<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 5, 1998
COMPUTER TRANSCEIVER SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 0-3825 22-1842747
- --------------- ------------------------ ----------------------------
(State or other (Commission File Number) (IRS Employer Identification
jurisdiction of Number
incorporation)
23 CAROL STREET, CLIFTON, NEW JERSEY 07014
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (973) 473-4700
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT
COMPUTER TRANSCEIVER SYSTEMS, INC. (the "Company") entered into a Merger
and Reorganization Agreement, dated March 3, 1998 (the "Agreement", attached
hereto as Exhibit "A") with Mortgage Plus Equity and Loan Corp. ("Mortgage
Plus"), a corporation organized and existing under the laws of the State of New
York, Vertex Industries, Inc. ("Vertex"), a corporation organized and existing
under the laws of the State of New Jersey and CTS-Subsidiary, Inc. (the
"Subsidiary"), a corporation which is a wholly-owned subsidiary of the Company,
organized and existing under the laws of the State of New York.
Pursuant to the Agreement, Mortgage Plus and Subsidiary (together, the
"Constituent Corporations") executed, delivered and filed with the office of the
New York Secretary of State on March 5, 1998, a Certificate of Merger (the
"Certificate of Merger"), merging Subsidiary with and into Mortgage Plus (the
"Merger"), with the latter being the surviving corporation (the "Surviving
Corporation").
Prior to the Effective Time, the Company's Board of Directors (the "Board")
was comprised of the following four (4) members: Thomas J. Tully, James Q.
Maloy, Allen G. Jacobson and Ronald C. Byer. Simultaneous with the Effective
Time, the Board, through the Unanimous Written Consent of the Board of
Directors, immediately filled three (3) vacancies then existing by electing
Steven M. Latessa, Carey Wolen and Jon P. Blasi, respectively, to the Board.
Immediately thereafter, the Board accepted the resignations tendered by Thomas
J. Tully, James Q. Maloy, Allen G. Jacobson and Ronald C. Byer from their
positions as Directors and Officers of the Corporation through the Unanimous
Written Consent of the Board of Directors. Each of the three (3) newly named
directors will remain as a director of the Company until his successor is duly
elected and qualified.
At the Effective Time, each share of Mortgage Plus Common Stock issued and
outstanding immediately prior to the Effective Time, including treasury shares
of Mortgage Plus Common Stock then owned by Mortgage Plus and shares held by
dissenting shareholders (holders of record of issued and outstanding shares of
Mortgage Plus Common Stock who have neither voted in favor of the Merger nor
consented thereto in writing and who have delivered to the Company a written
demand for appraisal of their shares of Mortgage Plus Common Stock within the
time and in the manner provided under the New York Law (the "Dissenting
Stockholders")) was cancelled and converted into one (1) fully paid and
nonassessable share of Company Common Stock. No fractional shares of Company
Common Stock were issued, but in lieu thereof, the holders of the Mortgage Plus
Common Stock who were entitled to receive a fractional share of Company Common
Stock were paid cash equal to the value of such fractional shares. All shares
of Mortgage Plus Common Stock held by Mortgage Plus at the Effective Time as
treasury shares or held by any of the Company's Subsidiaries (collectively,
"Treasury Shares") ceased to exist and the certificates for such shares were
cancelled and no shares of capital stock of the Company were issued in exchange
therefor.
<PAGE>
At the Effective Time, each outstanding share of Common Stock, par value
$.001 per share of Subsidiary (the "Subsidiary Common Stock") issued and
outstanding immediately prior to the Effective Time was converted into and
became one (1) fully paid and nonassessable share of Common Stock of the
Surviving Corporation. At the Effective Time, the Company, as the sole holder of
the Subsidiary Common Stock, surrendered any and all certificates representing
the number of shares of Common Stock of the Surviving Corporation and received
in exchange therefor a certificate representing the number of shares of Common
Stock of the Surviving Corporation (i.e. Mortgage Plus) into which the
Subsidiary Common Stock theretofore represented by the certificates so
surrendered in this manner.
The Surviving Corporation possesses all of the rights, privileges,
immunities, powers, franchises and authority, whether of a public or private
nature, and is subject to all restrictions, disabilities and duties of each of
the Constituent Corporations, and all rights, privileges, immunities, powers,
franchises and authority of each of the Constituent Corporations, and all assets
and properties of every description, real, personal and mixed, and every
interest therein, wherever located, and all debts and other obligations
belonging or due to either of the Constituent Corporations on whatever account,
as well as stock subscriptions and all other things in action belonging or due
to each of the Constituent Corporations are vested in the Surviving Corporation.
Mortgage Plus is a full service retail mortgage banking company that
provides a broad range of residential mortgage products (including first
mortgages, second mortgages and home equity loans) to (i) prime, or "A" credit,
borrowers who qualify for conventional mortgages (including loans which conform
to the standards of certain institutional investors, such as Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation), (ii) borrowers
who are classified as sub-prime, or "B/C" credit, borrowers, and (iii) borrowers
who qualify for mortgages insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. Mortgage Plus is headquartered in
Long Island, New York and has a total of fifteen (15) retail branches in nine
(9) states, including Arkansas (1), Connecticut (1) Florida (1), Illinois (1),
Missouri (3), New Jersey (1), New York (4) Ohio (1) and the Commonwealth of
Puerto Rico (1). Mortgage Plus is also a licensed mortgage banking company in
seven (7) additional states and anticipates becoming licensed in eleven (11)
additional states during the first quarter of 1998.
Following the Merger, the Company intends to change its name to MPEL
Holdings Corp., trade under the Bulletin Board symbol "MPLS" and continue to
operate as a full service retail mortgage banking company. The Company's new
address will be 6851 Jericho Turnpike, Syosset, New York 11791, and its new
telephone number will be (516) 364-2700.
<PAGE>
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS.
(a) Previous Independent Accountants
(i) On March 5, 1998, the Registrant dismissed the accounting
firm of Arthur Anderson, LLP ("Arthur Anderson") as its
independent accountants, effective March 5, 1998.
(ii) Arthur Anderson's reports on the financial statements for
the past 2 years have contained no adverse opinions or
disclaimers of opinion and were not modified as to
uncertainty, audit scope or accounting principals.
(iii) During the Registrant's fiscal years ended July 31, 1996
and 1997, and during any subsequent interim period
through March 5, 1998, the accountants' reports were
unqualified and there were no disagreements with the
former accountants on any matter or accounting principals
or practices, financial statements disclosures, or
auditing scope or procedure which would have caused the
former accountants to make reference in their report to
such disagreements if not resolved to their satisfaction.
(iv) The Registrant's Board of Directors approved the decision
to change independent accountants from Arthur Anderson to
Richard A. Eisner & Company, LLP.
(v) The Registrant has provided Arthur Anderson with a copy
of this disclosure and requested that Arthur Anderson
furnish it with a letter addressed to the Securities and
Exchange Commission (the "Commission") stating whether it
agrees with the above statements (A copy of the Arthur
Anderson letter addressed to the Commission will be
supplementally filed as an Exhibit to this Form 8-K when
it is received by the Company).
(b) New Independent Accountants
(i) On March 5, 1998, the Registrant engaged Richard A.
Eisner & Company, LLP, as its new independent accountant
for the fiscal year ending December 31, 1998.
(ii) Richard A. Eisner & Company, LLP was the independent
auditor for Mortgage Plus Equity and Loan Corp. for the
calendar years 1996, 1997 and the current year. Prior to
the appointment of Richard A. Eisner
<PAGE>
& Company, LLP, the Registrant did not engage or consult
with Richard A. Eisner & Company, LLP regarding the
matters described in Regulation S-K, Item 304(a)(2), but
had discussed with Richard A. Eisner & Company, LLP its
engagement fees and standard engagement terms for serving
as the Registrant's auditors in 1994.
ITEM 5. OTHER EVENTS.
Prior to the Closing of the Merger (the "Closing"), the Board of Directors
of the Company effected a 1:25 reverse split of the 2,811,603 outstanding shares
of Common Stock of the Company, resulting in total outstanding shares of Common
Stock of the Company equal to 112,464.
Prior to the Closing of the Merger, the Board of Directors of the Company
declared a stock dividend (the "Dividend") for the pre-merger holders of the
Company's shares of Common Stock. The Dividend resulted in the issuance of two
(2) shares of Common Stock for each 112,464 shares of Common Stock outstanding
following the 1:25 reverse split (the "Restricted Shares"). The Dividend
resulted in the issuance of 224,928 additional shares of Common Stock; the total
shares of Common Stock held by the pre-merger shareholders of the Company will
be 337,392. The Restricted Shares will not be registered under the Securities
Act of 1933, and accordingly will not be freely transferable (and will be
suitably legended). The certificates evidencing the Restricted Shares will be
delivered via certified mail to the last known address of each holder of Common
Stock. The Certifcates evidencing the Restricted Shares issued to shareholders
which cannot be located and the delivery affected within one (1) year following
the date of issue will be returned to the Company and canceled.
At Closing, Mortgage Plus exchanged 100% of its 8,056,000 outstanding
shares of Common Stock for the same number (8,056,000) of shares of Common Stock
of the Company.
Vertex agreed not to sell or transfer any of its 226,251 shares of Common
Stock of the Company for a period of six (6) months following the Closing. After
the six (6) months, the 75,417 pre-merger shares held by Vertex shall become
freely tradable, and the remaining shares held by Vertex shall become freely
tradable twelve months after the Closing, in accordance with the normal
provisions of Rule 144.
Immediately following the Closing, the Company filed a Certificate of
Amendment of the Certificate of Incorporation of the Company to change the name
of the Company to "MPEL Holdings Corp."
<PAGE>
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
(a) Prior to the Effective Time, the Company's Board of Directors
(the "Board") was comprised of the following four (4)
members: Thomas J. Tully, James Q. Maloy, Allen G. Jacobson
and Ronald C. Byer. Simultaneous with the Effective Time, the
Board, through the Unanimous Written Consent of the Board of
Directors, immediately filled three (3) vacancies then
existing by electing Steven M. Latessa, Carey Wolen and Jon
P. Blasi, respectively, to the Board. Immediately thereafter,
the Board accepted the resignations tendered by Thomas J.
Tully, James Q. Maloy, Allen G. Jacobson and Ronald C. Byer,
from their positions as Directors and Officers of the
Corporation through the Unanimous Written Consent of the
Board of Directors. Each of the three (3) directors remain as
directors of the Company until his successor is duly elected
and qualified.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Mortgage Plus Equity and Loan Corp.,
dated December 31, 1997, are annexed hereto.
(c) Exhibits.
(1) Merger and Reorganization Agreement, dated March 3,
1998.
(2) Certificate of Merger, filed March 5, 1998.
(3) Certificate of Amendment of the Certificate of
Incorporation of the Company, authorizing the 25:1
reverse split of shares of Common Stock.
(4) Certificate of Amendment of the Certificate of
Incorporation of the Company authorizing the change of
the name of the Company to "MPEL Holdings Corp."
<PAGE>
Forward Looking Statements
This Form 8-K contains forward-looking statements which involve risks
and uncertainties. When used herein, the words "anticipate", "believe",
"estimate" and "expect" and similar expressions as they relate to the Company or
its management are intended to identify such forward-looking statements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The Company's actual
results, performance or achievements could differ materially from the results
expressed in or implied by these forward-looking statements. Factors that could
cause or contribute to such differences are detailed from time to time in the
Company's Securities and Exchange Commission reports. Historical results are
not necessarily indicative of trends in operating results for any future period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPUTER TRANSCEIVER SYSTEMS, INC.
By: /s/ Steven Latessa
---------------------------------
Steven Latessa, President
Date: March 12, 1998
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Independent Auditors' Reports......................................... F-2
Consolidated Financial Statements:
Balance Sheet at December 31, 1996 and at December 31, 1997......... F-4
Statements of Operations for the years ending December 31, 1995 and
1996 and 1997...................................................... F-5
Statements of Stockholders' Equity/Capital Deficiency for the years
ended December 31, 1995 and 1996 and 1997.......................... F-6
Statements of Cash Flows for the years ended December 31, 1995 and
1996 and 1997...................................................... F-7
Notes to Financial Statements......................................... F-8-F-17
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Mortgage Plus Equity and Loan Corp.
We have audited the accompanying balance sheet of Mortgage Plus Equity and
Loan Corp. as of December 31, 1997, and the related statements of operations,
stockholders' equity/capital deficiency and cash flows for each of the years
in the two year period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Mortgage Plus Equity and Loan
Corp. as of December 31, 1997 and the results of its operations and its cash
flows for the each of the years in the two year period then ended, in
conformity with generally accepted accounting principles.
Florham Park, New Jersey
February 6 , 1998
With respect to Note 16
February 26, 1998
F-2
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents....................................... $ 377,709
Mortgage loans held for sale.................................... 6,300,764
Due from investors.............................................. 6,959,131
Other receivables and other assets.............................. 1,684,676
Due from stockholders........................................... 263,646
Deferred offering costs......................................... 122,283
Property and equipment--net..................................... 508,624
-----------
$16,216,833
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Warehouse line of credit........................................ $10,532,994
Loans closed to be disbursed.................................... 1,989,264
Notes payable................................................... 1,392,763
Subordinated debt............................................... 878,000
Obligation under capital lease.................................. 193,184
Accounts payable and accrued expenses........................... 786,158
-----------
Total liabilities........................................... 15,772,363
===========
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock--$.001 par value; authorized 1,000,000 shares,
issued and outstanding none..................................
Common stock--$.001 par value; authorized 20,000,000 shares;
issued and outstanding 8,056,000 shares...................... 8,056
Additional paid-in capital.................................... 513,116
Accumulated deficit........................................... (76,702)
-----------
Total stockholders' equity.................................. 444,470
-----------
$16,216,833
===========
</TABLE>
See notes to financial statements
F-3
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
REVENUES:
Mortgage origination, net............................ $5,307,353 $7,147,163
Interest earned...................................... 663,322 860,424
---------- ----------
Total revenues..................................... 5,970,675 8,007,587
---------- ----------
EXPENSES:
Commissions, wages and benefits...................... 3,715,169 5,549,795
Selling and administrative........................... 1,770,894 2,567,371
Interest expense..................................... 707,952 967,123
---------- ----------
Total expenses..................................... 6,194,015 9,084,289
---------- ----------
OPERATING LOSS......................................... (223,340) (1,076,702)
Other income......................................... 1,000,000
---------- ----------
NET LOSS............................................... (223,340) (76,702)
Basic loss per share................................. $ (0.03) $ (0.01)
========== ==========
Pro forma for 1996:
Historical net loss shown above...................... (223,340)
Pro forma benefit for income taxes for the period
prior to the termination of the S corporation sta-
tus................................................. (33,000)
----------
PRO FORMA NET LOSS .................................... $ (190,340)
==========
Pro forma basic loss per share......................... $ (0.03)
==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
STATEMENT OF STOCKHOLDERS' EQUITY/CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER OF COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
--------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1,
1996...................... 7,000,000 $7,000 $(363,611) $(356,611)
Shares transferred by a
principal stockholder to
an officer................ $ 41,000 41,000
Issuance of common stock... 1,000,000 1,000 868,903 869,903
S corporation distribution. (43,558) (43,558)
Net loss................... (223,340) (223,340)
Transfer of S corporation
cumulative loss to
additional paid-in capital
upon the Company's change
to C corporation status... (630,509) 630,509
--------- ------ -------- --------- ---------
BALANCE AS OF DECEMBER 31,
1996...................... 8,000,000 8,000 279,394 -- 287,394
Shares issued in payment of
interest on a subordinated
debt...................... 56,000 56 55,944 56,000
Issuance of warrants in
connection with a note
payable................... 177,778 177,778
Net loss................... (76,702) (76,702)
BALANCE AS OF DECEMBER 31,
1997...................... 8,056,000 $8,056 $513,116 $ (76,702) $ 444,470
========= ====== ======== ========= =========
</TABLE>
See notes to financial statements
F-5
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31.
----------------------
1996 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. $ (223,340) $ (76,702)
Adjustments to reconcile net loss to net cash used in
operating activities:
Shares issued in payment of interest expense......... 56,000
Shares transferred by a principal stockholder to an
officer............................................. 41,000
Depreciation......................................... 39,996 79,773
Changes in:
Mortgage loans held for sale........................ (4,781,181) 4,235,230
Due from investors.................................. (6,959,131)
Other receivables and other assets.................. (189,614) (1,452,834)
Accounts payable and accrued expenses............... (85) 93,399
---------- ----------
Net cash used in operating activities.............. (5,113,224) (4,024,265)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment................... (253,890) (267,167)
Advances to stockholders.............................. (29,562) (234,084)
---------- ----------
Net cash used in investing activities............... (283,452) (501,251)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from warehouse line of credit............ 4,062,670 718,349
Loans closed to be disbursed.......................... 490,227 1,499,037
Proceeds from subordinated debt....................... 1,278,000
Repayment of subordinated debt........................ (400,000)
Proceeds from notes payable........................... 30,000 1,322,222
Repayment of notes payable............................ (25,000) (91,959)
Proceeds from sale leaseback of equipment............. 275,000
Repayments of obligation under capital lease.......... (81,816)
S corporation distribution............................ (43,558)
Issuance of common stock, net......................... 869,903
Issuance of warrants.................................. 177,778
Deferred offering costs............................... (122,283)
---------- ----------
Net cash provided by financing activities........... 5,384,242 4,574,328
---------- ----------
NET INCREASE (DECREASE) IN CASH........................ (12,434) 48,812
Cash and cash equivalents at the beginning of year.... 341,331 328,897
CASH AND CASH EQUIVALENTS AT THE END OF YEAR........... $ 328,897 $ 377,709
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.............................................. $ 649,706 $ 909,014
========== ==========
</TABLE>
Supplemental non-cash disclosures:
In 1997, the Company issued 56,000 shares of common stock in settlement of
interest aggregating $56,000 on certain subordinated debt.
See notes to financial statements F-6
F-6
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Mortgage Plus Equity and Loan Corp. (the "Company") organized in 1987, is
primarily engaged in the business of originating and selling first mortgages
collateralized by single family residences. From its inception through 1993,
the Company operated as a mortgage broker. The Company, in 1994, became a
mortgage banker and in 1995, the Company commenced originating and selling
sub-prime residential first mortgages. The Company is an approved
nonsupervised mortgagee for the U.S. Department of Housing and Urban
Development, and originates substantially all of its mortgage loans in New
York, New Jersey and Missouri.
Cash equivalents:
The Company considers cash equivalents to consist of short term investments
with an initial maturity of three months or less. Management mitigates credit
risk by investing in or through large financial institutions.
Revenue recognition:
The Company sells whole mortgage loans and pools of mortgage loans,
servicing released, on a non-recourse basis. Mortgage origination fees, net of
direct loan origination costs, are deferred and included in mortgage loans
held for sale, until the loans are sold. Revenue recognition from the sale of
mortgage loans occurs when the loans are shipped to investors pursuant to
existing sales commitments. Mortgage origination revenue is the differential
between the sales proceeds including premium, if any, and the carry amount of
the mortgage. Based upon the amount of mortgage loans subject to recapture of
premiums and the amounts the Company has previously paid to investors as
recapture of premium, management provides an allowance for premium recapture
(See Note 15).
Mortgage loans held for sale:
Mortgage loans held for sale are collateralized residential real estate
loans with a weighted average interest rate of approximately 13% as of
December 31, 1997 and are carried at the lower of cost or market on an
aggregate basis.
Included in mortgage loans held for sale are deferred origination fees of
approximately $160,000 and deferred origination costs of $155,000.
Property and equipment:
Property and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is provided using the straight line method over the
estimated useful lives of the assets. Leasehold improvements are amortized
over the lesser of the useful life of the asset or the remaining lease period.
Expenditures for maintenance and repairs are charged to expense; major
replacements and betterments are capitalized.
If an asset is identified as impaired, the Company estimates future cash
flows (undiscounted and without interest) which are expected to result from
the use of the asset and its eventual disposition. If the sum of the future
cash flows is less than the carrying amount of the asset, the Company
recognizes an impairment loss. No such losses have been required to be
recognized.
Loans closed to be disbursed:
Loans closed to be disbursed generally represents the amounts for which
mortgagors have signed loan and mortgage documents in order to refinance
existing mortgage obligations where, since the three day recission period has
not expired, the Company has not disbursed any funds. Upon disbursement of
funds, the mortgage loan is typically pledged as collateral under a warehouse
line of credit.
F-7
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes:
Through December 30, 1996, the Company had elected for both federal and
state purposes to be treated as an S corporation and incurred only minimum
taxes at the state level. Consequently, the net earnings of the Company were
taxed directly to the stockholders rather than the Company. Effective as of
December 31, 1996, the Company terminated its S corporation status and will be
taxed as a C corporation.
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities. (See Note 10).
Advertising expenses:
The Company expenses advertising costs which consist primarily of
promotional items and print media. Total advertising expense for the year
ended December 31, 1997 and 1996 was $232,000 and $133,000, respectively.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Stock-based compensation:
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("FAS 123") allows companies to either expense the
estimated fair value of employee stock options or to continue to follow the
intrinsic value method set forth in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro
forma effects on net income (loss) had the fair value of the options been
expensed. The Company has elected to apply APB 25 in accounting for its
employee stock options incentive plans.
Per share data:
Basic loss per share was computed based on the net loss (pro forma in 1996)
and the weighted average number of shares of common stock outstanding during
the period. Diluted loss per share is not shown since it would be anti-
dilutive. The weighted average number of shares outstanding for the years
ended December 31, 1997 and 1996 was 8,025,315 and 7,002,732, respectively.
F-8
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. OTHER RECEIVABLES AND ASSETS
Other receivables and assets as of December 31, 1997 consist of:
<TABLE>
<S> <C>
Officer's life insurance receivable.............................. $1,000,000
Deferred costs on loans in process............................... 269,641
Due from employees............................................... 150,538
Mortgage fees receivable......................................... 146,853
Other............................................................ 117,644
----------
$1,684,676
==========
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1997 consist of :
<TABLE>
<CAPTION>
ASSET
LIVES
----------
<S> <C> <C>
Equipment and furniture................................. 5-10 Years $177,284
Equipment subject to capital lease...................... 5 Years 300,389
Leasehold improvements.................................. 5 Years 196,690
---------- --------
674,363
Accumulated depreciation and amortization............... (165,739)
--------
$508,624
========
</TABLE>
Included in depreciation expense for the year ended December 31, 1997 is
depreciation expense on equipment under capital lease of $45,000.
4. WAREHOUSE LINES OF CREDIT
The Company has a $12 million warehouse line of credit expiring April 30,
1998, with a commercial bank which is collateralized by specific mortgage
loans held for sale and amounts due from investors. Interest is variable based
on the prime rate and type of collateral and ranged from 8-1/4% to 8-3/4% as
of December 31, 1997. This warehouse line of credit is personally guaranteed
by the Company=s principal shareholders and contains certain covenants
requiring, among other things, maintenance of certain financial ratios and
minimum tangible net worth.
As of December 31, 1997, based upon the most restrictive covenants, the
Company is precluded from declaring or paying any cash dividends.
5. DEFERRED OFFERING COSTS:
The Company has incurred $122,000 in incremental costs in connection with a
proposed initial public offering of common stock. Upon consummation of the
offering, the deferred costs will be charged against the gross proceeds of the
offering or, if not consummated, they will be charged to expense. The Company
will incur substantial additional offering costs.
F-9
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. NOTES PAYABLE
Notes payable as of December 31, 1997 consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Note payable in monthly installments of the greater of
$100,000 or 50% of the premiums on mortgages sold to the
lender, plus interest at the prime rate plus 1% per annum
(9-1/2% as of December 31, 1997) due April 1999 and
collateralized by all unencumbered assets (a)............... $1,322,222
Note payable in monthly installments of $2,083 plus interest
at the prime rate plus 2% per annum (10-1/2% at December 31,
1997), due March 1999. Guaranteed by the principal stock-
holders and collateralized by a $50,000 cash account........ 37,006
Note payable in monthly installments of $4,104 plus interest
at the prime rate plus 2% per annum (10-1/2% as of December
31, 1997) due October 1998.................................. 33,535
----------
$1,392,763
==========
</TABLE>
- --------
(a) In connection with this note payable, which was issued in December 1997,
the Company issued warrants to purchase 888,888 shares of common stock.
These warrants are exercisable the earlier of August 1998 or the effective
date of a public offering and expire three years later. The exercise price
is $1.00 per share prior to the public offering and, subsequently, 85% of
the public offering price. The Company valued the warrants at $177,778.
Accordingly, the note payable has been reduced by the $177,778 discount
and additional paid-in capital increased by the same amount. The imputed
interest rate on the note is 27.6% per annum.
Minimum principal payments on the notes payable during the years ended
December 31, 1998 and 1999 are $995,170 and $397,590, respectively.
7. SUBORDINATED DEBT
In March 1997, the Company borrowed $778,000 ($313,000 from affiliates of
certain of the Company's principal stockholders). These borrowings, due March
1998, are not collateralized and are subordinated to the notes payable and the
warehouse line. Interest on these notes is 14% per annum. In July 1997, the
Company issued 28,000 shares of its common stock to a note holder in
satisfaction of the interest due at maturity on $400,000 of this debt. The
shares were valued at $56,000, representing the interest due on this
obligation based upon its stated maturity date. In December 31, 1997, the
$400,000 obligation was repaid with a portion of the proceeds of the
$1,500,000 note payable (see Note 6). In October 1997, the Company borrowed
$500,000 from an affiliate of certain principal stockholders. This borrowing,
due April 1998, is collateralized by the officer's life insurance claim
receivable and is subordinated to the notes payable and warehouse line.
Interest is 9% per annum.
F-10
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. OBLIGATION UNDER CAPITAL LEASE
As of December 31, 1997, the future minimum lease payments under a capital
lease expiring December 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998.............................................................. $108,024
1999.............................................................. 108,024
--------
216,048
Less amount representing interest................................. (22,864)
--------
$193,184
========
</TABLE>
This obligation is guaranteed by the Company's principal stockholders. The
obligation under the capital lease is the result of the Company entering into
a sale leaseback transaction. Since the lease covers substantially all of the
economic life of the equipment, it has been recorded as a capital lease and no
gain or loss on the sale has been recognized.
9. RELATED PARTY TRANSACTIONS
The Company subleases certain of its offices from an affiliate (see Note
15). Total related party lease expense paid approximated $158,000 and $134,000
for the years ended December 31, 1997 and 1996, respectively. The Company pays
rent to the affiliate based on its proportionate share of the amount paid by
the affiliate to the ultimate lessor.
During 1997, the Company accrued, but did not pay, approximately $33,000 of
interest expense on the subordinated debt due to related parties. The
liability is included in accounts payable and accrued expenses.
During 1996, the Company processed and closed approximately $18.3 million of
residential mortgage loans for an affiliate for which it received fees of
approximately $92,000. The Company ended this activity on September 30, 1996.
10. INCOME TAXES
The components of deferred tax assets and liabilities as of December 31,
1997 are as follows:
<TABLE>
<S> <C>
Deferred tax asset:
Deferred mortgage origination fees................................ $ 67,100
Net operating loss carryforward................................... 564,500
Other............................................................. 8,400
--------
Total deferred tax asset......................................... 640,000
Deferred tax liability--deferred mortgage origination costs:....... (113,200)
--------
Net deferred tax asset............................................. 526,800
Valuation allowance................................................ 526,000
--------
$ --
========
</TABLE>
F-11
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As a result of the Company becoming a C corporation for income tax purposes
as of December 31, 1996, it recognized a deferred tax asset valuation
allowance of $99,000 as of such date. In 1997, the valuation allowance
increased by $427,000.
The difference between the tax benefit computed at the statutory federal
income tax rate on the Company's net loss and the Company's effective tax rate
benefit for the years ended December 31, 1996 (on a pro forma basis) and 1997
is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ -----
<S> <C> <C>
Statutory federal income tax rate........................... (34.0)% (34.0)%
Increase in valuation allowance............................. 11.8 438.8
Non-deductible meals and entertainment...................... 4.1 24.3
Non-taxable proceeds from officer's life insurance claim.... (443.3)
Other....................................................... 3.3 14.2
------ -----
Effective income tax rate benefit........................... (14.8)% --
====== =====
</TABLE>
As of December 31, 1997, the Company had a net operating loss carryforward
of $1,300,000 expiring in 2012.
11. STOCKHOLDER'S EQUITY/CAPITAL DEFICIENCY
Common stock:
During 1996, a principal stockholder of the Company transferred 693,000
shares to an officer of the Company. The estimated fair value of $41,000 was
charged to operations and credited to additional paid-in capital.
On December 31, 1996, the Company issued 1,000,000 shares of common stock in
a private placement at a price of $1.00 per share to an unaffiliated investor.
Net proceeds of this private placement were approximately $869,000 which were
used for Company operations.
The Company has reserved 1,288,888 shares of its common stock for issuance
upon exercise of incentive stock options and warrants issued in connection
with a note payable.
Stock options:
On December 31, 1995, the Board of Directors approved the Equity Incentive
Plan (the "Plan") and authorized the issuance of up to 400,000 shares of
common stock of the Company upon the exercise of incentive stock options
("options") which may be granted for a maximum of ten years pursuant to the
Plan. The Plan provides primarily for the granting of options to certain key
employees and exercise prices at not less than the estimated fair value at
date of grant.
On November 1, 1996, 185,000 options were granted. The options were issued
at exercise prices equal to estimated fair value of the Company's common stock
on the grant date of $1.00 per common share. These options vest ratably on the
anniversary of the date of grant through November 1, 2000 (46,250 shares on
each of November 1, 1997, 1998, 1999 and 2000). The option's maximum term is
ten years. No options were forfeited or exercised during 1996 or 1997. No
options were canceled during 1996, however, options for 150,000 shares were
canceled in 1997.
F-12
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
11. STOCKHOLDER'S EQUITY/CAPITAL DEFICIENCY (CONTINUED)
Stock options: (continued)
On February 15, 1997, the principal stockholders of the Company granted an
officer options to acquire up to 378,414 shares of the Company's common stock
owned by the stockholders at exercise prices not less than the estimated fair
value of the Company's common stock at the grant date. The following table
summarizes information about these options which expire in February 2000:
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE
SHARES PRICE VESTING DATE
------ -------- ------------
<S> <C> <C>
126,138 $1.00 February 15, 1998
126,138 1.25 February 15, 1999
126,138 1.50 February 15, 2000
</TABLE>
The fair value of each option granted in 1996 and 1997 has been estimated on
the date of grant using the Black-Scholes options pricing model with the
following assumptions; no dividend yield, expected volatility of 0%, risk-free
interest rate of 6%, and expected lives of approximately four years for the
1996 options and three years for the 1997 options. The fair value of options
granted during 1996 and 1997 were $.0.21 and $0.06 per share, respectively.
The Company applies APB 25 in accounting for its stock option incentive plan
and, accordingly, recognizes compensation expense for the difference between
fair value of the underlying common stock and the grant price of the option at
the date of grant. The effect of applying SFAS No. 123 on 1996 and 1997 pro
forma net loss is not necessarily representative of the effect on reported net
income (loss) in future years due to, among other things (1) the vesting
period of the stock options and (2) the fair value of additional stock options
in future years. Had compensation cost for the Company's stock option plan
been determined based upon the fair value at the grant date for awards under
the plan consistent with the methodology prescribed under SFAS No. 123, the
Company's net loss in 1996 and 1997 would have been approximately $(230,000)
and $(97,000), respectively.
The following table summarizes information about stock options outstanding
for which the Company has an obligation to issue shares of common stock as of
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------- ------------------------
WEIGHTED
NUMBER AVERAGE NUMBER
OUTSTANDING REMAINING WEIGHTED EXERCISABLE WEIGHTED
AS OF CONTRACTUAL AVERAGE AS OF AVERAGE
EXERCISE DECEMBER 31, LIFE EXERCISE DECEMBER 31, EXERCISE
PRICE 1997 (IN YEARS) PRICE 1997 PRICE
-------- ------------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$1.00 35,000 8.84 $1.00 8,750 $1.00
</TABLE>
12. BRANCH EXPENSE
During the years ended December 31, 1997 and 1996, the Company incurred
expenses of, $654,000 and $556,000, respectively, in conjunction with the
expansion of the Company's lending operation through the opening of new
offices. These expenses consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1997
-------- --------
<S> <C> <C>
Commissions, wages and benefits........................... $331,000 $417,000
Selling and administrative expenses....................... 225,000 237,000
</TABLE>
F-13
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
13. RETIREMENT PLAN
The Company has a 401(k) savings plan (the "Plan") which enables employees
to make contributions on a pre-tax salary basis in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The Plan provides
for a discretionary company contribution to be determined annually. The
Company did not make any contributions for the 1997 and 1996 Plan years.
14. OTHER INCOME
Other income represents proceeds due the Company under an officer's life
insurance policy as a result of the death of the officer in October 1997.
15. COMMITMENTS, CONTINGENCY AND OTHER
Litigation:
In May 1997, two former employees initiated litigation alleging breach of
contract in connection with establishing and operating a branch office and are
seeking approximately $1,257,000 in damages and sought a preliminary
injunction. While the preliminary injunction has been denied, the remaining
claims are still pending. While the outcome cannot be determined, management
believes that the action is without merit and is vigorously contesting this
matter.
Leases:
The Company has various lease agreements for equipment and office space
extending through March 2004.
The following is a schedule of future minimum rental payments required under
noncancelable leases:
<TABLE>
<CAPTION>
YEARS ENDING RELATED OTHER
DECEMBER 31, PARTY EXPENSES LEASES
------------ -------------- ----------
<S> <C> <C>
1998.............................................. $143,700 $ 205,400
1999.............................................. 92,300 446,700
2000.............................................. 51,300 479,200
2001.............................................. 10,400 511,300
2002.............................................. 479,900
Thereafter........................................ 659,800
-------- ----------
$297,700 $2,782,300
======== ==========
</TABLE>
The Company's rent expense approximated, $525,000 and $362,000 for the years
ended December 31, 1997 and 1996, respectively.
Employment agreements:
Effective September 1997, the Company entered into employment agreements
with two key executives expiring in September 2000. Under the terms of the
agreements, the aggregate initial annual compensation is $150,000 per
executive. Additionally, the agreements, among other things, include
provisions for bonuses based on up to 5% of income before provision for income
taxes and also provides for increases in compensation and severance payments,
provided that the officer is not terminated for cause.
F-14
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
15. COMMITMENTS, CONTINGENCY AND OTHER (CONTINUED)
Contingency:
The Company has received an assessment from the Internal Revenue Service
(the "IRS") concerning the classification of certain workers by the Company as
independent contractors during the period 1992 through 1994. This assessment
totals approximately $233,000 for employment taxes as if the independent
contractors were classified as employees during the period. The Company has
formerly disputed this assessment and has commenced discussions with the IRS
to settle this dispute. Management believes, based on advice of counsel, that
it has sufficient documentation and basis for its independent contractor
classification. The Company has held settlement discussions with the IRS and
has accrued the anticipated settlement amount.
Financial instruments with off-balance sheet risk or concentrations of credit
risk:
In the normal course of business, there are various financial instruments
which are properly not recorded in the financial statements. The Company's
risk of accounting loss due to the credit risks and market risks associated
with these off-balance sheet instruments varies with the type of financial
instrument and principal amounts. Credit risk represents the possibility of a
loss occurring from the failure of another party to perform in accordance with
the terms of a contract. Market risk represents the possibility that future
changes in market prices may make a financial instrument less valuable or more
onerous.
Certain of the investors in sub-prime mortgages require the Company to
return a portion of the sale price of the mortgage loan paid to the Company if
the sub-prime mortgagor pays off within one year. During the two years ended
December 31, 1997, the Company incurred costs of approximately $50,000 related
to the early pay-off of sub-prime mortgage loans sold to investors. The
Company does not currently believe any future recapture costs would be
significant and has provided $20,000 as an allowance for estimated future
recapture costs as of December 31, 1997.
The Company had approximately $58.4 million of mortgage loans in various
stages of process as of December 31, 1997 of which approximately $13.4 million
has been committed and rate-locked. For approximately $31.0 million of
mortgage loans held for sale and loans in process, the Company has committed
to sell them to investors. For sub-prime mortgage loans, the Company
accumulates mortgage loans into pools (usually $1 million to $2 million) and
sells the weighted average note rate to an investor. The ultimate amount of
the gain or loss on the sale of the mortgage loan is determined by the
difference between the cost of the loans and the price paid by the investor.
In connection with the sale of loans to its investors, the Company normally
makes representations and warranties (which are customary in the industry)
relating to, among other things, the Company's compliance with laws,
regulations, investor standards and the accuracy of information supplied by
the mortgagor and verified by the Company. In the event of a breach of these
representations and warranties, the Company would be required to repurchase
such loans. The Company did not repurchase any loans during the period from
January 1, 1996 through December 31, 1997.
Fair value of financial instruments:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Values of Financial Instruments" ("FAS 107") requires disclosure of fair value
information about financial instruments, whether or not recognized on the
balance sheet, for which it is practicable to estimate that value. Because no
market exists for certain of the Company's assets and liabilities, fair value
estimates are based upon judgments regarding credit risk, investor expectation
of economic conditions, normal cost of administration and other risk
characteristics, including interest rate and prepayment risk. These estimates
are subjective in nature and involve uncertainties and matters of judgment and
significantly affect the estimates.
F-15
<PAGE>
MORTGAGE PLUS EQUITY AND LOAN CORP.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
15. COMMITMENTS, CONTINGENCY AND OTHER (CONTINUED)
Fair value estimates are based on existing balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. The tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on the fair value
estimates and have not been considered in the estimates.
The following summarizes the information about the fair value of the
financial instruments recorded on the Company's financial statements in
accordance with FAS 107.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------
CARRYING
VALUE FAIR VALUE
---------- ----------
<S> <C> <C>
Cash.................................................. $ 377,709 $ 377,709
Mortgages held for sale............................... 6,300,764 6,569,960
Due from investors.................................... 6,959,131 6,959,131
Loans closed to be disbursed.......................... 1,989,264 1,989,264
Borrowings............................................ 12,996,941 12,996,941
</TABLE>
The methodology and assumptions utilized to estimate the fair value of the
Company's financial instruments, including the off-balance sheet instruments
are as follows:
CASH
The carrying amount of cash approximates fair value.
MORTGAGE LOANS HELD FOR SALE
The Company has estimated the fair values reported based on recent sales.
DUE FROM INVESTORS
The carrying value reported approximates fair value due to the short-term
nature of the asset.
BORROWINGS AND LOANS CLOSED BUT NOT DISBURSED
The carrying value reported approximates fair value due to the short-term
nature of a significant portion of the borrowings and the variable interest
rates charged on most borrowings.
COMMITMENTS TO ORIGINATE LOANS AND LOANS IN PROCESS
Typically, the Company does not charge fees for commitments to originate
loans or to rate lock such commitments. Furthermore, the Company does not
receive fees on commitments to sell. In addition, market interest rates as of
December 31, 1997 have not changed significantly since the dates of the
commitments. Accordingly, these off-balance sheet instruments have no
estimated fair value.
Concentrations:
For the year ended December 31, 1997 and 1996, one investor accounted for
41% and five investors accounted for 84%, respectively of mortgages sold.
16. SUBSEQUENT EVENT
On February 26, 1998, the Company entered into an agreement to merge with
Computer Transceiver Systems, Inc. ("CTSI"), a nonoperating public company
which will have 337,392 shares of common stock outstanding prior to the
merger. Pursuant to the merger, CTSI will acquire all of the outstanding
common stock of the Company in exchange for 8,056,000 shares of CTSI common
stock. The merger will be accounted for as a reverse acquisition.
F-16
<PAGE>
Exhibit C(1)
MERGER AND REORGANIZATION AGREEMENT
-----------------------------------
MERGER AND REORGANIZATION AGREEMENT, dated as of the 3rd day of March,
1998, by and among:
(i) Mortgage Plus Equity and Loan Corporation ("Mortgage Plus"), a
corporation organized and existing under the laws of the State of New York and
having its principal office at 6851 Jericho Turnpike, Syosset New York 11791
("Mortgage Plus"); VERTEX INDUSTRIES, INC. ("Vertex"), a corporation organized
and existing under the laws of the State of New Jersey and having its principal
office at 23 Carol Street, Clifton, New Jersey 07014, which owns 75,417 shares
of the issued and outstanding common stock, $.01 par value per share (the
"Common Stock") of Computer Transceiver Systems, Inc. (the "Company"), a
corporation organized and existing under the laws of the State of New York and
having its principal office at 23 Carol Street, Clifton, New Jersey 07014; the
Company and CTS-Subsidiary, Inc. (the "Subsidiary"), a corporation which is a
wholly-owned subsidiary of the Company, organized and existing under the laws of
the State of New York.
RECITALS
--------
Mortgage Plus and the Company intend to effect a Plan of
Reorganization within the meaning of Sections [368(a)(1)(A) and 368(a)(2)(E)] of
the Internal Revenue Code of 1986, as amended by the merger of the Subsidiary
with and into Mortgage Plus (the "Merger").
In consideration of the mutual promises and covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is acknowledged, it is hereby agreed as follows:
<PAGE>
ARTICLE 1
TRANSFER OF CTSI-SUBSIDIARY SHARES
1.1 Execution, Filing, Effective Time. On the date of the Closing, and
---------------------------------
subject to the terms and conditions hereinafter set forth, Mortgage Plus and
Subsidiary agree to cause the Merger to be consummated by executing, delivering
and filing with the office of the New York Secretary of State a Certificate of
Merger (the "Certificate of Merger") substantially in the form attached hereto
as Exhibit A, and such other documents as may be required by the provisions of
New York Law and as are necessary to cause the Merger to become effective. The
time at which the Merger becomes effective is herein referred to as the
"Effective Time."
1.2 Constituent and Surviving Corporations. Mortgage Plus and the
--------------------------------------
Subsidiary shall be the constituent corporations in the Merger (collectively,
the "Constituent Corporations"). At the Effective Time, the Subsidiary shall be
merged into Mortgage Plus in accordance with New York Law and Mortgage Plus
shall be the surviving corporation in the Merger (in such capacity, Mortgage
Plus is sometimes hereinafter referred to as the "Surviving Corporation"). At
the Effective Time, the identity and separate existence of Subsidiary shall
cease. Upon the effectiveness of the Merger, the Surviving Corporation shall
possess all of the rights, privileges, immunities, powers, franchises and
authority, whether of a public or private nature, and be subject to all
restrictions, disabilities and duties, of each of the Constituent Corporations,
and all the rights, privileges, immunities, powers, franchises and authority of
each of the Constituent Corporations, and all assets and properties of every
description, real, personal and mixed, and every interest therein, wherever
located, and all debts and other obligations belonging or due to either of the
Constituent Corporations on whatever account, as well as stock subscriptions and
all
2
<PAGE>
other things in action belonging or due to each of the Constituent Corporations,
shall be vested in the Surviving Corporation, and all property rights,
privileges, immunities, powers, franchises and authority, and all and every
other interest, shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate or interest therein vested in either Constituent Corporation shall
not revert or be in any way impaired by reason of the Merger but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and the Surviving Corporation shall
be liable for the debts and other obligations of each of the Constituent
Corporations, and any claims existing or action or proceeding pending, by or
against either the Constituent Corporations may be prosecuted or judgment with
right of appeal, as if the Merger had not taken place.
1.3 Articles of Incorporation and By-Laws. At the Effective Time: (i) the
-------------------------------------
Articles of Incorporation of the Surviving Corporation shall be substantially in
the form of the Articles of Incorporation which are appended to the Articles of
Merger as Exhibit B thereto; and (ii) the Bylaws of the Surviving Corporation
shall be the Bylaws.
1.4 Board of Directors. Effective immediately after the Effective Time,
------------------
and without any further action on the part of any party, each of the members of
the Board of Directors of the Company shall submit their resignation subject to
the simultaneous appointment of the current directors of Mortgage Plus as the
directors of the Company, and from such time such persons shall remain the
directors of the Company and the Surviving Corporation, in each case to serve in
accordance with the By-Laws of the Company and the Surviving Corporation until
his successor is duly elected and qualified.
3
<PAGE>
1.5 Officers. Effective immediately after the Effective Time, and without
--------
any further action on the part of any party, each of the officers of the Company
shall submit their resignation, subject to the simultaneous appointment of the
current officers of Mortgage Plus as officers of the Company, and such persons
shall remain the officers of the Company and the Surviving Corporation, in each
case in accordance with the By-Laws of the Company and the Surviving Corporation
until his successor is duly appointed.
1.6 Conversion of the Company Common Stock.
--------------------------------------
(a) Conversion of Common Stock. At the Effective Time, each share of
--------------------------
Mortgage Plus Common Stock issued and outstanding immediately prior to the
Effective Time (treasury shares of Mortgage Plus Common Stock then owned by
Mortgage Plus and by any Dissenting Stockholder, as hereinafter defined), shall,
by virtue of the Merger and without any action on the part of Mortgage Plus, the
Company or the Subsidiary or the holder thereof, be cancelled and converted into
one (1) fully paid and nonassessable share of Company Common Stock (the "Per
Share Company Stock Consideration"). No fractional shares of Company Common
Stock will be issued, but in lieu thereof, any holder of the Mortgage Plus
Common Stock entitled to receive a fractional share of Company Common Stock
shall be paid cash equal to the value of such fractional share. All shares of
Mortgage Plus Common Stock held by Mortgage Plus at the Effective Time as
treasury shares or held by any of the Company's Subsidiaries (collectively,
"Treasury Shares") shall cease to exist and the certificates for such shares
shall, as promptly as practicable thereafter, be cancelled and no shares of
capital stock of the Company shall be issued in exchange therefor.
4
<PAGE>
(b) Delivery of New Certificates. Promptly after the Effective Time,
----------------------------
the Company shall mail to each holder of record of a certificate or certificates
representing shares of Mortgage Plus Common Stock (a "Certificate" and
collectively the "Certificates") (i) a letter of transmittal and (ii)
instructions for effecting the surrender of the Certificates in exchange for
certificates representing shares of Company Common Stock and cash in lieu of
fractional shares. Upon surrender of a Certificate for cancellation to the
Company together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefor (x) a certificate representing that
number of whole shares of Company Common Stock representing the amount of Per
Share Company Stock Consideration, and cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Section, after giving effect to any required withholding tax,
and the Certificate so surrendered shall forthwith be cancelled. If any
certificate for shares of Company Common Stock is to be issued in a name other
than that in which a certificate for shares of Mortgage Plus Common Stock so
surrendered is then registered, such surrender shall be accompanied by payment
of any applicable transfer taxes and documents required for a valid transfer.
From and after the Effective Time, until so surrendered, each Certificate
theretofore representing shares of issued and outstanding Mortgage Plus Common
Stock shall be deemed for all corporate purposes (except as provided herein with
respect to fractional shares and with respect to shares held by Dissenting
Stockholders, and except as set forth below), to evidence the number of whole
shares of Company Common Stock into which such shares of Mortgage Plus Common
Stock shall have been converted. Upon surrender of a
5
<PAGE>
Certificate representing Mortgage Plus Common Stock, the holder of record
thereof shall receive certificates representing the whole shares of Company
Common Stock, and cash in lieu of fractional shares to which he shall be
entitled, and all dividends and other distributions which shall have been paid
or made to holders of record of Mortgage Plus Common Stock after the Effective
Time with respect to such shares of Company Common Stock, without interest
thereon.
(c) No Liability. None of Mortgage Plus, the Company, the Subsidiary
------------
or any other person shall be liable to any former holder of shares of Mortgage
Plus Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
1.7 Conversion of Subsidiary Common Stock. At the Effective Time, each
-------------------------------------
outstanding share of Common Stock, par value $.001 per share of Subsidiary (the
"Subsidiary Common Stock") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one fully paid and
nonassessable share of Common Stock of the Surviving Corporation. At the
Effective Time, the Company, as the sole holder of the Subsidiary Common Stock,
shall surrender any and all certificates representing such Subsidiary Common
Stock to the Surviving Corporation and shall be entitled to receive in exchange
therefor a certificate representing the number of shares of Common Stock of the
Surviving Corporation into which the Subsidiary Common Stock theretofore
represented by the certificates so surrendered shall have been converted as
provided in this Section. From and after the Effective Time, until so
surrendered, each certificate theretofore representing shares of issues and
outstanding Subsidiary Common Stock shall be deemed for all corporate purposes
to evidence the number of shares of Common
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Stock of the Surviving Corporation into which such shares of Subsidiary Common
Stock shall have been converted.
1.8 Dissenting Stockholders. All issued and outstanding shares of
-----------------------
Mortgage Plus Common Stock held by holders of record who shall have neither
voted in favor of the Merger nor consented thereto in writing and shall have
delivered (and then been entitled to deliver) to the Company a written demand
for appraisal of their shares of Mortgage Plus Common Stock within the time and
in the manner provided under the New York Law (collectively, the "Dissenting
Stockholders" and, individually, a "Dissenting Stockholder") shall not be
converted into Company Common Stock, but shall be entitled to receive such
consideration as shall be provided in New York Law, except that each share of
Mortgage Plus Common Stock issued and outstanding immediately prior to the
Effective Time and held by a Dissenting Stockholder who shall thereafter
withdraw his demand for appraisal of his shares of Mortgage Plus Common Stock
with the Surviving Corporation's consent or lose his right to such payment as
provided in New York Law shall be deemed converted, as of the Effective Time,
into (x) one (1) fully paid and nonassessable share of Company Common Stock, in
which event such stockholder shall no longer be a Dissenting Stockholder. A
list of all holders of Mortgage Plus Common Stock who have filed written demands
for payment of their shares of Mortgage Plus Common Stock by the date hereof in
accordance with New York Law is attached hereto.
1.9 Dissenting Stockholder Payment. Each Dissenting Stockholder who
------------------------------
becomes entitled, pursuant to New York Law, to payment for the shares of
Mortgage Plus Common Stock held by such Dissenting Stockholder shall receive the
payment therefor from the Surviving
7
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Corporation, but only up to the amount of such payment as shall have been agreed
upon or finally determined pursuant to New York Law, and such shares shall
thereupon be cancelled.
1.10 All of the Company's Shares issued pursuant to this Agreement shall be of
the same class as pre-merger Company Shares.
ARTICLE 2
2.1 Assumption of Obligations and Liabilities by Vertex. Vertex
---------------------------------------------------
acknowledges and agrees that, except as set forth on Exhibit C hereto, (a) all
"Liabilities" of the Company in existence immediately prior to the Closing,
shall be assumed, satisfied and discharged by Vertex immediately prior to the
Closing, and (b) any Liabilities of the Company which accrue or arise after the
Closing relating to any act or omission occurring prior to the Closing shall be
promptly assumed, satisfied and discharged as promptly thereafter as possible by
Vertex, and (ii) that neither the Company nor any Mortgage Plus Shareholder
shall have any liability or obligation with respect to the payment of any such
Liability by virtue of Vertex's obligation herein, or any obligation to Vertex
as a result of such payment. "Liabilities" shall mean payments, claims,
penalties, expenses, obligations (for the payment of money or the performance of
services), indebtedness or damages, whether known or unknown, contingent or
determinable, accrued or unaccrued, asserted or unasserted or based in law or
equity in existence immediately prior to Closing.
2.2 Appointment as Attorney-In-Fact. Mortgage Plus acknowledges and agrees
-------------------------------
that the Company has appointed Vertex, and each officer of Vertex acting singly,
as the true and lawful agent and attorney-in-fact of the Company for purposes of
paying, settling, compromising, defending and discharging any and all of the
Liabilities, and that such
8
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appointment shall survive the Closing until the final and irrevocable settlement
and discharge in full of the Liabilities, provided that such appointment shall
not confer any authority (a) to agree to any restriction or limitation upon the
conduct of the Company after the Closing, (b) which imposes any lien,
encumbrance, restriction or limitation on any asset or right owned or used by
the Company and provided, further, such authority shall not be used in a
-------- -------
situation where a party may assert any claim against the Company which limits or
restricts the activities of the Company in any respect.
ARTICLE 3
CLOSING
3.1 Closing. The closing of the transactions hereunder (the "Closing")
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will take place on March 4, 1998, or such other date and place as the parties
may agree at the offices of Ruskin, Moscou, Evans & Faltischek, P.C., 170 Old
Country Road, Mineola, New York 11501, upon the execution of this Agreement and
shall be effective upon the filing of the Certificate of Merger with the
Secretary of State of New York. The day on which the Closing actually takes
place is herein sometimes referred to as the "Closing Date."
ARTICLE 4
OBLIGATIONS AT CLOSING
4.1 Obligations of Vertex at Closing. At Closing, Vertex shall deliver,
--------------------------------
or cause the Company to deliver to Mortgage Plus, the following:
(a) a true and complete copy of the Company's and the Subsidiary's
Articles of Incorporation (and any amendments thereto), certified as of a recent
date by the Secretary of State of New York; a true and complete copy of the
Company's and the Subsidiary's By-Laws in
9
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effect on the Closing Date; director and [shareholder] resolutions/consents of
Vertex, the Company and the Subsidiary authorizing and approving the
transactions contemplated hereby;
(b) the Company's and the Subsidiary's books, records, correspondence,
accounting books, ledgers, financial information and documentation, all tax
returns (and correspondence with appropriate taxing authorities); governmental
and regulatory filings, applications, licenses, permits and official and other
records and authorizations; [bank accounts (and all cash and securities in such
accounts as of March 4, 1998)], investment accounts, securities, trust funds,
escrow funds (with appropriate documentation terminating Vertex's right to
access or direct payment to or from such accounts); post office account/boxes;
and powers of attorney in effect;
(c) a certificate(s) that the representations and warranties of Vertex and
the Company contained in this Agreement and in any statement (including
financial statements), certificates, schedules or other documents delivered
pursuant hereto or in connection with the transactions contemplated hereby shall
be true and accurate as of the date when made and shall be deemed to be made
again (and be true and accurate) at and as of the time of the Closing;
(d) the resignations of all of the Company's and Subsidiary's officers and
directors and the appointment of the Mortgage Plus directors and officers, as
contemplated herein;
(e) any and all such other documents, agreements, certificates and
instruments required to be executed and/or delivered by Vertex, the Company and
the Subsidiary to Mortgage Plus or to the Mortgage Plus Shareholders, including
all assignment of claims and warranties.
10
<PAGE>
4.2 Further Assurances. At any time and from time to time after the
------------------
Closing, at the request of any person identified herein as a Mortgage Plus
Shareholder or the Company and without further consideration, Vertex will
execute and deliver such other instruments of sale, transfer, assignment and
delivery and take such action as any person identified herein as a Mortgage Plus
Shareholder may reasonably deem necessary or desirable in order to more
effectively transfer, assign and deliver to the it (or them) and to confirm each
Mortgage Plus Shareholder's title to the Shares to be transferred and/or issued
as contemplated herein.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF VERTEX
5.1 Representations and Warranties of Vertex. Vertex represents and
----------------------------------------
warrants to Mortgage Plus that the following matters are true on the date hereof
and will be true and correct on the Closing Date, as if set forth independently
on such date:
(a) Organization, subsistence and Qualification of the Company and the
------------------------------------------------------------------
Subsidiary. The Company and the Subsidiary are each corporations duly organized
- ----------
and validly subsisting under the laws of the State of New York and each has all
requisite corporate power and authority to own, lease and operate properties and
assets and to carry on business as it is presently contemplated by the
transactions set forth in this Agreement.
(b) Capitalization of the Company and the Subsidiary. Subject to
------------------------------------------------
Article 8, the Company's and the Subsidiary's capitalization is as set forth in
Exhibit D. Vertex is the record, legal and beneficial owner of 75,417 shares of
issued and outstanding shares of capital stock of the Company and the other
shareholders listed on Exhibit E are the record owners of 37,047 issued and
outstanding shares of capital stock of the Company. The Company is the
11
<PAGE>
record, legal and beneficial owner of all of the issued and outstanding capital
stock of the Subsidiary. Neither Vertex, the Company nor the Subsidiary has any
agreement, commitment, obligations, absolute or contingent, to any other person
to sell, transfer, assign, encumber, restrict or pledge any capital stock of the
Company or the Subsidiary, or to sell, transfer, encumber, restrict or pledge
any assets, income, revenues, rights, claims or authorizations of the Company or
the Subsidiary, or to sell, assign, transfer or restrict any capital stock of
the Company or the Subsidiary or to effect any merger, consolidation or other
reorganization of the Company or the Subsidiary or to enter into any agreement
with respect thereto, except as contemplated by this Agreement.
(c) Execution, Delivery and Performance of Agreement; Authority. The
-----------------------------------------------------------
execution and delivery of this Agreement by Vertex, the Company and the
Subsidiary and of each of the other Transaction Documents to which Vertex, the
Company and the Subsidiary is a party and the consummation of the transactions
contemplated hereby and thereby by Vertex, the Company and the Subsidiary have
been duly authorized by all requisite corporate and shareholder action of
Vertex, the Company and the Subsidiary, as the case may be. This Agreement
constitutes the legal, valid and binding obligations of Vertex, the Company, or
the Subsidiary, enforceable against it in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws which from time to time
may affect creditors' rights generally and by legal and equitable limitations as
a remedy against Vertex). Upon the Effective Time of the Merger, Mortgage Plus
shareholders will acquire good and marketable title to the Company's securities
free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other
12
<PAGE>
restriction or equity of any kind whatsoever, subject to applicable Federal and
State Securities Laws restrictions.
(d) No Conflict. The execution and delivery of this Agreement and the
-----------
consummation of the transactions contemplated hereby will not (i) violate or
conflict with any provision of the Certificate of Incorporation or By-Laws (or
other governing instrument) of Vertex, the Company or the Subsidiary; (ii) will
not violate, or be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, any
agreement, arrangement or other obligations of Vertex , the Company or the
Subsidiary or any statute, law, judgment, decree, order, regulation or rule of
any court or governmental body applicable to Vertex, the Company or the
Subsidiary; (iii) result in the creation of any lien, claim, charge, encumbrance
or exception upon any of the property, assets or rights of the Company, or the
Subsidiary; or (iv) give rise to any right of forfeiture, termination,
cancellation or acceleration with respect to any license or contract to which
the Company or the Subsidiary is a party, or any statute, law, judgment, decree,
order, regulation or rule of any court of governmental body applicable to the
Company or the Subsidiary; it being specifically agreed that at the Closing
neither the Company nor the Subsidiary will be a party to, or have an obligation
with regard to, any bond, mortgage note or other evidence of indebtedness for
borrowed money (or any guaranty thereof).
(e) Consents and Approvals. No consent, approval or authorization
----------------------
of, or declaration, filing or registration with, any governmental body or any
other person is required on behalf of Vertex, the Company or the Subsidiary in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby
13
<PAGE>
other than for such consents, approvals, authorizations, declarations, filings
or registrations that have been or shall be disclosed and/or delivered to
Mortgage Plus prior to the Closing as set forth on Exhibit A hereof.
(f) Litigation. There is no action, suit, inquiry, proceeding or
----------
investigation by or before any court, arbitrator or governmental body (i)
pending or threatened against or relating to the Company or the Subsidiary with
respect to any matter, or (ii) with respect to Vertex that involves the Company
or the Subsidiary. No action, suit, proceeding or arbitration is pending,
threatened or contemplated in which the Company or the Subsidiary is a plaintiff
or in which the Company or the Subsidiary is a witness or interested party.
There is no action, suit, proceeding or arbitration in the case of Vertex, the
Company or the Subsidiary which may exist or be pending in connection with or
relating to the transactions contemplated by this Agreement. There is no
injunction, order or decree of a court of competent jurisdiction against Vertex,
the Company or the Subsidiary that would prohibit or delay the consummation of
the transactions contemplated by this Agreement.
(g) No Brokers or Finders. Neither Vertex, the Company or the
---------------------
Subsidiary (and no affiliate thereof) nor any of its or their shareholders,
officers, directors, employees or agents, has employed any broker or finder or
incurred any Liability as to which the Company or the Subsidiary or any Mortgage
Plus shareholder may be liable for any brokerage or finder's fees or commissions
or similar payments in connection with the transactions contemplated by this
Agreement and the other Transaction Documents.
(h) SEC Reports. The Company has heretofore furnished Mortgage Plus
-----------
with true and complete copies of its (i) Annual Reports on Form 10-K for the
years ended July 31,
14
<PAGE>
1997 as filed with the SEC, (ii) Quarterly Reports on Form 10-Q for each fiscal
quarter ended after October 31, 1997; (iii) Proxy Statements relating to all
meetings of its shareholders (whether annual or special) during 1997, and (iv)
all other reports filed by the Company with the SEC during 1997. As of their
respective dates, such reports and statements complied as to form in all
material respects with the requirements applicable thereto and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements, in light of
the circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of the Company
included or incorporated by reference in such reports have been prepared in
accordance with GAAP applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the assets, liabilities and
financial position of the Company as of and at the dates thereof and the results
of operations and changes in financial position for the periods then ended,
subject in the case of the unaudited interim financial statements, to normal,
recurring year-end adjustments and any other adjustments described therein.
(i) Financial Information of the Entities; No Material Change.
---------------------------------------------------------
(i) Vertex has delivered to Mortgage Plus the Company's
"Financial Information" listed on Exhibit F hereof. The Financial Information
fairly presents, in all material respects, the assets, liabilities, financial
condition and results of operations of the Company, as at the respective dates
thereof and for the periods referred to therein. Except as shown on Exhibit F
and other than the Liabilities, the Company and the Subsidiary each has no
obligation or liability of any nature.
15
<PAGE>
(ii) Except as set fort on Exhibit G, since the date of the
Financial Information, neither the Company or the Subsidiary has (A) incurred
(and will not incur) any Liability; (B) sold or transferred any of the assets
used in connection with its business, cancelled any debts or claims or waived
any rights or except for this Agreement, entered into any transaction; or (C)
experienced any other material adverse change in its assets, properties,
business or prospects.
(j) Taxes. All taxes (which are deemed "Liabilities") including,
-----
without limitation, income, property, sales, use, franchise, value added,
employees' income withholding and social security taxes, imposed by the United
States or by any state, municipality, subdivision or instrumentality of the
United States or of any foreign country, or by any other taxing authority, which
are due or payable by the Company or the Subsidiary as of the Effective Time,
and all interest and penalties thereon, whether disputed or not, have been paid
in full, all tax returns required to be filed in connection therewith have been
accurately prepared and duly filed or applicable extensions therefor have been
obtained and all deposits required by law to be made by the Company with respect
to employees' withholding taxes have been duly made. The Company (and the
Subsidiary) is not delinquent in the payment of any tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and there is no basis for any such deficiency
or claim. Mortgage Plus shall be responsible for the cost and filing of all tax
returns for fiscal 1998..
(k) No Subsidiaries or Investments. Other than the Subsidiary, the
------------------------------
Company does not own any capital shares or other equity or ownership or
proprietary interest in any
16
<PAGE>
corporation, limited liability company, partnership, association, trust, joint
venture or other entity.
(l) Listing. ["Bulletin Board" symbol "CPTT".]
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF MORTGAGE PLUS SHAREHOLDERS
6.1 On November 12, 1997, Mortgage Plus prepared and filed with the
Securities and Exchange Commission (the "Commission"), a registration statement
(the "Registration Statement") on Form SB-2 (No. 333-____) under the Securities
Act of 1933, as amended (the Act"), which Registration Statement was prepared by
the Company in substantial conformity with the requirements of the Act. The
amended Registration Statement to be filed to reflect the transactions
contemplated by this Agreement at the time of filing thereof will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.2 Mortgage Plus has been duly organized and is a validly existing
corporation in good standing under the laws of the State of New York. Mortgage
Plus does not own or control, directly or indirectly, any corporation,
partnership, trust, joint venture or other business entity other than the
subsidiaries listed in Exhibit 21 of the Registration Statement. Mortgage Plus
is duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing (except
those jurisdictions in which the failure to not qualify will not, in the
aggregate, have a material adverse effect on Mortgage Plus). Mortgage Plus has
all requisite
17
<PAGE>
power and authority (corporate and other), and has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and bodies
(including, without limitations, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Registration Statement; Mortgage Plus has been doing business
in compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and Mortgage Plus has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the properties, or results of
operations Mortgage Plus taken as a whole.
6.3 Mortgage Plus has a duly authorized, issued and outstanding
capitalization as set forth in Exhibit H. Mortgage Plus is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
as described in the Registration Statement. Except as set forth in the
Registration Statement and on Exhibit H hereto, the Company has no outstanding
options to purchase, or any preemptive rights or other rights to subscribe for
or to purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations.
6.4 The 1997 audited financial statements of Mortgage Plus, together with
the related notes and schedules thereto, fairly present the financial position,
changes in stockholders equity and the results of operations of Mortgage Plus at
the respective dates and for the respective
18
<PAGE>
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles consistently applied
through the periods involved. There has been no material adverse change or
development involving a material prospective change in the condition, financial
or otherwise, or in the business, affairs, operations, properties, or results of
operations of Mortgage Plus and its subsidiaries taken as a whole whether or not
arising in the ordinary course of business since the date of said financial
statements.
6.5 Mortgage Plus (a) has paid all federal, state, local, franchise and
foreign taxes for which it is liable including, but not limited to, withholding
taxes and amounts payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986, as amended (the "Code"), and has furnished all information returns
it is required to furnish pursuant to the Code, (b) has established adequate
reserves for such taxes which are not due and payable, and (c) does not have any
tax deficiency or claims outstanding, proposed or assessed against it.
6.6 No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Company in connection with the consummation by Mortgage Plus of
any of their obligations under this Agreement.
6.7 There is no action, suit, proceeding, inquiry, arbitration, mediation,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or businesses of, Mortgage
Plus which (a) questions the validity of the capital stock of Mortgage Plus,
this Agreement, or of any action taken or to be taken by the Mortgage Plus
Shareholders to authorize this Agreement or the transactions contemplated
hereby, (b) is required to be disclosed in the
19
<PAGE>
Registration Statement which will not be so disclosed, or (c) might materially
and adversely affect the condition, financial or otherwise, or the business,
affairs, position, stockholders' equity, operation, properties, or results of
operations of Mortgage Plus.
6.8 Mortgage Plus has the power and authority to enter into this Agreement
and to consummate the transactions provided for in this Agreement; and this
Agreement has been duly and property authorized, executed and delivered by the
Mortgage Plus shareholders. This Agreement constitutes a legal, valid and
binding obligation of Mortgage Plus enforceable against Mortgage Plus in
accordance with its respective terms (except as the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), The consummation by Mortgage Plus of the
transactions contemplated herein does not conflict with or will not conflict
with or result or will result in, any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of Mortgage Plus pursuant
to the terms of (a) the articles of incorporation or by-laws of Mortgage Plus,
as amended and restated, (b) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which Mortgage Plus is a party
or by which it is or may be bound or to which its properties or assets (tangible
or intangible) is or may be subject, or any indebtedness, or (c) any statute,
judgment,
20
<PAGE>
decree, order, rule or regulation applicable to Mortgage Plus of any arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction over
Mortgage Plus or any of their activities or profits.
6.9 No consent, approval, authorization or order of, and no filing with,
any court, regulatory body, government agency or other body, domestic or
foreign, is required for Mortgage Plus to consummate the transactions
contemplated by this Agreement, including, without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any Mortgage Plus Shares.
6.10 All executed agreements, contracts, or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which Mortgage Plus is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by Mortgage Plus and
constitute the legal, valid and binding agreements of Mortgage Plus enforceable
against Mortgage Plus in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law).
6.11 Mortgage Plus has sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals and governmental authorizations to conduct its
business as now conducted; the expiration of any trademarks, trade names, patent
rights, copyrights, licenses, approvals or
21
<PAGE>
governmental authorizations would not have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of Mortgage Plus; Mortgage Plus has no knowledge of any infringement by it or
its subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and there is no claim
being made against Mortgage Plus regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which could have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of Mortgage Plus.
6.12 No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, installment
sale agreement, lease, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement, or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which Mortgage Plus is a party or by which Mortgage
Plus may be bound or to which the property or assets (tangible or intangible )
of Mortgage Plus is subject or affected.
6.13 To Mortgage Plus's knowledge, there are no pending investigations
involving Mortgage Plus by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. There is no unfair labor practice charge
or complaint against Mortgage Plus pending before the National Labor Relations
Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending
or to its knowledge threatened against or involving Mortgage Plus. No
representation question exists respecting the employees of Mortgage Plus. No
collective bargaining agreement or modification thereof is currently being
negotiated by Mortgage Plus. No grievance or arbitration
22
<PAGE>
proceeding is pending under any expired or existing collective bargaining
agreements of Mortgage Plus. No labor dispute with the employees of Mortgage
Plus exists or to its knowledge is imminent.
6.14 Except as described in the Registration Statement, Mortgage Plus does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). Mortgage Plus does not maintain or contribute to a
defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code, which could
subject Mortgage Plus to any tax penalty or prohibited transactions and which
has not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination letters have been received
form the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. Mortgage Plus has never
completely or partially withdrawn forma "multiemployer plan."
6.15 Mortgage Plus has good and marketable title to, or valid and enforceable
leasehold estates in, all items of real and personal property stated in the
Registration Statement to be owned or leased by it, free and clear of all liens,
charges, claims, encumbrances, pledges,
23
<PAGE>
security interests, or other restrictions or equities of any kind whatsoever
other than those referred to in the Registration Statement and liens for taxes
not yet due and payable.
6.16 Except as set forth in the Registration Statement, no officer, director
or stockholder of Mortgage Plus, or any "affiliate" or "associate" (as those
terms are defined in Rule 405 promulgated under the Regulations) of any of the
foregoing persons or entities has or has had, either directly or indirectly, (a)
an interest in any person or entity which (1) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
Mortgage Plus, or (2) purchases from or sells or furnishes to Mortgage Plus any
goods or services, or (b) a beneficiary interest in any contract or agreement to
which Mortgage Plus is a party or by which it may be bound or affected. Except
as set forth in the Registration Statement, there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among Mortgage Plus,
and any officer, director, principal shareholder (as such term is under in the
Registration Statement) of Mortgage Plus, or any affiliate or associate of any
of the foregoing persons or entities.
6.17 Mortgage Plus is not, and does not intend to conduct its business in a
manner in which it would become an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
6.18 Each of Mortgage Plus and its subsidiaries maintains insurance by
insurers of recognized financial responsibility of the types and in the amounts
as are prudent, customary and adequate for the business in which it is engaged,
including, but not limited to, insurance covering real and personal property
owned or leased by Mortgage Plus and its subsidiaries against theft,
24
<PAGE>
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect. Mortgage Plus has
no reason to believe that it will not be able to renew existing insurance
coverage with respect to Mortgage Plus as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business, in either cast, at a cost that would not have a material adverse
effect on the financial condition, operations, business, assets or properties of
Mortgage Plus. Mortgage Plus has not failed to file any claims, has no material
disputes with its insurance company regarding any claims submitted under its
insurance policies, and has complied with all material provisions contained in
its insurance policies.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. All representations,
------------------------------------------
warranties, covenants and agreements contained in this Agreement, or in any
written statement, including, without limitation, any certificate, exhibit,
schedule or other document delivered pursuant hereto or thereto and made a part
hereof or thereof, shall survive the execution and delivery of this Agreement
and the Closing hereunder for a period of two (2) years from the Closing Date;
provided, that all representations, warranties, covenants and agreements with
respect to (a) any liability for any foreign, federal, state, county or local
taxes and any interest and penalties thereon, and (b) any allegation of fraud,
shall survive the execution and delivery of this Agreement and the Closing
hereunder for the full period of any applicable statute of limitations.
7.2 Indemnification.
---------------
25
<PAGE>
Vertex agrees to indemnify and hold harmless from, and shall reimburse
each Mortgage Plus Shareholder and the Company (and any officer, employee,
shareholder, board member, advisor or attorney thereof) for any and all damages
(which includes any Liability) arising from, in connection with or relating to
any inaccuracy in any of the representations and warranties of Vertex or failure
by Vertex to perform or comply with any of their respective covenants and
agreements contained in this Agreement, the other Transaction Documents or in
any certificate, exhibit, schedule or other document delivered pursuant hereto
or thereto and made a part hereof or thereof.
7.3 Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless from, and shall reimburse Vertex (and any officer, employee,
shareholder, board member or attorney thereof) for, any and all damages arising
from, in connection with or relating to any inaccuracy in any of the
representations and warranties of Mortgage Plus (and any officer, employee,
shareholder, board member, advisor or attorney thereof) or failure by Mortgage
Plus to perform or comply with any of their respective covenants and agreements
contained in this Agreement or in any certificate, exhibit, schedule or other
document delivered pursuant hereto or thereto and made a part hereof or
thereof.
7.4 Direct Claims. If any indemnitee suffers a loss or incurs an expense,
-------------
loss or damage with respect to which it intends to seek indemnification
hereunder, it shall give written notice thereof to the indemnitor describing the
amount and nature of such loss or expense. If within thirty (30) days from such
notice the indemnitor has not delivered a written objection to such claim to
such indemnitee, the indemnitor shall be deemed to have agreed to the amount of
such claim and its liability therefor. In the event that the indemnitor objects
to such claim within
26
<PAGE>
such period, such indemnitee's rights to indemnification from the indemnitor for
such claim under this Article 7 shall be determined by (i) subsequent written
agreement of the indemnitor and such indemnitee; or (ii) a final decree or
judgment of a court of competent jurisdiction.
ARTICLE 8
COVENANTS OF VERTEX
8.1 Covenants of the Company (Pre-Merger). Immediately prior to the
-------------------------------------
Effective Time, the Company shall declare and distribute a 3 for 1 stock split
consisting of one (1) registered shares and two (2) unregistered shares of the
Company's Common Stock to pre-merger Company shareholders. The unregistered
Stock shall bear such legends (and related stop transfer instructions) as
Company's pre-merger counsel shall approve.
8.2 Vertex agrees not to, directly or indirectly, offer, offer to sell,
sell, grant any option for the sale of, transfer, assign, pledge, hypothecate or
otherwise encumber or dispose of any shares of the Company (including any shares
of Additional Stock) (either pursuant to Rule 144 of the Regulations or
otherwise) or dispose of any interest therein for a period from the date hereof
until six (6) months following the date hereof, after which the pre-merger
registered shares of the Company's Common Stock held by Vertex shall be free of
all restrictions on their resale.
ARTICLE 9
COVENANTS OF THE COMPANY (POST-MERGER)
9.1 The Company will use its best efforts, in a commercially reasonable
manner, to promptly file an amended Registration Statement with the Commission
to effect the sale, for the Company's account, on a self-underwritten best
efforts underwriting, of between 1,000,000 and
27
<PAGE>
1,200,000 shares of the Company's Common Stock at an anticipated purchase price
between $4.50 and $5.00 per share, but not less than $4.50 per share, and shall
use its best efforts to cause such Registration Statement to be declared
effective by the Commission.
9.2 For a period of at least twelve (12) months following the Effective
Time, the Company will not authorize or approve any "reverse" stock split and
prior to the release of Rule 144 restrictions for all shares issued to the
Company's pre-merger shareholders, (see Exhibit I, annexed hereto).
ARTICLE 10
NOTICES
10.1 Notices. Any and all notices and other communications required or
-------
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when delivered by hand or
mailed by first class certified or registered mail, return receipt requested, or
when sent by a nationally recognized overnight courier, addressed to the Parties
at the following addresses (or at such other address as a Party may designate by
notice to the other Parties given as aforesaid):
If to the Mortgage Plus Shareholders:
6851 Jericho Turnpike
Syosset, New York 11791
With copies to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: Norman M. Friedland, Esq.
28
<PAGE>
If to Vertex:
Ronald C. Byer, President
Vertex Industries, Inc.
23 Carol Street
Clifton, New Jersey 07014
With copies to:
Law Office of Jeffrey D. Marks, Esq., P.C.
415 Clifton Avenue
Clifton, New Jersey 07015
If to the Company:
Computer Transceiver Systems, Inc.
23 Carol Street
Clifton, New Jersey 07014
Attention: Tom Tully
ARTICLE 11
MISCELLANEOUS
11.1 Publicity. Public announcements relating to the transactions
---------
contemplated by this Agreement and the other Transaction Documents shall be
jointly planned, coordinated and agreed to by the parties prior to Closing.
11.2 Expenses. The Parties to this Agreement shall each bear their own
--------
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the other Transaction Documents and the consummation of
the transactions contemplated hereby and thereby including, without limitation,
all fees and expenses of agents, representatives, counsel and accountants. The
post-merger Company shall bear the costs and expenses in connection with the
issuance of all new stock certificates contemplated by this Agreement.
29
<PAGE>
11.3 Further Assurances. Each of the Parties hereto agrees to execute,
------------------
acknowledge, deliver, file, record and publish such further certificates,
instruments, agreements and other documents, and to take all such further
actions, as may be required in connection with the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
11.4 Entire Agreement. This Agreement and the other Transaction Documents
----------------
and all written statements including without limitation, all certificates,
exhibits, schedules and other documents delivered pursuant hereto or thereto and
made a part hereof or thereof, constitute the entire agreement among the Parties
with respect to the subject matter hereof and thereof, supersede all prior
written agreements (whether written or oral) among the Parties.
11.5 Amendments; Waivers. This Agreement may not be modified, supplemented or
-------------------
amended except by a written agreement executed by all of the Parties hereto. No
waiver of any breach or default under this Agreement shall be considered valid
unless in writing and signed by the Party or Parties giving such waiver, and no
such waiver shall be deemed to be a waiver of any subsequent breach or default
of the same or similar nature.
11.6 Gender and Number. Unless the context otherwise requires, when used
-----------------
herein, the singular includes the plural and vice versa, and the masculine
includes the feminine and neuter and vice versa.
11.7 Assignment, Binding Effect. No Party to this Agreement may assign its
--------------------------
rights and obligations hereunder, without the prior written consent of the other
Parties hereto. This Agreement shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors.
30
<PAGE>
11.8 Headings. The article and section headings contained in this Agreement
--------
are for the purpose of convenience only and are not intended to define or limit
the contents of said articles and sections.
11.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to the
conflicts of law provisions thereof. Each of the Parties to this Agreement
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts of the State of New York.
11.10 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which, when taken together, shall
constitute one and the same instrument.
11.11 Escrow. All parties to this Agreement agree that all documents related
------
to this transaction shall be held in escrow by the parties' attorneys and shall
have no force or effect prior to the consent of Norman M. Friedland, Esq. and
Jeffrey D. Marks, Esq. to the release and effectiveness of said documents.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MORTGAGE PLUS EQUITY AND LOAN
CORPORATION
By: /s/ STEVEN M. LATESSA
-------------------------------------
STEVEN M. LATESSA, President and
Chief Executive Officer
VERTEX INDUSTRIES, INC.
By: /s/ Ronald C. Byer
-------------------------------------
Ronald C. Byer, President
COMPUTER TRANSCEIVER SYSTEMS,
INC.
By: /s/ Thomas J. Tully
-------------------------------------
Thomas J. Tully, President
CTS-Subsidiary
By: /s/ Thomas J. Tully
-------------------------------------
Thomas J. Tully, President
32
<PAGE>
EXHIBIT C(2)
CERTIFICATE OF MERGER
OF
CTS-SUBSIDIARY, INC.
INTO
MORTGAGE PLUS EQUITY AND LOAN CORP.
(UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW)
The undersigned, President and Secretary of Mortgage Plus Equity and Loan
Corp. and President and Secretary of CTS-Subsidiary, Inc. (the "Constituent
Corporations"), said corporations being domestic corporations duly organized and
existing under the laws of the State of New York, and an agreement for merger
and reorganization (the "Merger Agreement") to merge CTS-Subsidiary, Inc. with
and into Mortgage Plus Equity and Loan Corp., (the "Merger"), with the latter
being the surviving corporation (the "Surviving Corporation") having been
adopted by the boards of directors, and duly authorized by the shareholders, of
each of said Constituent Corporations, do hereby certify:
1. The names of the Constituent Corporations are Mortgage Plus Equity and Loan
Corp. and CTS-Subsidiary, Inc. The name of the Surviving Corporation is
Mortgage Plus Equity and Loan Corp.
2. The designation, number, and voting rights of the outstanding shares of
each class and series of the Constituent Corporations are as follows:
<TABLE>
<CAPTION>
Name of Constituent Class Designation Number of Shares Outstanding
Corporation and Voting Right
<S> <C> <C>
Mortgage Plus Equity and Loan Common Stock, 8,056,000 Shares, One Vote
Corp. $.001 par value per Share
CTS-Subsidiary, Inc. Common Stock, 200 Shares, One Vote per
no par value Share
</TABLE>
3. The effective date of the Merger (the "Date of Merger") shall be the date
of filing by the Department of State of this Certificate of Merger.
4. (a) The Certificate of Incorporation of Mortgage Plus Equity and Loan
Corp. was filed by the Department of State on September 25, 1987.
(b) The Certificate of Incorporation of CTS-Subsidiary, Inc. was filed
by the Department of State on February 12, 1998.
5. (a) The Merger was authorized with respect to Mortgage Plus Equity and
Loan Corp. by 82.8% (6,670,000) of the holders of shares of its common stock
entitled to vote thereon.
<PAGE>
(b) The Merger was authorized with respect to CTS-Subsidiary, Inc. by
a written consent signed by the holders of all outstanding shares entitled to
vote thereon.
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 3rd day of March, 1998, and hereby affirm the statements
contained herein are true under penalties of perjury.
MORTGAGE PLUS EQUITY AND LOAN CORP.
By: /s/Steven Latessa
--------------------------------
Steven Latessa, President
By: /s/Cary Wolen
--------------------------------
Cary Wolen, Secretary
CTS-SUBSIDIARY, INC.
By: /s/Thomas J. Tully
--------------------------------
Thomas J. Tully, President
By: /s/Ronald C. Byer
--------------------------------
Ronald C. Byer, Secretary
2
<PAGE>
Exhibit C(3)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COMPUTER TRANSCEIVER SYSTEMS, INC.
__________________________________________________
Pursuant to Section 805 of the Business Corporation Law
____________________________________________________
The undersigned, being the duly elected President and Secretary,
respectively, of Computer Transceiver Systems, Inc. (the "Corporation"), hereby
certify as follows:
1. The name of the Corporation is Computer Transceiver Systems, Inc.
2. Its Certificate of Incorporation was filed with the Secretary of State
on March 13, 1968, under the original name of Portronic Terminals, Inc.
3. This Amendment is to change 2,811,603 common shares outstanding, .001
par value, to 112,464 common shares outstanding, $.01 par value, the terms of
the change being at a rate of 1 issued common share, $.01 par value for each 25
issued common shares, $.001 par value with, the rounding up of all fractional
shares; and to change the authorized common shares from 5,000,000 common shares
with a par value of $.001 to 15,000,000 common shares with a par value of $.01.
There will be 14,887,536 shares authorized but unissued.
1
<PAGE>
4. Article "FOURTH" of the Certificate of Incorporation, relating to
authorized shares, is hereby revised and amended so as to read in its entirety
as follows:
"FOURTH". The Company shall enter into a 1 for twenty five reverse
--------
split of its Common Stock, with the rounding up of all fractional
shares. The number of authorized shares outstanding shall be 112,464
with a par value of $.01. The number of authorized but unissued
shares shall be 14,887,536, with a par value of $.01. The Corporation
shall be authorized to issue a single class of 15,000,000 shares of
Common Stock with a par value of $.01 each.
5. The foregoing amendment to the Certificate of Incorporation was
authorized by the directors of the Corporation and by a vote of the holders of
more than fifty-six (56%) percent of the outstanding shares entitled to vote
thereon by written consent of the shareholders of the Corporation.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation this 26th day of February, 1998,
and affirm that the statements contained therein are true and correct under the
penalties of perjury.
/s/ Thomas J. Tully
-------------------
THOMAS J. TULLY, PRESIDENT
/s/ Ronal C. Byer
-----------------
RONALD C. BYER, SECRETARY
2
<PAGE>
Exhibit C(4)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
COMPUTER TRANSCEIVER SYSTEMS, INC.
-----------------------------------
Under Section 805 of the
Business Corporation Law
-----------------------------------
The undersigned, Steven Latessa, and Cary Wolen, being duly elected
President and Secretary, respectively, of Computer Transceiver Systems, Inc.
(the "Corporation"), acting pursuant to Section 805 of the Business Corporation
Law a hereby certify as follows:
1. The name of the corporation is COMPUTER TRANSCEIVER SYSTEMS, INC. Its
Certificate of Incorporation was filed with the Secretary of State on March 13,
1968 under the original name of Portronic Terminals, Inc. and subsequently was
amended by certificates of amendment filed July 5, 1968, July 31, 1968 and July
14, 1987.
2. The Certificate of Incorporation is amended to change the name of the
Corporation.
3. The Certificate of Incorporation is hereby amended by striking out the
whole of Article FIRST as it now exists and inserting in lieu and instead
thereof, a new Article FIRST reading as follows:
FIRST: The name of the Corporation is MPEL HOLDINGS CORP.
4. This amendment was authorized by the unanimous written consent of the
Board of Directors followed by the consent of the majority of the Shareholders
of the Corporation on March 5, 1998.
<PAGE>
IN WITNESS WHEREOF, this Certificate has been signed this 5th day of
March, 1998, and it is affirmed that the statements made herein are true under
the penalties of perjury.
/s/ STEVEN LATESSA
_________________________
STEVEN LATESSA, President
/s/ CARY WOLEN
__________________________
CARY WOLEN, Secretary
