AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (hereinafter
referred to as this "Agreement"), is entered into this 29th day of
September, 1995, by and among CUSA TECHNOLOGIES, INC., a Nevada
corporation ("CTI"), PREFERRED HEALTH SYSTEMS, INC., a Nevada
corporation ("PHS"), and XXXX X. XX XXXX, XXXXXX X. XXXXX, and
XXXXXX X. XXXXXX, individuals (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 medical industry. PHS is a privately-held
corporation and developer of software products for the medical
industry.
B. The Shareholders hold 100% of the issued and outstanding
stock of PHS.
C. The acquisition of PHS by CTI shall be effected through
the reorganization pursuant to sections 368(a)(1)(B) of the Code
by the exchange of shares between CTI and the Shareholders. After
consummation of the transaction, PHS shall continue its business as
a wholly-owned subsidiary of CTI.
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 therefrom, it is
hereby agreed as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings
indicated:
Section 1.01 Closing. The consummation of the transactions
contemplated by this Agreement.
Section 1.02 Closing Date. The date on which the Closing
occurs.
Section 1.03 Code. The Internal Revenue Code of 1986, as
amended.
Section 1.04 CTI Common Stock. The authorized common stock,
par value $0.001 per share, of CTI.
Section 1.05 CTI Preferred Stock. The authorized preferred
stock, par value $0.001 per share, of CTI.
Section 1.06 Effective Date. The date, as set forth in the
closing memorandum between the parties.
Section 1.07 Exchange Act. The Securities Exchange Act of
1934, as amended.
Section 1.08 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 PHS issued and outstanding on the
Closing Date.
Section 1.09 GAAP. Generally accepted accounting
principles, as in effect on the date of determination, applied on
a consistent basis.
Section 1.10 PHS. Preferred Health Systems, Inc., a Nevada
corporation.
Section 1.11 PHS Stock. The 18,750 shares of common stock
of PHS 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.
Xxxxxxx 0.00 XXX. Xxx Xxxxxx Xxxxxx Securities and Exchange
Commission.
Section 1.13 Securities Act. The Securities Act of 1933, as
amended.
Section 1.14 Shareholders. Xxxx XxXxxx, Xxxxxx Xxxxx, and
Xxxxxx X. Xxxxxx, who own 100% of the issued and outstanding shares
of PHS Stock that will be converted into shares of Exchanged CTI
Stock pursuant to the terms of this Agreement.
ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF PHS
AND THE SHAREHOLDERS
As an inducement to, and to obtain the reliance of CTI, PHS
and the Shareholders represent and warrant as follows:
Section 2.01 Organization. PHS 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
PHS. Included in the PHS Schedules (as hereinafter defined) are
complete and correct copies of the articles of incorporation and
bylaws of PHS 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 PHS's articles of
incorporation or bylaws.
Section 2.02 Approval of Agreement. The board of directors
and the Shareholders have authorized the execution and delivery of
this Agreement by PHS and have approved the consummation of the
transactions contemplated hereby. Included in the PHS Schedules is
a signed copy of a consent duly adopted by the board of directors
and the shareholders of PHS evidencing such approval. PHS 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 Shareholders. The
Shareholders have 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
shares of PHS held by the Shareholders.
Section 2.04 Capitalization. The authorized capitalization
of PHS consists of 25,000 shares of common stock, no par value, of
which 18,750 shares are currently issued and outstanding. All of
the issued and outstanding stock of PHS is held by the
Shareholders. No shares of PHS 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 PHS or
the Shareholders are a party or to which they are subject. All
issued and outstanding shares of PHS 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. PHS has no
subsidiaries or any predecessor corporation as that term is defined
by generally accepted accounting principles.
Section 2.06 Financial Statements. Included in the PHS
schedules is the accounting of Xxxx X. XxXxxx for the original
shareholders contributions detailing expenditures, etc. The assets
of PHS consist of a small amount of cash and the software asset
known as Managed Care Solution. The liabilites of PHS consist
principally of an amount payable to Xxxxx Xxxx not to exceed
$15,000.
The Shareholders and PHS agree to provide all assistance
necessary in the event that CTI determines it necessary to produce
audited financial statements of PHS, including but not limited to
balance sheets and related statements of income and earnings.
Section 2.07 Information. The information concerning PHS
set forth in this Agreement and in the PHS 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. There are no existing
warrants, calls, commitments, or other rights of any character
relating to authorized and unissued PHS Stock or other securities
of PHS.
Section 2.09 Absence of Certain Changes or Events. Except
as set forth in this Agreement or in the PHS Schedules, since the
date of the most recent balance sheet included in the PHS
Schedules:
(a) There has not been (i) any material adverse change
in the business, operations, assets, or condition of PHS or
(ii) any damage, destruction, or loss to PHS (whether or not
covered by insurance) materially and adversely affecting the
business, operations, assets, or condition of PHS;
(b) PHS 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 PHS; (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) PHS 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 PHS 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
$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 PHS; 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) PHS has not become subject to any law or regulation
which materially and adversely affects the business,
operations, properties, assets, or condition of PHS.
Section 2.10 Title to Personal and Real Property.
(a) Except as disclosed in the most recent balance sheet
included in the PHS Schedules, PHS 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 PHS 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
PHS'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 in the PHS Schedules. All personal property held by
PHS 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) PHS does not own any real property in fee simple.
(c) Included in the PHS Schedules is an accurate and
complete list of all personal property owned by PHS or used in
its business and having a purchase price of over $5,000,
together with a description of any mortgages, financing
instruments, or other encumbrances to the title to such
properties. Also included in the PHS Schedules are copies of
all leases for real and personal property to which PHS is a
party. Except as disclosed in the PHS 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 PHS. Except as set forth in the PHS Schedules, PHS 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 PHS 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. PHS owns the entire
right, title, and interest in and to its proprietary intellectual
property listed in the PHS Schedules, including all of the trade
secrets, technology, know-how, tradenames, trademarks,
servicemarks, copyrights, patents, patent applications,
registrations, and applications with respect thereto, and other
proprietary information owned by or used in connection with the
business of PHS, (collectively the "Intellectual Property").
Except as set forth in the PHS Schedules, such Intellectual
Property is not subject to the payment of royalties or the
performance of any other obligation owed to any other person or
entity. Neither the Shareholders nor any other employee or former
employee of PHS 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 in writing proceedings,
litigation, or other adverse claims of which PHS 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 PHS 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 PHS,
threatened in writing by or against PHS or affecting PHS 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. PHS 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 PHS Schedules is a description of
every contract, agreement, distributorship, franchise,
license, or other agreement, arrangement, or commitment to
which PHS is a party or by which its assets or properties are
bound, which calls for the payment by PHS of more than $2,000
a month, or $24,000 in the aggregate;
(b) Except as described in this Agreement or in the PHS
Schedules, PHS is not a party to or bound by, and the
properties of PHS 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 PHS can now
reasonably foresee) materially and adversely affect, the
business operations, properties, assets, or financial
condition of PHS; and
(c) Except as included or described in the PHS Schedules
or reflected in the most recent PHS balance sheet, PHS 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
PHS whose compensation was or is greater than $5,000 per
month; or (viii) other contract, agreement, or other
commitment involving payments by it in the future of more than
$10,000 in the aggregate per agreement.
Section 2.14 Material Contract Defaults. PHS 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 PHS, 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 PHS has not taken
adequate steps to prevent such a default from occurring.
Section 2.15 Insurance Claims. During the last three years,
PHS 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. PHS 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 PHS is
a party or to which any of its properties or operations are
subject, which would have a material adverse affect on PHS.
Section 2.17 Governmental Authorizations. PHS 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 PHS of this Agreement and the consummation by PHS of
the transactions contemplated hereby.
Section 2.18 Compliance With Laws and Regulations. PHS 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 PHS or except to the extent that
noncompliance would not result in the incurrence of any material
liability for PHS. Included in the PHS 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 PHS Schedules is a
complete list of all business liability, casualty, automobile,
extended coverage, and other insurance policies which PHS 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 PHS 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
PHS Schedules is a description of every contract, agreement, or
arrangement between PHS and any person who is or has ever been
during the previous three (3) years an officer or director of PHS
or person owning of record, or known by PHS to own beneficially, 5%
or more of the issued and outstanding common stock of PHS 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 PHS 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 PHS
than terms available from otherwise unrelated parties in arm's
length transactions. Except as disclosed in the PHS Schedules or
otherwise disclosed herein, no officer or director of PHS or 5%
shareholder of PHS has, or has had during the preceding three
years, any interest, directly or indirectly, in any material
transaction with PHS. The PHS Schedules also include a description
of any commitment by PHS, 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. PHS 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 PHS. There is no strike or other
labor dispute involving PHS pending or threatened, which could have
a material adverse effect on the assets, properties, financial
condition, operating results, or business of PHS or (as such
business is presently conducted and as it is proposed to be
conducted), and PHS is not aware of any labor organization activity
involving its employees. PHS is not aware that any officer or key
employee, or that any group of key employees, intends to terminate
their employment with PHS, nor does PHS have a present intention to
terminate the employment of any of the foregoing. Except as set
forth in the PHS Schedules, the employment of each officer and
employee of PHS is terminable at the will of PHS.
Section 2.22 Pension Reform Act of 1974. PHS 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 PHS current actual knowledge
of the inaccuracy of any statements has come to the
attention of PHS 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 PHS's Current Actual Knowledge, PHS does not have
any material liability under any Environmental Law applicable
to its operations.
(c) PHS has not violated any Environmental Laws
applicable to its operations, the violation or noncompliance
with which would have a material adverse effect on PHS.
(d) PHS 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 PHS Schedules. PHS and the Shareholders have
delivered to CTI the following schedules, which are collectively
referred to as the "PHS Schedules." The PHS Schedules shall be
updated through the date of Closing and shall be certified by the
chief executive officer of PHS as complete, true, and accurate:
(a) A schedule including copies of the articles of
incorporation and bylaws of PHS 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 PHS 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,
identified in section 2.06;
(e) A schedule listing the accounts receivable and notes
and other obligations receivable of PHS as of the date of the
most recent balance sheet included in the PHS 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 PHS as of the date of the
most recent balance sheet included in the PHS Schedules or
that arose thereafter other than in the ordinary course of the
business of PHS, 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 PHS 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 PHS since the
most recent balance sheet included in the PHS 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 PHS 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
PHS;
(i) A schedule containing a description of all personal
property owned by PHS or used in its business and having a
purchase price of over $5,000, including a description of
every material mortgage, financing instrument, or encumbrance
to which such personal property of PHS 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 PHS 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 PHS carries on or proposes to
carry on its business (except those which are immaterial to
the present or proposed business of PHS), 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
PHS 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 PHS 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 PHS 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 PHS Schedules by sections 2.01 through 2.23.
ARTICLE III REPRESENTATIONS, COVENANTS, AND WARRANTIES OF CTI
As an inducement to, and to obtain the reliance of, PHS and
the Shareholders, CTI represents and warrants as follows:
Section 3.01 Organization. CTI 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 either 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 CTI. Included in the CTI Schedules (as hereinafter
defined) are complete and correct copies of the articles of
incorporation and bylaws of CTI 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. CTI has full
power, authority, and legal right and has taken all action required
by law, its articles of incorporation, bylaws, and otherwise to
consummate the transactions herein contemplated.
Section 3.02 Approval of Agreements. The board of directors
of CTI, has authorized the execution and delivery of this Agreement
by CTI, and has approved the consummation of the transactions
contemplated hereby. Included in the CTI Schedules are copies of
resolutions duly adopted by the board of directors of CTI
evidencing such approval. CTI 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 this Agreement
and consummate the transactions contemplated hereby.
Section 3.03 Authority of CTI. Except as set forth in the
CTI Schedules, CTI has 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 3.04 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 8,508,956 shares are issued and
outstanding. In addition, CTI has reserved 2,338,800 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.
Section 3.05 Subsidiaries or Predecessor. CTI was formerly
known as Mountain Surgical Centers, Inc., which was formerly known
as Dimension Capital. CTI has 11 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., and CTI Resources, Inc.
All references to CTI herein shall be deemed to include its
subsidiaries and predecessor entities.
Section 3.06 Financial Statements.
(a) Included in the CTI Schedules is the audited balance
sheet of CTI as of June 30, 1994, and the related audited
statements of income, stockholders' equity, and cash flows for
each of the two fiscal years ended June 30, 1994, and 1993,
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
March 31, 1995, and the related unaudited statements of
earnings and cash flows for the six months ended March 31,
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 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
options, warrants, calls, commitments, or other rights of any
character relating to the authorized and unissued 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 2,338,800 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.
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 3.05
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
(ii) any damage, destruction, or loss to CTI (whether or not
covered by insurance) materially and adversely affecting the
business, operations, assets, or condition of CTI;
(b) CTI 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 their
capital stock; (iii) waived any rights of value which in the
aggregate are extraordinary or material; or (iv) made any
change in its method of management, operation, or accounting
which is material to CTI; (v) entered into any other
transaction which is material to CTI;
(c) CTI has 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; 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, operations, 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 by or against CTI 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. CTI has no 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 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 condition of
CTI, 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 has not taken adequate
steps to prevent such a default from 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 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 its 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 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 condition of CTI or
except to the extent that noncompliance would not result in the
incurrence of any material liability for CTI. 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 3.15 Labor Agreements and Actions. CTI is not bound
by or subject to (and none of its 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, has sought to
represent any of the employees, representatives, or agents of CTI.
There is no strike or other labor dispute involving CTI, or to the
best knowledge of CTI threatened, which could have a material
adverse effect on the assets, properties, financial condition,
operating results, or business of CTI (as such business is
presently conducted and as it is proposed to be conducted), nor is
CTI aware of any labor organization activity involving its
employees.
Section 3.16 Pension Reform Act of 1974. CTI has no
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 3.17 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 current actual knowledge
of the inaccuracy of any statements has come to the
attention of CTI 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 CTI's Current Actual Knowledge, CTI has no
material liability under any Environmental Law applicable to
its operations.
(c) CTI has not violated and is in compliance with all
Environmental Laws applicable to its operations.
(d) CTI 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 3.18 Intellectual Property. CTI owns the entire
right, title, and interest in and to its proprietary software
sometimes known as The CUSA System, The Automated Medical Office
System ("XXXX"), Care Point for Clinics, Reliance, CTOC, and,
except as listed in the CTI 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 CTI, including all copyrights, patents, patent
applications, registrations, and applications with respect thereto
(collectively the "Intellectual Property"). Except as set forth in
the CTI Schedules, such Intellectual Property is not subject to the
payment of royalties or any other obligation to any other person or
entity. Neither the shareholders of CTI, nor any other employee or
former employee of CTI 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 in writing proceedings,
litigation, or other adverse claims of which CTI is aware affecting
or with respect to the Intellectual Property. To the best of CTI s
knowledge, 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 CTI as now
being conducted and as proposed to be conducted.
Section 3.19 CTI Schedules. CTI has delivered to PHS 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 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 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, 1994, quarterly
reports on form 10-QSB for the quarters ended March 31, 1995,
December 31, 1994 (as amended on form 10-QSB/A), and September
30, 1994, interim reports on form 8-K dated July 21, 1994,
September 19, 1994 (including form 8-K/A), March 24, 1995,
June 30, 1995, and July 21, 1995, and the Shareholders
Information Statement for the Annual Shareholders Meeting held
April 6, 1995;
(d) A schedule setting forth a description of any
material change in the business, operations, assets, or
condition of CTI since March 31, 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 3.18.
ARTICLE IV PLAN OF REORGANIZATION
Section 4.01 Terms of the Reorganization. The consideration
for the reorganization as contemplated herein and the acquisition
of PHS as a wholly-owned subsidiary of CTI, subject to all of the
terms, covenants, and conditions set forth in this Agreement, shall
be the issuance to the Shareholders of 75,000 shares of restricted
CTI Common Stock. The shares of CTI Common Stock will be delivered
to the Shareholders, pro rata in proportion to the shares of PHS
currently held by each as set forth on Exhibit "A" to this
Agreement.
Section 4.02 Tax Obligations. The Shareholders shall be
solely responsible for tax due, if any, from the Shareholders with
respect to the receipt by the Shareholders of the consideration set
forth in section 4.01 of this Agreement.
Section 4.03 Closing Events. At the Closing,
(a) Each of the respective parties hereto shall execute,
acknowledge, and deliver (or shall cause to be executed,
acknowledged, and delivered) any plans of reorganization,
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
(b) 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)(B).
Section 4.04 Effective Date. For corporate law purposes,
the Effective Date of the merger shall be the date, as defined in
the plan of reorganization. To the extent permitted by GAAP, the
effective date for financial reporting purposes shall be October 1,
1995.
Section 4.05 Pre-Closing Termination.
(a) This Agreement and the merger contemplated hereby
may be terminated at any time prior to the Effective Date by
the consent of the Shareholders and by both CTI and PHS
through action of their respective boards of directors. In
the event of termination pursuant to this paragraph (a) of
section 4.05, 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 PHS or the Shareholders 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 PHS or the Shareholders
contained herein shall be inaccurate in any material respect.
In the event of termination pursuant to this paragraph (b) of
section 4.07, PHS 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 may be terminated at any time prior
to the Effective Date by action of PHS' board of directors if
CTI 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 CTI contained
herein shall be inaccurate in any material respect. In the
event of termination pursuant to this paragraph (c) of section
4.07, CTI shall reimburse PHS for its costs and obligations
with respect to the negotiation and documentation of this
Agreement and the transactions contemplated hereby.
Section 4.06 Post-Closing Covenants of CTI. Subsequent to
the Closing of the transactions contemplated by this Agreement, CTI
covenants as follows:
(a) CTI shall take all actions necessary or reasonably
requested by the Shareholders to enable the Shareholders to
sell the Exchanged CTI Stock without registration under the
Securities Act within the limitations 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 Shareholders, other
information necessary to enable the Shareholders to sell the
Exchanged CTI Stock pursuant to such rule). Upon the request
of the Shareholders, CTI will deliver to the Shareholders a
written statement as to whether it has complied with such
requirements.
(b) Use its best efforts to develop the business of PHS
subsidiaries and promote the sale of the products of PHS.
(c) CTI shall execute any and all documents,
instruments, and agreements necessary to effectuate the
purposes of this Agreement.
All of the provisions of this section 4.06 shall survive the
Closing and the consummation of the transactions contemplated
herein.
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 PHS 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) PHS and the Shareholders 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) PHS and the Shareholders have received and read this
Agreement and the annual report of CTI on form 10-K for the
year ended June 30, 1994, the quarterly reports on form 10-Q
for the quarters ended March 31, 1995, December 31, 1994, and
September 30, 1994, and the interim reports on form 8-K dated
July 21, 1994, September 19, 1994, March 24, 1995, June 30,
1995, and July 21, 1995, and understand the risks related to
the consummation of the transactions herein contemplated. PHS
and the Shareholders 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 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. PHS 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. 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 for 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, 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 4.09 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
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. PHS, 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.
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF CTI
The obligations of CTI 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 PHS and the Shareholders in
this Agreement shall be true as of the Closing, and PHS 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 PHS or the Shareholders, respectively, prior to
or at the Closing. CTI shall be furnished with a certificate,
signed by the chief executive officer of PHS and dated the Closing
Date, to the foregoing effect.
Section 6.02 Officer's Certificate. CTI shall have been
furnished with a certificate dated the Closing Date and signed by
the duly authorized chief executive officer of PHS to the effect
that:
(a) This Agreement has been duly approved by PHS's board
of directors and stockholders and has been duly executed and
delivered in the name and on behalf of PHS by its duly
authorized officers pursuant to, and in compliance with,
authority granted by PHS's board of directors;
(b) The representations and warranties of PHS 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 PHS Schedules in the
financial condition, business, or operations of PHS 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 PHS 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 PHS 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 PHS, pursuant to any
mortgage, resolution, agreement, or instrument to which PHS 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
PHS 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 PHS, wherein an
unfavorable decision, ruling, or finding would have a material
adverse effect on the financial condition of PHS, the
operations or business of PHS, the acquisition and
reorganization contemplated herein, or any material agreement
or instrument by which PHS is bound or would in any way
contest the existence of PHS.
Section 6.03 Good Standing. CTI shall have received a
certificate of good standing from the SCC with respect to PHS,
dated as of a date within ten days prior to the Closing Date,
certifying that PHS is in good standing as a corporation in Nevada.
Section 6.04 UCC Certificate. CTI shall have received a
Nevada Uniform Commercial Code certificate from the SCC 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 PHS, other
than those disclosed in the PHS Schedules.
Section 6.05 Shareholder Agreements. Each of the
Shareholders has executed an employment agreement with CTI and PHS.
Section 6.06 Other Items. CTI shall have received such
further documents, certificates, or instruments relating to the
transactions contemplated hereby as CTI may reasonably request.
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PHS
AND THE SHAREHOLDERS
The obligations of PHS 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 in this Agreement shall
be true as of the Closing and CTI shall have performed and complied
with all material covenants and conditions required by this
Agreement to be performed or complied with by CTI prior to or at
the Closing. PHS 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 dated the
Closing Date, to the foregoing effect.
Section 7.02 Officer's Certificate. PHS and the
Shareholders shall have been furnished with certificates dated the
Closing Date and signed by the duly authorized officer or officers
of CTI to the effect that:
(a) This Agreement has been duly approved by CTI's board
of directors and has been duly executed and delivered in the
name and on behalf of CTI by duly authorized officers pursuant
to, and in compliance with, authority granted by CTI's board
of directors;
(b) The representations and warranties of CTI 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 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, 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 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, pursuant to any
mortgage, resolution, agreement, or instrument to which CTI 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 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 the acquisition and reorganization
contemplated herein, or any material agreement or instrument
by which CTI is bound or would in any way contest the
existence of CTI.
Section 7.03 Good Standing. PHS 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
100
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 Shareholder Agreements. Each of the
Shareholders has executed an employment agreement with CTI and PHS.
Section 7.05 Other Items. PHS and the Shareholders shall
have received such further documents, certificates, or instruments
relating to the transactions contemplated hereby as PHS and the
Shareholders may reasonably request.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Brokers. CTI and PHS 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 PHS 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 each of
its respective directors and officers, and each person, if any, who
controls CTI 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
Shareholders or PHS. 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
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. CTI agrees 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 arise out of or
are based upon any breach of any representation, warranty,
covenant, or agreement in this Agreement by CTI. 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(a)(1)(B). Although this
transaction has been structured in an effort to qualify for
treatment under section 368(a)(1)(B) 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:
If to CTI, to: CTI Technologies, Inc.
Attention: Xxxxxxx X.
Xxxxxxxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Fax No. (000) 000-0000
Confirmation (000) 000-0000
With copies to: Xxxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx, L.L.C.
Eighth Floor, Bank Xxx Xxxxx
00 Xxxx Xxxxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Fax No. (000) 000-0000
Confirmation (000) 000-0000
If to PHS or the Shareholders, to: Preferred Health
Systems, Inc.
Attn: Xxxx X. XxXxxx
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Fax No. (000) 000-0000
Confirmation (000) 000-0000
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 PHS 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 and PHS 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 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 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.
CTI:
CUSA TECHNOLOGIES, INC.
By
Duly Authorized Officer
[signatures continued on following page]
PHS:
PREFERRED HEALTH SYSTEMS, INC.
By
Duly Authorized Officer
The Shareholders:
Xxxx XxXxxx
Xxxxxx Xxxxx
Xxxxxx X. Xxxxxx
