificate
of good standing with respect to Source, dated as of a date
within twenty (20)
days prior to the Closing Date, certifying what Source is in
good standing as
a corporation in Arizona.
Section 6.04 UCC Certificate. CTI shall have received an
Arizona Uniform
Commercial Code certificate dated as of a date within five
(5) days of the
Closing Date to the effect that there are no encumbrances of
record on the
assets of Source, other than those disclosed in the Source
Schedules.
Section 6.05 Employment Agreement. Xxxxxxx X. Brothers has
executed an
employment agreement with CTI, NewCo and Source.
Section 6.06 Other Items. CTI and NewCo shall have
received such further
documents, certificates, or instruments relating to the
transactions
contemplated hereby as CTI and NewCo may reasonably request.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF SOURCE AND THE SHAREHOLDERS
The obligations of Source and the Shareholders 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 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. Source 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 7.02 Officer's Certificate. Source and the
Shareholders 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 board 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 and
NewCo, or the merger contemplated herein, or any material
agreement or
instrument by which CTI and NewCo are bound or would in any
way contest the
existence of CTI and NewCo.
Section 7.03 Good Standing. Source and the Shareholders
shall have received
a certificate of good standing from the Secretary of State
of Nevada with
respect to CTI, dated as of a date within ten (10) days
prior to the date of
this Agreement, certifying that CTI is in good standing as a
corporation in
the State of Nevada.
Section 7.04 Employment Agreement. Xxxxxxx X. Brothers has
executed an
employment agreement with CTI and Source.
Section 7.05 Grant of Options. CTI will grant options to
current employees
of Source to purchase a total of 25,000 shares of CTI stock.
The exercise
price of the options will be eighty-five percent (85%) of
the market price on
the date of grant and the options will vest over a five (5)
period.
Section 7.06 Other Items. Source and the Shareholders
shall have received
such further documents, certificates, or instruments
relating to the
transactions contemplated hereby as Source and the
Shareholders may reasonably
request.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Brokers. CTI and Source 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 Source 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 8.01 shall survive the
Closing and the
consummation of the transactions herein contemplated.
Section 8.02 Indemnification by the Shareholders. The
Shareholders agree to
indemnify and hold harmless CTI and NewCo and each of their
respective
directors and officers, and each person, if any, who
controls CTI and 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 of
Ten Thousand Dollars ($10,000) or more, insofar as such
losses, claims,
damages, expenses, liabilities or actions arise directly out
of any breach of
any representation, warranty, covenant, or agreement in this
Agreement by the
Shareholders or Source. The indemnity agreement contained
in this Section
8.02 shall remain operative and in full force and effect,
regardless of any
investigation made by or on behalf of CTI and NewCo and
shall survive the
consummation of the transactions contemplated by this
Agreement for a period
of three (3) years after the Closing Date.
Section 8.03 Indemnification by CTI and NewCo. CTI and
NewCo agree to
indemnify and hold harmless the Shareholders 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,
resulting in liabililty of Ten Thousand Dollars ($10,000) or
more, 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 and NewCo. The indemnity
agreement
contained in this Section 8.03 shall remain operative and in
full force and
effect, regardless of any investigation made by or on behalf
of the
Shareholders and shall survive the consummation of the
transactions
contemplated by this Agreement for a period of three (3)
years after the
Closing Date.
Section 8.04 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. 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
Section 368. Although
this transaction has been structured in an effort to qualify
for treatment
under Section 368 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 8.05 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 Utah.
Section 8.06 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:
(a) If to CTI or NewCo, to:
CTI Technologies, Inc.
000 Xxxx Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Fax No: (000) 000-0000
Confirmation (000) 000-0000
With copies to:
Prince, Yeates & Xxxxxxxxxx
000 Xxxx 000 Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Fax No: (000) 000-0000
(b) If to Source or the Source Computing, Inc.
Shareholders, to:
000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxxx X. Brothers
Fax No: (000) 000-00000
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 8.07 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 8.08 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 8.09 Schedules; Knowledge. Whenever in any section
of this Agreement
reference is made to information set forth in the CTI
Schedules or Source
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 8.10 Third-Party Beneficiaries. This Agreement is
solely between
CTI, NewCo and Source and the Shareholders, 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 8.11 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
agreement 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 8.12 Survival. The representations, warranties,
and covenants of the
respective parties shall survive the Closing of the
transactions contemplated
hereby.
Section 8.13 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 8.14 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 8.15 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 8.16 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.
CUSA TECHNOLOGIES, INC.
By_________________________________
Duly Authorized Officer
NEW SOURCE COMPUTING, INC.
By________________________________
Duly Authorized Officer
SOURCE COMPUTING, INC.
By________________________________
Duly Authorized Officer
THE SHAREHOLDERS:
__________________________________
Xxxxxxx X. Brothers
__________________________________
Xxxxxxx X. XxXxxxx
__________________________________
Xxxxxx X. Xxxxxxxxx
