<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 1998
T-NETIX, INC.
-------------
(Exact name of registrant as specified in charter)
COLORADO 0-25016 84-1037352
-------- ------- ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
67 INVERNESS DRIVE EAST, SUITE 100 ENGLEWOOD, CO 80112
------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 790-9111
<PAGE> 2
This report on From 8-K/A amends and supplements a report on Form 8-K
filed by T-NETIX, Inc. ("T-NETIX" of the "Company") on January 12, 1999 in
connection with the purchase of Cell-Tel Monitoring, Inc. on December 31, 1998.
The disclosure required by Item 2 is included in that report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
F-1 Independent Auditors' Report
F-2 Balance Sheets as of December 31, 1998 and 1997
F-3 Statements of Operations for the year ended December
31, 1998 and the period from October 16, 1997 (date
of inception) to December 31, 1997
F-4 Statements of Cash Flows for the year ended December
31, 1998 and the period from October 16, 1997 (date
of inception) to December 31, 1997
F-5 Statement of Shareholders' Equity for the period from
October 16, 1997 (date of inception) to December 31, 1998
F-6 Notes to financial statements
(b) Pro forma financial information
F-9 Unaudited Pro Forma Condensed Combined Statement of
Operations for the five months ended December 31, 1998
F-10 Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended July 31, 1998
F-11 Unaudited Pro Forma Financial Information
(c) Exhibits
Exhibit 2 Plan of Merger by and between T-NETIX,
International Corporation, a wholly owned
subsidiary of T-NETIX, Inc. and Cell-Tel
Monitoring, Inc. dated as of December 30, 1998.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
T-NETIX, Inc.
Dated: May 10, 1999 BY: /s/ Alvyn A. Schopp
-------------------
Alvyn A. Schopp, Chief
Executive Officer
-3-
<PAGE> 4
Dempsey & Russell P.C.
CERTIFIED PUBLIC ACCOUNTANTS
1539 REX STREET
MONTGOMERY, AL 36107
MEMBERS
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
ALABAMA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
DENNIS T. DEMPSEY, C.P.A. 334-263-5154
MICHAEL D. RUSSELL, C.P.A. (FAX) 334-263-5276
MARK D. RUSSELL, C.P.A.
INDEPENDENT AUDITOR'S REPORT
----------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
CELL-TEL MONITORING, INC.
We have audited the accompanying balance sheets of Cell-Tel Monitoring, Inc., (a
development stage company) as of December 31, 1998 and 1997, and the related
statements of operations, shareholders' equity, and cash flows for the year
ended December 31, 1998 and the period from October 16, 1997 (date of inception)
to December 31, 1997. The financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cell-Tel Monitoring, Inc. at
December 31, 1998 and 1997, and the results of its operations and cash flows for
the year ended December 31, 1998 and for the period from October 16, 1997 (date
of inception) to December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Dempsey & Russell, P.C.
February 28, 1999
F-1
<PAGE> 5
CELL-TEL MONITORING, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
Assets 1998 1997
------------ ------------
<S> <C> <C>
Current Assets
Cash $ 79,213 $ 72,967
------------ ------------
Total Current Assets 79,213 72,967
Office furniture and equipment 264,142 140,380
Less: Accumulated Depreciation (99,745) (11,698)
------------ ------------
Office furniture and equipment, net 164,397 128,682
Software Development Costs 1,357,823 198,682
Other Assets, net 8,072 12,685
------------ ------------
Total Assets $ 1,609,505 $ 413,016
============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $ - $ 11,135
Accrued Liabilities - 22,541
------------ ------------
Total Current Liabilities - 33,676
Shareholders' Equity
Preferred Stock, $1 par value, 2,074,523 350,438
3,000,000 shares authorized,
2,074,523 shares in 1998
and 350,438 shares in 1997
issued and outstanding
Common Stock, $.01 par value, 85,000 85,000
10,000,000 shares authorized,
8,500,000 shares
issued and outstanding
Accumulated Deficit (since (550,018) (56,098)
------------ ------------
October 16, 1997, date of inception)
Total Shareholders' Equity 1,609,505 379,340
------------ ------------
Total Liabilities and Shareholders' Equity $ 1,609,505 $ 413,016
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-2
<PAGE> 6
CELL-TEL MONITORING, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
October 16, 1997
Year Ended (date of inception)
December 31, to December 31,
1998 1997
------------- ------------------
<S> <C> <C>
Services Revenue $ 298,549 $ -
Expenses:
Cost of Services 298,549 -
Selling, General 231,608 43,247
and Administrative
Research and Development 169,652 -
Depreciation and Amortization 92,660 12,851
------------- ------------
Total Expenses 792,469 56,098
------------- ------------
Operating Loss (493,920) (56,098)
Income taxes - -
------------- ------------
Net Loss $ (493,920) $ (56,098)
============= ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-3
<PAGE> 7
CELL-TEL MONITORING, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
October 16,
Year Ended 1997 to
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash provided by
operating activities:
Net Loss $ (493,920) $ (56,098)
Adjustments to reconcile
net loss to net cash
used by operating activities
Depreciation and 92,660 12,851
Amortization
Changes in operating
assets and liabilities:
Change in accounts payable (11,135) 11,135
Change in accrued liabilities (22,541) 22,541
---------- ----------
Net Cash used by
operating activities (434,936) (9,571)
Investing activities:
Capital expenditures (123,762) (70,218)
Software Development Costs (1,159,141) (198,682)
---------- ----------
Net Cash used by
investing activities (1,282,903) (268,900)
Financing activities:
Sale of preferred stock 1,724,085 350,438
Sale of common stock - 1,000
---------- ----------
Net Cash provided by
financing activities 1,724,085 351,438
---------- ----------
Net increase in cash 6,246 72,967
Cash at beginning of period 72,967 -
---------- ----------
Cash at end of period $ 79,213 $ 72,967
========== ==========
Supplementary Cash Flow Disclosure
Contribution of intangible
assets and office furniture
and equipment for common stock $ - $ 85,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-4
<PAGE> 8
CELL-TEL MONITORING, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Accum- Total Share-
Preferred Common ulated holders'
Stock Stock Deficit equity
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Balances at October 16,
1997 (Date of Inception) $ - $ - $ - $ -
Common Stock Issued for:
Assets (8,400,000 shares) - 85,000 - 85,000
Cash (100,000 shares)
Preferred Stock
Issued for Cash 350,438 - - 350,438
(350,438 shares)
Net Loss - - (56,098) (56,098)
----------- ----------- ---------- -----------
Balances at
December 31, 1997 350,438 85,000 (56,098) 379,340
Preferred Stock
Issued for Cash 1,724,085 - - 1,724,085
(1,724,085 shares)
Net Loss - - (493,920) (493,920)
----------- ----------- ---------- -----------
Balances at
December 31, 1998 $ 2,074,523 $ 85,000 $ (550,018) $ 1,609,505
=========== =========== ========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
F-5
<PAGE> 9
CELL-TEL MONITORING, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
General
- -------
Cell-Tel Monitoring, Inc. was incorporated in Florida in 1997. The company,
currently in the development stage, developed a parole officer caseload
management tool, CONTAIN(sm). CONTAIN(sm) is a product and service offering
which uses voice verification and the Internet for cost effective offender
caseload management by community corrections, probation and parole agencies.
There has been no significant revenue to date from the sale of the CONTAIN(sm)
product. The Company did, however, provide engineering services on a cost
reimbursement basis, and recognized revenue on such services. This was pursuant
to the agreement with T-NETIX, INC. for development work outside of the
CONTAIN(sm) product.
Cash Equivalents
- ----------------
Cash equivalents consist of highly liquid investments with original maturities
of 90 days or less.
Office Furniture and Equipment
- ------------------------------
Office furniture and equipment are stated at cost, including costs necessary to
place such office furniture and equipment in service, except for office
furniture and equipment contributed by shareholders. Office furniture and
equipment contributed by shareholders is stated at the fair market value at the
date of inception ($71,162). Depreciation is computed on a straight line basis
using estimated useful lives of the assets, generally five years. Depreciation
expense was $88,047 for the year ended December 31, 1998 and $11,698 for the
period October 16, 1997 (date of inception) to December 31, 1997.
Impairment of Long-Lived Assets
- -------------------------------
The Company reviews its office furniture and equipment and unamortized
intangible assets whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The Company estimates the future cash
flows expected to result from operations and if the sum of the expected
undiscounted future cash flows is less than the carrying amount of the
long-lived asset, the Company recognized an impairment loss by reducing the
unamortized cost of the long-lived asset to its estimated fair value. To date
the Company has not recognized impairment on any long-lived assets.
Other Assets
- ------------
Other assets include intellectual property rights contributed by shareholders.
Other assets are stated at the estimated fair market value at October 16, 1997,
(date of inception), less accumulated amortization of $5,766 and $1,153 at
December 31, 1998 and December 31, 1997, respectively. Amortization is computed
on the straight-line basis over 3 years. Amortization expense was $4,613 for the
year ended December 31, 1998 and $1,153 for the period October 16, 1997 (date of
inception) to December 31, 1997.
F-6
<PAGE> 10
(1) Summary of Significant Accounting Policies (continued)
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
- -------------------
Revenue and the related cost of services are recognized at the time service is
performed and costs of services are incurred.
Research and Development
- ------------------------
Costs associated with the research and development of new technology or
significantly altering existing technology are charged to operations as
incurred.
Software Development
- --------------------
Software development costs have been accounted for in accordance with Statement
of Financial Accounting Standards 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed". Under the standard,
capitalization of software development costs begins upon the establishment of
technological feasibility, subject to net realizable value considerations.
Capitalized software costs are amortized over the economic useful life of the
software product, which is generally estimated to be five years. The Company
capitalized $ 1,159,141 of software development costs for the year ended
December 31, 1998 and $198,682 for the period from October 16, 1997 (date of
inception) to December 31, 1997.
Income Taxes
- ------------
The company utilizes the asset and liability method of accounting for income
taxes. Accordingly, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted income tax rates expected
to apply to taxable income in the years in which those differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in income tax rates is recognized in the results of operation in the
period that includes the enactment date.
Recently Issued Accounting Pronouncements
- -----------------------------------------
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use", was issued in March 1998. SOP
98-1 provides guidance on accounting for the costs of computer software
developed or obtained for internal use. The adoption of SOP 98-1 is not expected
to have a significant impact on the Company's financial statements.
(2) Commitments
The Company leases office space under an operating lease agreement. Rent expense
under operating lease agreements for the year ended December 31, 1998 was
$60,135 and was not significant for the period from October 16, 1997 (date of
inception) to December 31, 1997. Future minimum lease payments under this lease
agreement are not significant.
F-7
<PAGE> 11
(3) Shareholders' Equity
On December 3, 1997, the company entered into a Shareholder and Subscription
Agreement (the "Agreement") with T-NETIX, Inc. ("T-NETIX), whereby the Company
agreed to sell to T-NETIX shares of preferred stock. The subscription agreement,
as amended, provided T-NETIX the option to purchase up to 2,300,000 shares of
preferred stock for total proceeds of $2,300,000. The agreement also included a
provision for T-NETIX to purchase consulting services from the Company.
The agreement also contained an option for T-NETIX to purchase 100% of the
outstanding common stock of the company. The option, as amended, was to expire
on January 31, 1999. Effective December 31, 1998, T-NETIX exercised its option
and acquired 100% of the Common Stock of the Company from its shareholders in
exchange for conversion of Preferred Stock and $1,690,000 in cash.
(4) Income Taxes
As of December 31, 1998, the Company had a federal net operating loss
carryforward of approximately $500,000. The net operating loss carryforward will
expire in 2019 if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986 and similar state provisions.
F-8
<PAGE> 12
T-NETIX, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Five Months Ended December 31, 1998
-----------------------------------------------
Pro Forma Pro Forma
T-NETIX Cell-Tel Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Telecommunications services $ 13,288 $ -- $ -- $ 13,288
Telecommunications licensing 47 -- -- 47
Direct call provisioning 1,595 -- -- 1,595
Voice print 158 -- -- 158
Equipment sales -- -- -- --
Professional service fees -- 299 (299)(g) --
-------- -------- -------- --------
Total revenue 15,088 299 (299) 15,088
Expenses:
Operating costs and expenses
Telecommunications services 6,878 -- -- 6,878
Direct call provisioning 1,503 -- -- 1,503
Voice print 510 -- -- 510
Cost of equipment sold -- -- -- --
Cost of professional services -- 299 (299)(g) --
-------- -------- -------- --------
Total operating costs and expenses 8,891 299 (299) 8,891
Selling, general and administrative 4,390 122 -- 4,512
Research and development 1,036 154 -- 1,190
Depreciation and amortization 3,289 39 256 (c) 3,584
-------- -------- -------- --------
Total expenses 17,606 614 (43) 18,177
Operating income (loss) (2,518) (315) (256) (3,089)
Interest and other income (expense) (420) -- (123)(d) (543)
-------- -------- -------- --------
Earnings (loss) before income taxes (2,938) (315) (379) (3,632)
Income taxes 750 -- 64 (e) 814
-------- -------- -------- --------
Net earnings (loss) $ (2,188) $ (315) $ (315) $ (2,818)
======== ======== ======== ========
Diluted earnings (loss) per common share $ (0.26) $ (0.33)
======== ========
Weighted average common shares 8,551 (f) 8,551
======== ========
</TABLE>
The accompanying notes are an integral part of this proforma information.
F-9
<PAGE> 13
T-NETIX, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended July 31, 1998
---------------------------------------------
Pro Forma Pro Forma
T-NETIX Cell-Tel Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Telecommunications services $ 34,860 $ -- $ -- $ 34,860
Telecommunications licensing 205 -- -- 205
Direct call provisioning 2,516 -- -- 2,516
Voice print 632 -- -- 632
Equipment sales -- -- -- --
Professional service fees -- -- -- --
-------- -------- -------- --------
Total revenue 38,213 -- -- 38,213
Expenses:
Operating costs and expenses
Telecommunications services 15,920 -- -- 15,920
Direct call provisioning 2,311 -- -- 2,311
Voice print 78 -- -- 78
Cost of equipment sold -- -- -- --
Cost of professional services -- -- -- --
-------- -------- -------- --------
Total operating costs and expenses 18,309 -- -- 18,309
Selling, general and administrative 7,448 153 -- 7,601
Research and development 2,354 15 -- 2,369
Depreciation and amortization 8,250 67 615 (c) 8,932
-------- -------- -------- --------
Total expenses 36,361 235 615 37,211
Operating income (loss) 1,852 (235) (615) 1,002
Interest and other income (expense) (1,055) -- (295)(d) (1,350)
-------- -------- -------- --------
Earnings (loss) before income taxes 797 (235) (910) (348)
Income taxes (198) -- 149 (e) (49)
-------- -------- -------- --------
Net earnings (loss) $ 599 $ (235) $ (761) $ (397)
======== ======== ======== ========
Diluted earnings (loss) per common share $ 0.07 $ (0.04)
======== ========
Weighted average common shares 9,206 (f) 9,206
======== ========
</TABLE>
The accompanying notes are an integral part of this proforma information.
F-10
<PAGE> 14
UNAUDITED PRO FORMA FINANCIAL INFORMATION
A) BASIS OF PRESENTATION
The unaudited pro forma financial information presented herein gives effect to
the Company's acquisition of Cell-Tel Monitoring, Inc. ("Cell-Tel") under the
purchase method of accounting. The unaudited pro forma condensed consolidated
statements of operations for the year ended July 31, 1998 and for the five month
period ended December 31, 1998 gives effect to the acquisition as though it had
occurred on August 1, 1997.
The unaudited pro forma condensed combined statements of operations present
financial information for T-NETIX and Cell-Tel for the five months ended
December 31, 1998 and the fiscal year ended July 31, 1998. Cell-Tel's fiscal
year ends December 31. As such, information for the period from inception to
July 31, 1998 has been combined with the statement of operations of T-NETIX for
the year ended July 31, 1998.
The acquisition of Cell-Tel was executed on December 31, 1998 has been accounted
for using the purchase method of accounting. Accordingly, assets acquired and
liabilities assumed have been recorded at their estimated fair values, which are
subject to further adjustment, based upon appraisals and other analyses.
Management does not expect that the final allocation of the purchase price will
differ materially from the allocations set forth in the unaudited pro forma
financial information presented herein.
The pro forma adjustments are based upon available information and assumptions
that management believes are reasonable. The unaudited pro forma condensed
statements of operations do not purport to present the results of operations of
the Company had the acquisition of Cell-Tel occurred at the beginning of the
earliest period presented, nor are they necessarily indicative of the results of
operations that may be achieved in the future. The unaudited pro forma condensed
consolidated statements of operations do not reflect any adjustments for
synergies that management expects to realize commencing upon consummation of the
acquisition. No assurances can be made as to the amount of cost savings or
revenue enhancements, if any, that actually will be realized.
The unaudited pro forma financial information is based on certain assumptions
and adjustments described in the notes to unaudited pro forma condensed
consolidated financial statements and should be read in conjunction therewith
and with the consolidated financial statements and related notes of the Company
included in its Annual Report on Form 10-K for the fiscal year ended July 31,
1998 and its Quarterly Transition report on Form 10-QT for the five months
period ended December 31, 1998, and the financial statements of Cell-Tel
included in Item 7 (a) of this report.
F-11
<PAGE> 15
B) DESCRIPTION OF CONSIDERATION
The pro forma cost of the acquisition of Cell-Tel has been allocated to assets
acquired and liabilities assumed at their estimated fair values as follows:
<TABLE>
<S> <C>
Historical preferred stock investment at July 31, 1998 $1,343,000
Additional purchases of preferred stock during the five
months ended December 31, 1998 732,000
Cash paid for exercise of option 1,690,000
Other acquisition expenses 18,000
----------
Pro forma cost of the acquisition of Cell-Tel 3,783,000
Estimated fair value of tangible and identifiable
intangible assets 1,610,000
----------
Excess of cost over estimated fair value of net assets
acquired $2,173,000
</TABLE>
There were no direct costs associated with the conversion of the preferred
stocks to common stocks. The excess of cost over the estimated fair value of net
assets acquired was allocated to goodwill. The total amount will be amortized on
a straight-line basis over 7 years.
C) AMORTIZATION AND DEPRECIATION OF TANGIBLE AND INTANGIBLE ASSETS
Represents adjustments to reflect the amortization of goodwill, capitalized
software, and furniture and equipment from the acquisition of Cell-Tel. The
value of the Goodwill, $2,173,000 is to be amortized over seven years. The fair
value of computer software, $1,358,000 is to be amortized over five years. The
fair value of furniture and equipment, $164,000, is to be depreciated over five
years.
D) INTEREST EXPENSE
Represents an adjustment for interest charges on the borrowings associated
with the purchase price of Cell-Tel, assuming the entire purchase price of $3.8
million was outstanding during the five month period ended December 31, 1998
and the year ended July 31, 1998. All borrowings would have been drawn under
T-NETIX's line of credit facility. The interest rate for the facility is the
prime rate, which may vary over the life of the facility. The effective
interest rate was 7.75% at December 31, 1998. This rate was used to determine
the pro forma interest expense for all periods presented.
The impact of a change of 1/8th percent in the current interest rate on
pro forma combined net income (loss) would have been $2,000 for the five month
period ended December 31, 1998, and $4,000 for the year ended July 31, 1998.
E) INCOME TAXES
Income taxes in the unaudited pro forma condensed consolidated statements of
operations reflect the Company's incremental tax rate of approximately 25.5%.
F-12
<PAGE> 16
F) WEIGHTED AVERAGE SHARES OUTSTANDING
For the five months ended December 31, 1998 and the year ended July 31, 1998,
weighted average shares outstanding on a pro forma basis exclude potentially
dilutive securities as there were pro forma losses for those periods.
G) INTERCOMPANY REVENUE
Represents the elimination of intercompany service revenue between T-NETIX and
Cell-Tel.
F-13
<PAGE> 17
PLAN OF MERGER
This Plan of Merger ("Plan") is entered into this 30th day of December,
1998, by and between T-Netix International Corporation, a Colorado corporation
("TIC"), and Cell-Tel Monitoring, Inc., a Florida corporation ("Cell-Tel").
RECITALS
A. TIC is a wholly owned subsidiary of T-NETIX, Inc., a Colorado
corporation.
B. The respective Boards of Directors of TIC and Cell-Tel have
determined that it is in the best interest of said corporation and
their shareholders to merge Cell-Tel with and into TIC, with TIC as
the surviving corporation, upon the terms and conditions set forth
herein.
THEREFORE, in consideration of the mutual covenants contained herein, TIC
and Cell-Tel agree as follows:
1. On the effective date specified in the Articles of Merger to be filed
with the Colorado Secretary of State and the Articles of Merger to be
filed with the Florida Secretary of State, Cell-Tel shall merge with
and into TIC (the "Merger"), the separate existence of Cell-Tel shall
cease and TIC shall continue as the surviving corporation.
2. Upon consummation of the Merger, all outstanding shares of the common
stock and the preferred stock of Cell-Tel shall be canceled in
exchange for consideration described in the Shareholders and
Subscription Agreement dated December 3, 1997, by and among Cell-Tel,
T-NETIX, Inc., Michael D. Duke and Carol E. Webb, as amended.
3. The Articles of Incorporation and bylaws of TIC as in effect
immediately prior to the Merger will remain the Articles of
Incorporation and bylaws of TIC as the surviving corporation after
the Merger. TIC shall immediately after the Merger amend its Articles
of Incorporation to change its corporate name to "T-Netix Monitoring
Corporation" and shall take all actions necessary to become qualified
to transact business in the State of Florida as a foreign
corporation.
4. The directors and officers of TIC immediately prior to the Merger
shall be the directors and officers of TIC after the Merger until
their successors have been elected and have qualified.
5. After the Merger, all rights, privileges, powers and all property and
assets of TIC and Cell-Tel shall be vested in and be held by TIC as
the surviving corporation, without further act or deed, and all the
estates and interest of every kind of TIC and Cell-Tel, including all
debts due to either of them, shall be the property of TIC as the
surviving
<PAGE> 18
corporation. All rights of creditors and liens upon any property of
TIC or Cell-Tel shall be preserved unimpaired and all debts,
liabilities and duties of TIC and Cell-Tel shall be debts,
liabilities and duties of TIC as the surviving corporation and may
be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
6. This Plan may be terminated and the Merger abandoned at any time
prior to the effective date by the mutual written consent of the
parties hereto.
IN WITNESS WHEREOF, this Plan of Merger has been signed by the duly
authorized officers of TIC and Cell-Tel on the date above written.
T-NETIX INTERNATIONAL CORPORATION
/s/ Alvin Schopp
-----------------------------------
Alvin Schopp, President
CELL-TEL MONITORING, INC.
/s/ Carol E. Webb
-----------------------------------
Carol E. Webb, President
-2-
