PLAN AND AGREEMENT OF REORGANIZATION
This Plan and Agreement of Reorganization (this "Agreement") is
entered into on this 12th day of September, 1997, by and among
PSYCHROMETRIC SYSTEMS, INC., a Nevada corporation ("PSI"), FI-TEK VI,
INC., a Delaware corporation subject to the reporting requirements
imposed pursuant to Section 15(d) of the Securities Exchange Act of 1934,
as amended ("Fitek"), Xxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X. Xxxxxx
("Xxxxxx") and Xxxxxx X. Xxxx ("Xxxx").
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is to be a
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended. Fitek will acquire all of PSI's issued and outstanding
common and preferred stock, without par value (the "PSI Stock" or the
"PSI Shares"), in exchange for 261,382,500 shares of the common stock,
par value $.00001 per share, of Fitek (the "Common Stock"), and 1,000,000
shares of Fitek Class A preferred stock (the "Preferred Stock").
AGREEMENT
1. Status of PSI Shares: Transfer Of PSI Shares: Lack of Encumbrances.
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(a) PSI and Xxxx represent that, as of the date of this
Agreement, all of the shareholders of PSI and their shareholdings,
both common and preferred stock, are listed on Exhibit A-1
attached to this Agreement. It is contemplated that Xxxx may
transfer a portion of his holdings of PSI Stock to other persons
or entities prior to the Closing (as defined in Section 3).
(b) The Shareholders of PSI (the "PSI Shareholders") shall
transfer, assign, convey and deliver to Fitek at the Closing
certificates representing, as of the Closing Date (as defined in
Section 3), all of the PSI Shares.
(c) The transfer of the PSI Shares shall be made free
and clear of all liens, mortgages, pledges, encumbrances, or
charges, whether disclosed or undisclosed, except as the PSI
Shareholders and Fitek shall have otherwise agreed in writing.
2. Issuance of Exchange Stock to PSI Shareholders.
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(a) As consideration for the transfer, assignment,
conveyance and delivery of the PSI Stock, Fitek shall, at the
Closing, issue to the PSI Shareholders, pro rata in accordance
with each Shareholder's percentage ownership of PSI immediately
prior to the Closing, certificates representing 261,382,500 shares
of Common Stock (the "Fitek Exchange Stock") which shall represent
approximately 89.08% of the outstanding Common Stock of Fitek
immediately following the Closing.
(b) As additional consideration for the transfer, assignment,
conveyance and delivery of the PSI Stock, the PSI Shareholders shall be
issued an aggregate of 1,000,000 shares of Fitek Class A preferred stock
(the "Preferred Stock") pro rata in accordance with each Shareholder's
percentage ownership of PSI Common Stock immediately prior to Closing.
The Preferred Stock shall be created by Fitek board of directors prior to
the Closing and it shall have the following characteristics: (i) each
share of Preferred Stock shall be convertible to 290 shares of Common
Stock upon attainment of Fitek/PSI gross annual sales of $60,000,000 for
any fiscal year ended prior to the fiscal year ending in 2002; and (ii)
it shall be subject to redemption by Fitek at a price of $.0001 per
preferred share should the required sales level not be attained by 2002.
Notwithstanding the provisions of (i) above, the Preferred Stock shall
become convertible upon a change in ownership of the combined Fitek/PSI,
which is defined as a single transaction which results in a change in
more than 50% control of the combined entity.
(c) The issuance of the Fitek Exchange Stock and the Preferred
Stock shall be made free and clear of all liens, mortgages, pledges,
encumbrances, or charges, whether disclosed or undisclosed, except as the
PSI Shareholders and Fitek shall have otherwise agreed in writing.
(d) As provided herein, and immediately prior to the Closing,
Fitek shall have issued and outstanding not more than 32,042,500 shares
of Common Stock, including the shares to be issued pursuant to Section I0
(c) hereof, not more than 8,042,500 Class A Warrants, and not more than
8,042,500 Class B Warrants, and shall not have any shares of preferred
stock issued and outstanding. Fitek will also have issued and outstanding
804,250 warrants issued to Westminster Securities in connection with
Fitek's public offering ("Underwriter Warrants").
(e) None of the Exchange Stock and Preferred Stock issued or
transferred to the PSI Shareholders and none of the PSI Stock transferred
to Fitek hereunder shall, at the time of Closing, be registered under
federal securities laws but, rather, shall be issued pursuant to an
exemption therefrom and be considered "restricted stock" within the
meaning of Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Act"). All of such shares shall bear a legend worded
substantially as follows:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" within the meaning of Rule 144 under the
Act. The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration under
the Act, the availability of which is to be established to the
satisfaction of the Company.
The respective transfer agents of Fitek and PSI shall annotate their
records to reflect the restrictions on transfer embodied in the legend
set forth above. There shall be no requirement that Fitek register the
Exchange Stock or Preferred Stock under the Act, nor shall PSI or the
Shareholders be required to register any PSI Shares under the Act.
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3. Closing.
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The consummation of the exchange described in
Sections 1 and 2 (the "Closing") shall take place on a date (the "Closing
K)ate") chosen by mutual agreement of PSI and Fitek within sixty (60)
days from the date of this Agreement, unless a later time shall be
mutually agreed upon by the parties.
4. Deliveries at Closing.
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(a) PSI and the PSI Shareholders shall deliver to Fitek, at Closing:
(1) certificates representing all shares of the PSI Stock (both
common and preferred) as described in Section 1 (b), each endorsed in
blank by the registered owner;
(2) an agreement from each Shareholder, substantially in the
form of Exhibit B, agreeing to a restriction on the transfer of the
Exchange Stock as described in Section 1 l(c) hereof;
(3) a copy of a consent of PSI's board of directors authorizing
PSI to take the necessary steps toward consummation of the transactions
described by this Agreement; and
(4) a copy of a Certificate of Good Standing for PSI issued not
more than thirty days prior to Closing by the Nevada Secretary of State.
(b) Fitek shall deliver to the PSI Shareholders, at Closing,
certificates representing the Exchange Stock and Preferred Stock, in the
names of the appropriate Shareholders, each in the appropriate
denomination, as described in Section 2.
(c) Fitek shall deliver to the new Fitek Board, appointed
pursuant to Section 11 (k) below, at Closing, the original of all of
Fitek's corporate records.
(d) Fitek shall deliver to PSI at Closing:
(1) a copy of a consent of Fitek's board of directors
authorizing Fitek to take the necessary steps toward consummation of the
transactions described by this Agreement and electing the new directors
designated by PSI effective as of the Closing; and
(2) a copy of a Certificate of Good Standing for Fitek issued
not more than thirty days prior to Closing by the Secretary of State of
Delaware.
5. Covenants. Representations and Warranties of PSI and the Shareholders.
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Subject to the schedule of exceptions, attached hereto as
Exhibit C and incorporated herein by this reference, which schedule shall
be acceptable to Fitek, PSI and Xxxx represent and warrant to Fitek as
follows:
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(a) Corporate Existence and Power of PSI. PSI is (i) a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Nevada, (ii) has all necessary corporate
power and authority and all material licenses, authorizations, consents
and approvals required to own, lease, license or use its properties now
owned, leased, licensed or used and to carry on its business as now
conducted, (iii) is duly qualified as a foreign corporation under the
laws of each jurisdiction in which both (A) qualification is required
either (i) to own, lease license or use its properties now owned, leased,
licensed and used or (ii) to carry on its business as now conducted and
(B) the failure to be so qualified could materially and adversely affect
either or both of (i) the business, properties, operations, prospects or
condition (financial or otherwise) of PSI and (ii) PSI's ability to
perform its obligations under this Agreement and (iv) has all necessary
corporate power and authority to execute and deliver this Agreement.
PSI's books and records are complete and correct and have been maintained
with good business practice and accurately reflect in all material
respects the transactions to which they relate. Copies of PSI's
Certificate of Incorporation, and all amendments thereof to date,
certified by the proper Nevada officials, and of Fitek's bylaws as
amended to date, together with all minutes of shareholders' and
directors' meetings, certified by PSI's Secretary, will be delivered to
Fitek prior to C19sing and shall be complete and correct as of the date
of delivery of said documents. The same shall be subject to the review
and approval of counsel for Fitek.
(b) Subsidiaries and Ownership of Securities. PSI has, as of
the date of this Agreement, no subsidiaries.
(c) Capitalization. The aggregate number of shares of Common
Stock, without par value, which PSI is authorized to issue is 25,000, of
which 20,376 shares are currently issued and outstanding. All of such
outstanding shares are validly issued, fully paid and nonassessable. PSI
also has 50 shares of preferred stock issued and outstanding, which
shares of preferred stock shall have been redeemed by PSI prior to
Closing. PSI has no outstanding warrants or options to purchase Common
Stock and no such warrants or options will be issued prior to the
Closing.
According to PSI's books and records, each of the persons or
entities that is to be a Shareholder at Closing is domiciled in one of
the following jurisdictions: Nevada, Colorado or Idaho. All securities
issued by PSI as of the date of this Agreement have been issued in
compliance with all applicable state and federal laws.
(d) Financial Statements. PSI will deliver to Fitek, prior to
Closing, a copy of PSI's audited and unaudited financial statements
through June 30, 1997 ("Financial Statements"), which will be true and
complete and will have been prepared on a tax basis in accordance with
generally accepted accounting principles. The Financial Statements have
not been prepared in accordance with Regulation S-X appearing in Title 17
of the Code of Federal Regulations ("Regulation S-X").
(e) Absence of Undisclosed Liabilities. Except as disclosed in
Exhibit C, as reflected in this Agreement or in PSI's unaudited balance
sheet at June 30, 1997, PSI has no
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actual knowledge of any material liabilities of any nature, whether
accrued, absolute, contingent, or otherwise, including, without
limitation, annual franchise taxes or other corporate charges in the
normal course of business.
(f) Absence of Certain Changes. Except as disclosed in
Exhibit C, since June 30, 1997, there has not been, and as of the
Closing, there will not be (i) any change in PSI's financial
condition, assets, liabilities, or business other than changes in
the ordinary course of business, none of which, taken individually
or considered together with other changes, has been materially
adverse, or (ii) any damage, destruction, or loss, whether or not
covered by insurance, materially and adversely affecting PSI's
properties or business.
(g) Title to Properties. PSI has good-and marketable
title to all of its properties and assets, real and personal,
tangible and intangible, none of which is subject to any security
interest, mortgage, pledge, lien, encumbrance, or charge, except
for liens, if any, shown on PSI's financial statements as of June
30, 1997, or on Exhibit D prepared in compliance with subsection
(j) below as securing specified liabilities set forth therein
(with respect to which no default exists) and, except for minor
imperfections of title and encumbrances, if any, which are not
substantial in amount, do not materially detract from the value of
the properties subject thereto, or materially impair PSI's
operations and have arisen in the ordinary course of business.
(h) Accounts Receivable. PSI represents that, except to
the extent disclosed in Exhibit C or reserved against on its
balance sheet at June 30, 1997, it is not aware of any material
accounts and contracts receivable existing that in its judgment
would be uncollectible. An account or contract receivable shall be
deemed to be material if it is in excess of $50,000.
(i) Litigation. Except as disclosed in Exhibit G, there
is no litigation or proceeding pending, or to PSI's knowledge
threatened, against or relating to PSI, its properties, or
business, nor does PSI know or have reasonable grounds to know, of
any basis for any such action, or of any governmental investigation
relative to PSI, its properties, or business. PSI is not, and on
the Closing Date will not be, in default under or with respect to
any judgment, order, writ, injunction or decree of any court or of
any federal, state, municipal or other governmental authority,
department, commission, board, agency or other instrumentality;
and PSI has, and on the Closing Date will have, complied in all
material respects with all laws, rules, regulations and orders
applicable to it and to its business, if any.
(j) Exhibits Relating 19 Certain Matters. Exhibit D
contains a complete and accurate recitation of the following
documents: a description of all liens, mortgages, charges, and
encumbrances that are outstanding with respect to any of the
properties and assets of PSI; a list of all leases wherein PSI is
either lessor or lessee; a list of all other written or oral
contracts, commitments, agreements, and other contractual
obligations to which PSI is a party; a list of all insurance
policies carried by PSI; a description of all bonus, pension,
profit sharing, retirement, stock purchase, stock option,
hospitalization, insurance, and other executive or employee
compensation or benefit plans to which PSI is a party; a list of
all notes payable of PSI; and, a list of all notes and contracts
receivable of PSI.
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(k) Contracts. PSI is not a party to any contract, except
contracts described in Exhibits ~ Or D. To the best of its knowledge, PSI
has in all material respects performed all obligations required to be
performed by it to date and is not in default in any material respect
under any agreements, leases, or other documents to which it is a party,
except as disclosed in Exhibit D to this Agreement.
(1) Taxes. Except as disclosed in Exhibit IU, PSI has filed in
correct form, or has received proper extensions to file, all federal and
state income tax returns due with respect to all periods through the end
of its last fiscal year, and all real and personal property tax
schedules, franchise, sales or use tax returns, and all federal and state
employment and withholding tax returns that are required to be filed, and
has paid or properly recorded in its books of record all taxes as shown
on the said returns and all assessments received by it to the extent that
such taxes and assessments have become due. The Internal Revenue Service
has not examined any income tax return of PSI.
(m) Authority to Execute Agreement. The Board of Directors of
PSI, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by PSI of this Agreement, and has
duly authorized each of the transactions hereby contemplated. A copy of
the Consent of Board of Directors of PSI authorizing such action is
attached hereto as Exhibit E and incorporated herein by this reference.
PSI has the power and authority to execute and deliver this Agreement, to
consummate the transactions hereby contemplated and to take all other
actions required to be taken by it pursuant to the provisions hereof. PSI
has taken all actions required by law, its Articles of Incorporation, as
amended, its bylaws, as amended, or otherwise to authorize the execution
and delivery of this Agreement. This Agreement is valid and binding upon
PSI and Xxxx in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will constitute a violation or breach of the Articles
of Incorporation, as amended, or the bylaws, as amended, of PSI, or any
agreement, stipulation, order, writ, injunction, decree, law, rule or
regulation applicable to PSI.
(n) Finder's Fees. PSI and Xxxx are not, and on the Closing
Date will not be, liable or obligated to pay any finder's, agent's or
broker's fee arising out of or in connection with this Agreement or the
transactions contemplated by this Agreement.
(o) Disclosure. No representation or warranty by PSI in this
Agreement, nor any statement or certificate hereto, or in connection with
the transactions contemplated hereby, knowingly contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
(p) Compliance. To the best of its knowledge, PSI has complied
in all material respects with all applicable laws, orders and regulations
of federal, state, municipal and/or other governments and/or any
instrumentality thereof, domestic or foreign, currently applicable to its
assets and to the business conducted by it.
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(q) Change of Fitek Name. PSI agrees to use its best
efforts to amend Fitek's Certificate of Incorporation immediately
following the Closing to change Fitek's name to Global Water
Technology, Inc., or to a name that is substantially similar.
(r) Fitek Representative Or Board Member. PSI agrees
that the current Fitek board shall have the right, in lieu of
naming a board member pursuant to Section 1 l(k), to designate a
non-board advisor who shall be entitled to notice of and to attend
all board meetings. In any of the circumstances stated above or in
Section 11 (k), PSI agrees that the Fitek representative (or board
member) shall have the right to be reimbursed for all travel
expenses to attend meetings and shall receive such compensation as
may be approved by the new Fitek board of directors but no less
than the compensation that any other "outside" director of Fitek,
if any, may receive.
6. Access and Information.
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Subject to the protections provided
by Section 14, PSI shall give to Fitek and to Fitek's counsel,
accountants, and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of
PSI's properties, books, contracts, commitments, and records, including
information concerning products and customer base, and patents held by,
or assigned to, PSI, and furnish Fitek during such period with all such
information concerning PSI's affairs as Fitek reasonably may request.
7. Covenants. Representation and Warranties of Fitek, Xxxxxx and Xxxxxx.
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Fitek, Xxxxxx and Xxxxxx, and each of them, represents and
warrants as follows:
(a) Corporate Existence and Power of Fitek. Fitek is (i)
a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, (ii) has all
necessary corporate power and authority and all material licenses,
authorizations, consents and approvals required to own, lease,
license or use its properties now owned, leased, licensed or used
and to carry on its business as now conducted, (iii) is duly
qualified as a foreign corporation under the laws of each
jurisdiction in which both (A) qualification is required either
(i) to own, lease license or use its properties now owned, leased,
licensed and used or (ii) to carry on its business as now
conducted and (B) the failure to be so qualified could materially
and adversely affect either or both of (i) the business,
properties, operations, prospects or condition (financial or
otherwise) of Fitek and (ii) Fitek's ability to perform its
obligations under this Agreement and (iv) has all necessary
corporate power and authority to execute and deliver this
Agreement. Fitek's books and records are complete and correct and
have been maintained with good business practice and accurately
reflect in all material respects the transactions to which they
relate. Copies of Fitek's Certificate of Incorporation, and all
amendments thereof to date, certified by the proper Delaware
officials, and of Fitek's bylaws as amended to date, together with
all minutes of shareholders' and directors' meetings, certified by
Fitek's Secretary, will be delivered to PSI prior to Closing and
shall be complete and correct as of the date of delivery of said
documents. The same shall be subject to the review and approval of
counsel for PSI.
(b) Subsidiaries. Fitek has, as of the date of this
Agreement, no subsidiaries.
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(c) Capitalization. As of the date of this Agreement, the
aggregate number of shares of common stock, par value $.00001 per share,
which Fitek is authorized to issue is 500,000,000 of which 32,042,500
shares are currently issued and outstanding. In addition, there are
8,042,500 Class A Common Stock Purchase Warrants and 8,042,500 Class B
Common Stock Purchase Warrants issued and outstanding, each of which
warrants is exercisable for one share of common stock at a price of $.12
per share for Class A Warrants and $.20 per share for Class B Warrants.
Fitek also has issued 804,250 Underwriter Warrants. Except for the Class
A Common Stock Purchase Warrants and Class B Common Stock Purchase
Warrants and the Underwriter Warrants, no options or rights to purchase
common stock or preferred stock are currently outstanding, or will be
outstanding as of the Closing. The aggregate number of shares of
preferred stock, par value $.00001 per share, which Fitek is authorized
to issue is 20,000,000, of which no shares are issued and outstanding.
(d) Financial Statements. Fitek will deliver to PSI, prior to
Closing, copies of all of Fitek's audited and unaudited financial
statements through June 30, 1997, all of which are true and complete and
have been prepared in accordance with generally accepted accounting
principles and Regulation S-X.
(e) Absence of Undisclosed Liabilities. Except to the extent
reflected in this Agreement or in Fitek's balance sheet at June 30, 1997,
none of Fitek, Xxxxxx or Xxxxxx has any knowledge of any liabilities, as
of such date, of any nature, whether accrued, absolute, contingent, or
otherwise, including, without limitation, annual franchise taxes or other
corporate charges in the normal course of business. There are no
liabilities, contingent or otherwise, which have been incurred as a
result of any prior letters of intent between Fitek and any other company
relating to an unconsummated business combination between Fitek.
(f) Absence of Certain Changes. Fitek is engaged in no business
and conducts no operations. Since June 30, 1997, there has not been any
material change in Fitek's financial condition, assets or liabilities,
except the incurring of expenses in connection with the acquisition of
PSI or as reflected in this Agreement.
(g) Litigation. There is no litigation or proceeding pending,
or to Fitek's, Xxxxxx'x or Xxxxxx'x knowledge, threatened, against or
relating to Fitek, nor does Fitek know or have reasonable grounds to
know, of any basis for any such action, or of any governmental
investigation relative to Fitek. Fitek is not, and on the Closing Date
will not be, in default under or with respect to any judgment, order,
writ, injunction or decree of any court or of any federal, state,
municipal or other governmental authority, department, commission, board,
agency or other instrumentality; and Fitek has, and on the Closing Date
will have, complied in all material respects with all laws, rules,
regulations and orders applicable to it, if any.
(h) Contracts. Fitek is not a party to any contract, nor is
Fitek a party to any written or oral commitment, for capital
expenditures. Fitek has in all material respects performed all
obligations required to be performed by it to date and is not in default
in any material respect under any agreements or other documents to which
it was a party.
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(i) SEC Filings. As of the date of this Agreement, Fitek has
filed with the Securities and Exchange Commission ("SEC") all
registration statements, financial statements, applications, reports,
schedules, forms, proxy statements and all other instruments, documents
and written information (collectively, the "SEC Filings") required to be
filed by Fitek under the Securities Act of 1933, as amended (the "1933
Act") and the Securities Exchange Act of 1934, as amended (the "1934
Act"). All documents filed with the SEC complied in all material respects
with the requirements of the 1933 Act and the 1934 Act, as the case may
be, and none of the SEC Filings (including any and all financial
statements included therein) contains or, on the Closing Date, will
contain any untrue statement of a material fact or omits or, on the
Closing Date, will omit to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances in
which they were made or shall have been made, not misleading. The
financial statements of Fitek included in the SEC Filings comply as to
form in all material respects with applicable accounting requirements
and published rules and regulations of the SEC with respect thereto.
(j) Authority. to Execute Agreement. The Board of Directors of
Fitek, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Fitek of this Agreement and the
Fitek Exchange Stock, and has duly authorized each of the transactions
hereby contemplated. A copy of the Consent of Board of Directors of Fitek
authorizing such action is attached hereto as Exhibit F and incorporated
herein by this reference. Fitek has the power and authority to execute
and deliver this Agreement, to consummate the transactions hereby
contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. Fitek has taken all the actions
required by law, its Certificate of Incorporation, as amended, its
bylaws, as amended, or otherwise to authorize the execution and delivery
of the Fitek Exchange Stock pursuant to the provisions hereof. This
Agreement is valid and binding upon Fitek in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute a violation or
breach of the Certificate of Incorporation, as amended, or the bylaws, as
amended, of Fitek, or any agreement, stipulation, order, writ,
injunction, decree, law, rule or regulation applicable to Fitek. Upon
issuance, the Fitek Exchange Stock shall be validly issued, fully paid
and non-assessable.
(k) Finder's Fees. Fitek is not, and on the Closing Date will
not be, liable or obligated to pay any finder's, agent's or broker's fee
arising out of or in connection with this Agreement or the transactions
contemplated by this Agreement.
(1) Disclosure. No representation or warranty by Fitek in this
Agreement, nor any statement or certificate furnished or to be furnished to
PSI or the Shareholders pursuant hereto, or in connection with the
transactions contemplated hereby, knowingly contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained therein not
misleading.
(m) Taxes. Fitek has filed all federal income tax returns due with
respect to all periods through the end of its last fiscal year, and has
paid all taxes as shown on the said returns
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and all assessments received by it to the extent that such taxes
and assessments have become due. The Internal Revenue Service has
riot examined any income tax return of Fitek.
(n) Registration Rights. Except to the extent set forth
in Fitek's Prospectus, dated April 14, 1992, which pertains to
Fitek's obligations in favor of its warrantholders, Fitek has not
granted any registration rights to holders of warrants or to
holders of restricted Common Stock.
8. Access and Information.
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Subject to the protections provided
by Section 14, each party shall give the other party and their counsel,
accountants, and other representatives full access, during normal
business hours throughout the period prior to the Closing, to all of the
party's properties, books, contracts, commitments, and records, if any,
and shall furnish the other party during such period with all such
information concerning its affairs as the other party reasonably may
request.
9. Conduct of PSI Business Pending Closing.
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PSI and Xxxx covenant that pending the Closing:
(a) Except as described in, or as may be necessary to
effect the transactions contemplated by, the next sentence, no
change will be made in PSI's Articles of Incorporation or bylaws
and no change will be made in PSI's issued shares of stock, other
than such changes as may be first approved in writing by Fitek.
Fitek and Xxxx acknowledge that Xxxx intends to transfer
outstanding PSI shares, prior to the Closing, to one or more of
the persons or entities listed on Exhibit A-2.
(b) No dividends shall be declared and no stock options
shall be granted.
(c) Except as otherwise requested by Fitek, PSI will use
its best efforts (without making any commitment on Fitek's behalf)
to preserve PSI's business organization intact; to keep available
to PSI the services of its present officers and employees; and to
preserve the goodwill of those having business relations with PSI.
10. Conduct of Fitek Pending Closing.
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Fitek covenants that, pending the Closing:
(a) Except as provided in Section 10 (c), no change will
be made in Fitek's Certificate of Incorporation or bylaws or in
Fitek's authorized or issued shares of stock, except as may be
first approved in writing by PSI.
(b) No dividends shall be declared, no stock options
granted and no employment agreements shall be entered into with
officers or directors of Fitek, except as contemplated by this
Agreement or as may be first approved in writing by PSI.
(c) PSI and Xxxx agree that Fitek shall, prior to the
Closing, issue to each of Xxxxxx and Xxxxxx 1,500,000 shares of
the Common Stock of Fitek as full compensation for prior services
of Xxxxxx and Xxxxxx as officers and directors of Fitek to the
date of the Closing. Such shares shall not be registered under the
federal securities laws, but rather shall be considered
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"restricted stock" with the same characteristics as are set forth
in Section 2 (e) hereof with respect to the Exchange Stock.
~
11. Conditions Precedent to Closing.
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All obligations of Fitek,
PSI and the PSI Shareholders under this Agreement are subject to the
fulfillment, prior to or at the Closing, of all conditions elsewhere
herein set forth, including, but not limited to, receipt by the
appropriate party of all deliveries required by Section 4 herein, and
fulfillment, prior to the Closing, of each of the following conditions,
unless any such conditions are waived by such party at or before the
Closing:
(a) The respective representations, warranties and
covenants of PSI and Xxxx, and of Fitek, Xxxxxx and Xxxxxx
contained in this Agreement shall be true at the time of Closing
as though such representations, warranties and covenants were made
at such time.
(b) PSI, Kast, Fitek, Xxxxxx and Xxxxxx shall have
performed and complied with all agreements and conditions required
by this Agreement to be performed or complied with by each prior
to or at the Closing.
(c) Each PSI Shareholder acquiring Exchange Stock will
be required, at Closing, to submit an agreement, substantially in
the form of Exhibit B, confirming that all the Exchange Stock
received will be acquired for investment and not with a view to,
or for sale in connection with, any distribution thereof, and
agreeing not to transfer any of the Exchange Stock for a period of
one year from the Closing Date, except to those persons approved
by legal counsel to Fitek as falling within an exemption from
registration under the Act and any applicable state securities
laws, which transfers do not constitute a public distribution of
securities, and in which the transferees execute an investment
letter in form and substance satisfactory to counsel for Fitek.
The foregoing provision shall not prohibit the registration of
those shares at any time following the Closing. Each PSI
Shareholder acquiring Exchange Stock will be required to transfer
to Fitek at the Closing his or her respective PSI Shares, free and
clear of all liens, mortgages, pledges, encumbrances or changes,
whether disclosed or undisclosed.
(d) Fitek shall have been presented with, and shall have
approved, an updated version of Exhibits C and D, prepared by PSI,
current as of the Closing.
(e) Each party shall have received favorable opinions
from the other party's counsel on such matters in connection with
the transactions contemplated by this Agreement as are reasonable,
including an opinion from counsel for PSI that the Exchange, if
consummated, will not in any manner violate corporate or
securities laws of any states where any PSI Shareholder resides.
(f) Each party shall have satisfied itself that since
the date of this Agreement the business of the other party has
been conducted in the ordinary course except to the extent
otherwise contemplated by this Agreement. In addition, each party
shall have satisfied itself that no withdrawals of cash or other
assets have been made and no indebtedness has been incurred since
the date of this Agreement, except the possible execution by PSI
of a lease with an option
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to purchase an office building and with respect to services rendered or
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement, unless said withdrawals or indebtedness
were either contemplated by the terms of this Agreement or subsequently
consented to in writing by the parties.
(g) Each party covenants that, to the best of its knowledge, it
has complied in all material respects with all applicable laws, orders
and regulations of federal, state, municipal and/or other governments
and/or any instrumentality thereof, domestic or foreign, applicable to
their assets, to the business conducted by them and to the transactions
contemplated by this Agreement.
(h) Fitek shall have provided to PSI through June 30, 1997, all
audited and unaudited financial statements prepared in accordance with
generally accepted accounting principles and with Regulation S-X, and the
audited statements certified as such by independent accountants of Fitek.
(i) PSI shall have provided to Fitek audited financial
statements of PSI for the three most recently completed fiscal years (or
for such shorter period as PSI or its subsidiaries, if any, shall have
been in existence), prepared on a tax basis in accordance with generally
accepted accounting principles, together with unaudited financial
statements in the same form for the period from the end of the most
recently ended fiscal year to a date within thirty days of the Closing.
Such unaudited financial statements of PSI shall have included the
following schedules: Schedule of Assets; Schedule of Notes Payable;
Schedule of Accounts Payable; and Schedule of Notes Receivable or, in
their absence, an affirmation that such items do not exist. PSI shall
also provide, as of a date within ten days of Closing, an update of any
material change in the aforementioned schedules. In addition, PSI will
deliver to Fitek, prior to Closing, in a form satisfactory to Fitek, a
letter from PSI's independent auditors confirming that PSI's financial
statements, covering the three most recently completed fiscal years, are
auditable and can be prepared in accordance with generally accepted
accounting principles and Regulation S-X within seventy-five (75) days of
the Closing Date.
(j) Each party shall have granted to the other party (acting
through its management personnel, counsel, accountants or other
representatives designated by it) full opportunity to examine its books
and records, properties, plants and equipment, proprietary rights and
other instruments, rights and papers of all kinds in accordance with
Sections 6 and 8 hereof and each party shall be satisfied to proceed with
the transactions contemplated by this Agreement upon completion of such
examination and investigation.
(k) Effective as of the Closing Date, all (or, at Fitek's
option, all but one) of the members of Fitek's current board of directors
and each and every person serving as an officer of Fitek shall resign
their respective positions and/or offices by tendering written
resignations. Immediately prior to said resignations, Fitek's board of
directors shall appoint as members of Fitek's new board those persons
designated by PSI to fill said director positions, with such appointments
to be effective as of the Closing. If all members of Fitek's current
board of
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directors (the "Current Board") resign as of the Closing, the parties
hereto agree that the Current Board may designate, at any time within
Twelve months following the Closing, one person to serve as a member of
the Board. If that person is not a current board member of Fitek, the
nominee shall be subject to the approval of PSI.
(1) All press releases, shareholder communications, SEC Filings
and other publicity generated by Fitek or PSI regarding the transactions
contemplated by this Agreement shall have been reviewed and approved by
the other party before their release to the public or any governmental
agency.
(m) Each party shall have satisfied itself that all transactions
contemplated by this Agreement, including those contemplated by the
exhibits attached hereto, shall be legal and binding under applicable
statutory and case law of the States of Delaware and Nevada,
respectively, including, but not limited to Nevada's securities laws and
all other applicable state securities laws.
(n) Each of the PSI Stockholders shall have tendered his or her
stock certificate or certificates to Fitek, endorsed in blank, to permit
the transfer of the PSI's Exchange Stock at Closing as contemplated by
Section 2(b).
(o) At PSI's request, Xxxxxx and Xxxxxx shall act as advisors
to Fitek/PSI for a period of up to twelve months following the Closing,
performing such duties as shall be assigned by the Fitek board of
directors. Xxxxxx and Xxxxxx agree to perform the functions as advisor
without compensation. However, Xxxxxx and Xxxxxx shall be entitled to
reimbursement of all out of pocket expenses incurred in the performance
of duties assigned to them as advisors.
(p) All holders of Fitek restricted common stock in excess of
one million shares shall execute agreements in form and substance
satisfactory to PSI and Fitek whereby they agree that 75% of their
restricted shares shall not be sold for a period of twelve months
following Closing, except that private sales may be made to purchasers
who agree to be bound by the provisions of the "lock-up" agreement. No
such private sales may be made, however, unless PSI and its counsel have
received an opinion from counsel for the seller that the proposed private
sale is exempt from the registration provisions of the 1933 Act and
applicable state securities laws.
(q) Each party shall have received from the other party the
following, each dated as of the Closing Date, in form and substance
reasonably satisfactory to the receiving party:
(i) a certificate of the President of PSI or Fitek, as
the case may be, to the effect that (i) the representations and
warranties of such other party contained in this Agreement are true and
correct in all material respects as of the Closing Date and (ii) such
other party has performed, in all material respects, all covenants and
other obligations required by this Agreement to be performed by it at or
before the Closing Date; and
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(ii) a certificate of the Secretary of State of each
jurisdiction in which such other party is incorporated, dated as of a
recent date, as to the good standing of and payment of taxes by such
other party and as to the charter documents of such other party on file
in the office of the Secretary of State.
12. Standstill Agreement.
---------------------
Prior to the closing, none of Fitek,
PSI, Xxxx, Xxxxxx or Xxxxxx may discuss or negotiate with any other
corporation, firm or person, or entertain or consider any inquiries, or
proposals relating to the possible disposition of their shares of capital
stock of their companies, or their assets, and each of them will cause
their respective companies to conduct business only in the ordinary
course, except that PSI may undertake investigation, discussion and/or
negotiations with potential acquisition candidate companies, provided
that such negotiations, discussions and investigations are in furtherance
of PSI's business plan, and further, Xxxx shall be authorized to sell his
stock to employees and/or others prior to Closing. Notwithstanding the
foregoing, each party shall be free to engage in activities mentioned in
the preceding sentence which are designed to further the mutual interests
of the parties for the contemplated consolidation of the companies and
advancement of PSI' s business plan.
13. Termination.
------------
This Agreement may be terminated prior to
Closing, and the contemplated transactions abandoned, without liability
to either party, except with respect to the obligations of Fitek, PSI and
Xxxx under Section 14 hereof:
(a) by mutual consent of the parties;
(b) by Fitek, if in its reasonable belief there has been a
material misrepresentation or breach of warranty on the part of PSI or
Xxxx in the representations and warranties set forth in the Agreement;
(c) by PSI or Xxxx if, in the reasonable belief of PSI or Xxxx,
there has been a material misrepresentation or breach of warranty on the
part of Fitek, Xxxxxx or Xxxxxx in the representations and warranties set
forth in the Agreement;
(d) by either Fitek or by Xxxx if the Closing shall not have occurred by the
Closing Date;
(e) by Fitek if, in its opinion or that of its counsel, the
transactions contemplated by this Agreement do not qualify for exemption
from registration under applicable federal and state securities laws, or
qualification, if obtainable, cannot be accomplished, in Fitek's opinion
or that of its counsel, without unreasonable expense or effort;
(f) by Fitek if, in its opinion or that of its counsel, the
transactions contemplated by this Agreement cannot be consummated under
Nevada or other relevant state corporate law or, if consummation is
possible, that it cannot be accomplished, in Fitek's opinion or that of
its counsel, without unreasonable expense or effort;
-14-
(g) by Fitek or by Xxxx if Fitek in its sole discretion
or Xxxx in his discretion shall determine that any of the
transactions contemplated by this Agreement have become inad-
visable or impracticable by reason of the institution or threat by
state, local, or federal governmental authorities or by any other
person of material litigation or proceedings against any party;
(h) by Fitek if the business or assets or financial
condition of PSI, taken as a whole, have been materially and
adversely affected, whether by the institution of litigation or by
reason of changes or developments or in operations in the ordinary
course of business or otherwise; or, by a Xxxx if the business or
assets or financial condition of Fitek, taken as a whole, have
been materially and adversely affected, whether by the institution
of litigation or by reason of changes or developments or in
operations in the ordinary course of business or otherwise;
(i) by Fitek if it shall appear to Fitek that PSI shall
not be able to obtain within a reasonable amount of time after
Closing all consents and approvals of all governmental authorities
having any jurisdiction over the business of PSI, or if such
authorities shall withdraw any approvals, licenses, or permits
given to PSI or to any other entity with which PSI is affiliated
or in which PSI has an interest;
(j) by Fitek if more than 5% (by percentage ownership)
of the PSI Shareholders dissent from the exchange described in
Sections 1 and 2, or are unable or for any reason refuse to
transfer any or all of their PSI Shares to Fitek in accordance
with Section 1, or fail to tender at the Closing the certificate
or certificates, endorsed in blank, representing all of their PSI
Stock;
(k) by PSI if Fitek fails to perform material conditions
set forth in Section 11;
(1) by PSI if examination of Fitek's books and records
pursuant to Section 8 uncovers a material deficiency; and
(m) by Fitek if PSI fails to perform material conditions
set forth in Section 11.
In the event of a bad-faith termination of this Agreement, the
non-terminating party shall be limited solely and exclusively to recovery
of its attorney's fees expended in the preparation and reporting of the
transaction. Fitek, Xxxxxx and Xxxxxx expressly waive all other damages,
fees, costs, and lost opportunity costs (consequential damages) against
each other as a result of termination of this Agreement.
14. Confidentiality.
----------------
While each party is obligated to provide
access to and furnish information in accordance with Sections 6 and 8
herein, it is understood and agreed that such disclosures and information
subsequently obtained as a result of such disclosures are proprietary and
confidential in nature. Each party agrees to hold such information in
confidence and not to reveal any such information to any person who is
not a party to this Agreement, or an officer, director, key employee, or
shareholder thereof, and not to use the information obtained for any
purpose other than assisting in
-15-
its due diligence inquiry precedent to the Closing. Upon request of any
party, a confidentiality agreement, acceptable to the disclosing party,
will be executed by any person selected to receive such proprietary
information, prior to receipt of such information.
15. Nature and Survival of Representations.
---------------------------------------
All statements
contained in any certificate or other instrument delivered by or on
behalf of PSI, Kast, Fitek, Xxxxxx or Xxxxxx pursuant hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by PSI, Xxxx, Fitek Xxxxxx or Xxxxxx,
respectively, and shall survive the closing for a period of twelve (12)
months.
16. Binding Agreement.
------------------
(a) This Agreement shall become binding upon the parties
when, but only when, it shall have been signed by or on behalf of
all parties.
(b) Subject to the condition stated in subsection (a),
above, this Agreement shall be binding upon, and inure to the
benefit of, the respective parties and their legal
representatives, successors and assigns. This Agreement, in all of
its particulars, shall be enforceable by legal action for the
recovery of damages or by way of specific performance and the
terms and conditions of this Agreement shall remain in full force
and effect subsequent to Closing and shall not be deemed to be
merged into any documents conveyed and delivered at the time of
Closing. In the event that any person is required to initiate any
action at law or in equity for the enforcement of this Agreement,
the prevailing party in such litigation shall be entitled to
recover, from the party determined to be in default, all of its
reasonable costs incurred in said litigation, including attorneys'
fees.
17. Construction.
-------------
This Agreement is intended to be performed in
the State of Colorado, and shall be construed and enforced in accordance
with the laws of that State.
18. Notices.
--------
All notices, requests, demands, and other
communications hereunder shall be in writing, and shall be deemed to have
been duly given if delivered or mailed, first class postage, prepaid, to
PSI or Xxxx, at 00000 Xxxx Xxxxxx Xxx, Xxxxx X-000, Xxxxxxxx, XX 00000,
Attention: Xxxxxx Xxxx, or if to Fitek, Xxxxxx or Xxxxxx at 000 Xxxx
Xxxxxx, Xxxxxx, XX 00000, Attention: Xxxxxx X. Xxxxxx.
19. Counterparts.
-------------
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Arbitration.
------------
Any dispute arising pursuant to or in any way
related to this Agreement or the transactions contemplated hereby shall
be settled by arbitration in the City and County of Denver, State of
Colorado, provided, however, that nothing in this Section shall restrict
the right of either party to apply to a court of competent jurisdiction
for emergency relief pending final determination of a claim by
arbitration in accordance with this Section. All arbitration shall be
conducted in accordance with the
-16-
rules and regulations of the American Arbitration Association by a panel
of three arbitrators, one selected by each party and the third selected
by the other two arbitrators. Each party shall pay their own expenses
associated with such arbitration, including the expenses of any
arbitrator selected by such party and 50% of the expenses of the third
arbitrator. The decision of the arbitrator shall be binding upon the
parties and judgment in accordance with that decision may be entered in
any court having jurisdiction thereof.
21. Enforceability.
---------------
Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties
hereto hereby waive any provision of law which renders any provision
'hereof prohibited or unenforceable in any respect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first above written.
PSYCHROMETRIC SYSTEMS, INC. FI-TEK VI, INC.
By:\S\ Xxxxxx X. Xxxx By:\s\Xxxxx X. Xxxxxx
----------------------------- -------------------------
Xxxxxx X. Xxxx, President Xxxxx X. Xxxxxx, President
\s\ Xxxxxx X. Xxxx \s\Xxxxx X. Xxxxxx
----------------------------- ------------------------
Xxxxxx X. Xxxx Xxxxx X. Xxxxxx
\s\Xxxxxx X. Xxxxxx
------------------------
Xxxxxx X. Xxxxxx
-17-
EXHIBIT LIST
Exhibit A-1 -- Names and Respective Shareholdings in PSI of the
Individuals and Entities that are currently PSI
Shareholders.
Exhibit A-2 -- Names and Anticipated Respective Shareholdings in PSI of
the Individuals and Entities that are to be PSI
Shareholders immediately prior to Closing.
Exhibit B -- Form of Investment Letter of PSI Shareholders.
Exhibit C --Schedule of Exceptions to Covenants, Representations and Warranties
of Psychrometric Systems, Inc.
Exhibit D --Description of Liens, Mortgages, Charges and Encumbrances of
Psychrometric Systems, Inc.
Exhibit E -- Consent of Board of Directors of Psychrometric Systems, Inc.
Exhibit F -- Consent of Directors of Fi-Tek VI, Inc.
