EXHIBIT 2
AGREEMENT FOR MERGER
DATED AS OF NOVEMBER 13, 1996
BY AND AMONG
TOUCH TONE AMERICA, INC.,
TOUCH TONE/ARCADA, INC.
AND
ARCADA COMMUNICATIONS, INC.
TABLE OF CONTENTS
AGREEMENT FOR MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. EFFECTIVE TIME; CLOSING. . . . . . . . . . . . . . . . . . . . . . . 3
3. REPRESENTATIONS AND WARRANTIES OF NEWCO. . . . . . . . . . . . . . . 3
3.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . 3
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 4
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS AND WARRANTIES OF TTA. . . . . . . . . . . . . . . . 4
4.1 Organization, Power, Good Standing, Etc. . . . . . . . . . . . 5
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 8
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . 8
4.8 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Absence of Certain Changes or Events . . . . . . . . . . . . . 8
4.10 Litigation, Etc.. . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . 9
4.12 Employees; Employee Benefit Plans . . . . . . . . . . . . . .10
4.13 TTA Information . . . . . . . . . . . . . . . . . . . . . . .12
4.14 Compliance With Applicable Law. . . . . . . . . . . . . . . .12
4.15 Contracts and Agreements. . . . . . . . . . . . . . . . . . .13
4.16 Affiliate Transactions. . . . . . . . . . . . . . . . . . . .13
4.17 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .14
4.18 Title to Property . . . . . . . . . . . . . . . . . . . . . .14
4.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.20 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . .16
4.21 Sufficient Resources. . . . . . . . . . . . . . . . . . . . .16
4.22 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . .16
4.23 Bank Accounts, Etc. . . . . . . . . . . . . . . . . . . . . .16
5. REPRESENTATIONS OF ARCADA. . . . . . . . . . . . . . . . . . . . . .17
5.1 Organization, Power, Good Standing, Etc. . . . . . . . . . . .17
5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . .18
5.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . .18
5.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . .19
5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . .19
5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . .19
5.8 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.9 Absence of Certain Changes or Events . . . . . . . . . . . . .20
5.10 Litigation, Etc.. . . . . . . . . . . . . . . . . . . . . . .20
5.11 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . .20
5.12 Employees; Employee Benefit Plans . . . . . . . . . . . . . .21
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5.13 Arcada Information. . . . . . . . . . . . . . . . . . . . . .24
5.14 Compliance With Applicable Law. . . . . . . . . . . . . . . .24
5.15 Contracts and Agreements. . . . . . . . . . . . . . . . . . .24
5.16 Affiliate Transactions. . . . . . . . . . . . . . . . . . . .24
5.17 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .25
5.18 Title to Property . . . . . . . . . . . . . . . . . . . . . .25
5.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.20 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . .27
5.21 Bank Accounts, Etc. . . . . . . . . . . . . . . . . . . . . .27
6. COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . .27
6.1 Redemption of Redeemable Warrants. . . . . . . . . . . . . . .27
6.2 Reincorporation in Washington State. . . . . . . . . . . . . .27
6.3 Conduct of the Business of TTA . . . . . . . . . . . . . . . .28
6.4 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . .29
6.5 Current Information. . . . . . . . . . . . . . . . . . . . . .30
6.6 Access to Properties and Records Confidentiality . . . . . . .30
6.7 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
6.8 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . .31
6.9 Approval of TTA Stockholders . . . . . . . . . . . . . . . . .32
6.10 Approval of Arcada Stockholders . . . . . . . . . . . . . . .32
6.11 Further Assurances. . . . . . . . . . . . . . . . . . . . . .33
6.12 Public Announcements. . . . . . . . . . . . . . . . . . . . .33
6.13 Assignment of Contract Rights . . . . . . . . . . . . . . . .33
6.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . .33
6.15 Indemnification of Arcada Directors and Officers. . . . . . .33
6.16 Current Public Information. . . . . . . . . . . . . . . . . .34
6.17 Resolution of Certain Matters . . . . . . . . . . . . . . . .34
6.18 Purchase Accounting . . . . . . . . . . . . . . . . . . . . .34
7. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . .35
7.1 Conditions to Each Party's Obligations
Under This Agreement . . . . . . . . . . . . . . . . . . . .35
7.2 Conditions to the Obligations of TTA
Under This Agreement . . . . . . . . . . . . . . . . . . . .35
7.3 Conditions to the Obligations of Arcada
Under This Agreement . . . . . . . . . . . . . . . . . . . .36
8. TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . .37
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . .37
8.2 Break-up Fee . . . . . . . . . . . . . . . . . . . . . . . . .38
8.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . .39
8.4 Amendment, Extension and Waiver. . . . . . . . . . . . . . . .40
9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.4 Parties in Interest. . . . . . . . . . . . . . . . . . . . . .41
9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . .41
9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .41
9.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .41
9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . .43
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AGREEMENT FOR MERGER
This Agreement for Merger ("Agreement") is made and entered into as of
November 13, 1996 by and among Touch Tone America, Inc., a California
corporation ("TTA"), Touch Tone/Arcada, Inc., a Washington corporation and
wholly-owned subsidiary of TTA ("Newco"), and Arcada Communications, Inc.,
a Washington corporation ("Arcada").
Newco is a wholly owned subsidiary of TTA. The parties desire that
TTA and Newco enter into a transaction with Arcada which will result in a
merger (the "Merger") of Arcada with and into Newco, which shall be the
surviving institution.
The shareholders of Arcada are also all of the shareholders of each of
Stellar Telecommunications Services, Inc., a Washington corporation
("Stellar") and LeBanco, Ltd., an Oregon corporation ("LeBanco"). Prior to
the consummation of the transactions contemplated hereby, each of Stellar
and LeBanco shall be merged into Arcada. For all purposes of this
Agreement references to Arcada shall be deemed references to all three
entities.
Therefore, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, the parties hereto agree as
follows:
1. MERGER. Subject to the terms and conditions of this Agreement,
the Merger is to be accomplished in the manner described herein.
(a) MERGER OF ARCADA AND NEWCO. At the Effective Time (as
defined in Section 2), Arcada shall be merged with and into Newco, with
Newco being the surviving institution, in accordance with the Plan of
Merger by and among TTA, Newco and Arcada substantially in the form
attached hereto as Exhibit A (the "Plan of Merger"). The Plan of Merger
provides for the terms of the Merger and the manner of carrying it into
effect. The terms and conditions of the Plan of Merger are incorporated
herein and made a part hereof.
(b) CONVERSION OF ARCADA COMMON STOCK. Subject to the
provisions below and in the Plan of Merger, at the Effective Time, all of
the outstanding shares of common stock, no par value per share, of Arcada
("Arcada Common Stock") shall be converted into the right to receive shares
of common stock, no par value per share, of TTA ("TTA Common Stock"), as
described below and in the Plan of Merger.
(i) Subject to the provisions below and the provisions of
the Plan of Merger, each outstanding share of Arcada Common Stock will at
the Effective Time be converted into the right to receive 250 newly issued
shares of TTA Common Stock and a one-year, eight percent (8%) promissory
note of TTA in the original principal amount of $30.00, (collectively, the
Merger Consideration), subject to the conditions set forth in this
Agreement and in the Plan of Merger. No fractional shares of TTA Common
Stock shall be issued. In lieu of any fractional shares, any holder of
Arcada Common Stock who would otherwise be entitled to a fractional share
of TTA Common Stock will, upon surrender of his certificate or certificates
representing Arcada Common Stock outstanding immediately prior to the
Effective Time, be
paid the cash value of such fractional share interest, which shall be equal
to the product of the fraction multiplied by the Average Price (as
hereinafter defined). For the purposes of determining any such fractional
share interests, all shares of Arcada Common Stock owned by an Arcada
stockholder shall be combined so as to calculate the maximum number of
whole shares of TTA Common Stock issuable to such Arcada stockholder.
(ii) If between the date of this Agreement and the third
Nasdaq Stock Market trading day prior to the Effective Time, the shares of
TTA Common Stock shall be changed into a different number of shares by
reason of any recapitalization, split-up, combination or exchange of
shares, or if a stock dividend thereon shall be declared with a record date
within such period, the number of shares of TTA Common Stock issued in
exchange for each share of Arcada Common Stock specified in Section l(b)(i)
shall be adjusted accordingly.
(c) STOCKHOLDERS' MEETINGS. (i) TTA shall, as soon as
practicable, hold a meeting of its stockholders (the "TTA Stockholders'
Meeting") to submit for stockholder approval (the "TTA Stockholder
Approval") (a) this Agreement, (b) the Plan of Merger and (c) the
reincorporation of TTA in the State of Washington and (ii) Arcada shall, as
soon as practicable, hold a meeting of its stockholders (the "Arcada
Stockholders' Meeting") to submit for stockholder approval (the "Arcada
Stockholder Approval") (a) this Agreement and (b) the Plan of Merger.
(d) PROXY STATEMENT/PROSPECTUS.
(i) The parties hereto will cooperate in the preparation of
an appropriate proxy statement/prospectus satisfying all applicable
requirements of federal and state law (such proxy statement/prospectus in
the form mailed to TTA and Arcada stockholders, together with any and all
amendments or supplements thereto, being herein referred to as the "Proxy
Statement/Prospectus").
(ii) Arcada will furnish such information concerning itself
as is necessary in order to cause the Proxy Statement/Prospectus, insofar
as it relates to Arcada, to comply with Section l(e)(i). Arcada agrees
promptly to advise TTA if at any time prior to the TTA and Arcada
Stockholders' Meetings any information provided by Arcada for inclusion in
the Proxy Statement/Prospectus becomes incorrect or incomplete in any
material respect and to provide the information needed to correct such
inaccuracy or omission. Arcada will continue to furnish TTA with such
supplemental information as may be necessary in order to cause such Proxy
Statement/Prospectus, insofar as it relates to Arcada, to comply with
Section l(e)(i) after the mailing thereof to TTA and Arcada stockholders.
(iii) TTA will furnish such information concerning itself
as is necessary in order to cause the Proxy Statement/Prospectus, insofar
as it relates to TTA, to comply with Section l(e)(i). TTA agrees promptly
to advise Arcada if at any time prior to the TTA and Arcada Stockholders'
Meetings any information provided by TTA for inclusion in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material
respect and to provide the information needed to correct such inaccuracy or
omission. TTA will continue to furnish Arcada with such supplemental
information as may be necessary in order to cause such Proxy
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Statement/Prospectus, insofar as it relates to TTA, to comply with Section
l(e)(i) after the mailing thereof to TTA and Arcada stockholders.
(iv) TTA will prepare and file with the SEC a registration
statement on Form S-4 (together with amendments thereto, the "Registration
Statement") containing the Proxy Statement/Prospectus in connection with
the registration under the 1933 Act, and the rules and regulations
promulgated thereunder (the "1933 Act") of the TTA Common Stock to be
issued in connection with the Merger, will use all reasonable efforts to
have or cause the Registration Statement to become effective as promptly as
practicable, will use all reasonable efforts to have or cause such TTA
Common Stock to be listed on the Nasdaq SmallCap Market-SM, and will take
any other action required to be taken under any applicable federal or state
securities laws in connection with the issuance of TTA Common Stock in the
Merger. TTA will advise Arcada promptly when the Proxy
Statement/Prospectus has been approved for use in all necessary states.
The parties shall cooperate with each other in taking any other appropriate
actions that may be necessary to cause the TTA Common Stock to be issued in
connection with the Merger to be registered under the 1933 Act.
2. EFFECTIVE TIME; CLOSING. As used herein, the term 'Effective
Time' shall mean the date and time when the Merger becomes effective. As
used herein, the term 'Effective Date' shall mean the day on which the
Effective Time occurs. The parties intend that the Effective Time shall
occur as soon as reasonably practicable following the satisfaction of the
conditions set out in Section 7. l(a) and (b) below. A closing (the
"Closing") shall take place prior to the Effective Time at the offices of
Cairncross & Hempelmann, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxxxx,
or at such other place as the parties hereto may mutually agree upon for
the Closing to take place.
3. REPRESENTATIONS AND WARRANTIES OF NEWCO. Each of TTA and Newco,
jointly and severally, hereby represent and warrant to Arcada as follows:
3.1 CORPORATE ORGANIZATION. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Washington. Newco has all the requisite power and authority to
own, lease and operate all of its properties and assets and to carry on its
business as currently conducted. Newco is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature
of the business conducted by it makes such licensing or qualification
necessary and where the failure to be so qualified would, individually or
in the aggregate, have a Material Adverse Effect (as defined below) on TTA.
3.2 AUTHORITY. Newco has requisite corporate power and
authority to execute and deliver this Agreement and the Plan of Merger and,
subject to applicable regulatory approvals, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the
Board of Directors of Newco. This Agreement has been duly and validly
executed and delivered by Newco. Assuming the due authorization, execution
and delivery hereof by the other parties hereto, this Agreement constitutes
the valid and binding obligation of Newco, enforceable against it in
accordance with its respective terms.
3
3.3 NO VIOLATIONS. Neither the execution and delivery of this
Agreement or the Plan of Merger nor the consummation by Newco of the
transactions contemplated hereby and thereby, nor compliance by Newco with
any of the terms or provisions hereof or thereof, will (i) violate any
provision of the Articles or bylaws of TTA, (ii) assuming the consents and
approvals referred to in Section 7.1 hereof are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to Newco or any of its respective properties or
assets, or (iii) violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon
any of the properties or assets of Newco under any of the terms, conditions
or provisions of any note, bond, mortgage indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Newco
is a party, or by which it or any of its properties or assets may be bound
or affected, except with respect to (iii) above, for such violations,
conflicts, breaches, defaults, termination's, accelerations and
encumbrances which would not in the aggregate (a) have a Material Adverse
Effect on TTA or (b) otherwise prevent or delay the consummation of the
transactions contemplated hereby.
3.4 CONSENTS AND APPROVALS. Except for consents and approvals
of or filings, deliveries or registrations with the SEC or other applicable
governmental authorities, no consents or approvals of or filings or
registrations with any third party or public body or authority, except for
consents, approvals, filings or registrations where the failure to obtain
such consents or approvals or to make such filings or registrations would
not prevent or delay the Merger and would not in the aggregate have a
Material Adverse Effect on TTA, are necessary in connection with the
execution and delivery by Newco of this Agreement and the consummation of
the transactions contemplated hereby.
3.5 CAPITALIZATION. The authorized capital stock of Newco as of
the date hereof consists of 100,000 shares of common stock, no par value
per share, of which 50,000 shares are duly issued and outstanding, fully
paid and nonassessable. All such shares of common stock are owned by TTA.
There are outstanding no options, convertible securities, warrants or other
rights to purchase or acquire capital stock of Newco and there is no
commitment of TTA or Newco to issue any of the same.
4. REPRESENTATIONS AND WARRANTIES OF TTA. The 'TTA Disclosure
Schedules' shall mean all of the disclosure schedules required by this
Agreement, dated as of the date hereof, which have been delivered to
Arcada. TTA hereby represents and warrants to Arcada as follows:
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4.1 ORGANIZATION, POWER, GOOD STANDING, ETC.
(a) TTA is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. TTA has all the
requisite corporate power and authority to own, lease and operate all of
its properties and assets and to carry on its business as currently
conducted. TTA is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted
by it makes such licensing or qualification necessary and where the failure
to be so qualified would, individually or in the aggregate, have a Material
Adverse Effect on TTA. TTA owns all of the outstanding capital stock of
Newco. TTA has heretofore delivered or made available to Arcada true and
correct copies of its Articles of Incorporation (the "Articles") and its
bylaws as in effect on the date hereof. As used in this Agreement, the
term 'Material Adverse Effect' with respect to a party shall mean any
change or effect that is reasonably likely to be materially adverse to the
business, operations, properties, condition (financial or otherwise),
assets or liabilities of such party and such party's subsidiaries taken as
a whole.
(b) Except for Newco and GetNet International, Inc. ("GetNet"),
there is no firm, corporation, partnership, joint venture or similar
organization which is consolidated with TTA for financial reporting
purposes or any corporation a majority of the outstanding capital stock of
which is owned by TTA. All of the issued and outstanding capital stock of
GetNet is owned by TTA. GetNet is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona GetNet
has all requisite corporate power and authority to carry on its business as
currently conducted. GetNet is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the nature of the
business conducted by it makes such licensing or qualification necessary
and where the failure to be so qualified would have a Material Adverse
Effect on TTA. Disclosure Schedule 4.l(b) correctly sets forth a list of
each firm, corporation, partnership, joint venture or similar organization
in which TTA has a direct or indirect controlling, or 10 percent or
greater, equity interest.
(c) The minute books of TTA and its subsidiaries contain
materially complete and accurate records of all meetings held and other
corporate action taken, since its date of organization, by such entities
stockholders and Board of Directors.
(d) Except for Newco and GetNet or as set forth on Disclosure
Schedule 4.1(d), TTA does not own (beneficially or otherwise) any capital
stock or other equity interest in any corporation or other entity.
(e) TTA has previously delivered or made available for
inspection by, Arcada, true and complete copies of all agreements to which
it or any of its subsidiaries is a party or by which it or any of its
subsidiaries or any of their respective assets may be bound, (i) which
relate to any ownership interest by TTA or any of its subsidiaries of an
equity interest in any partnership, joint venture, or similar enterprise or
(ii) pursuant to which TTA or any of its subsidiaries may be required to
transfer funds in respect of an equity interest to, make an investment in,
or guarantee or assume any debt, dividend or other obligation of, any
person or entity, partnership, joint venture or similar enterprise.
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4.2 CAPITALIZATION.
(a) The authorized capital stock of TTA consists of (a)
100,000,000 shares of common stock, of which 3,318,300 shares are issued
and outstanding, and of which (i) 1,725,000 shares are reserved for
issuance pursuant to redeemable common stock purchase warrants issued by
TTA in May 1996 pursuant to a Warrant Agreement dated May 31, 1996 between
TTA and American Securities Transfer, Inc. (the "Warrant Agreement"), (ii)
1,668,400 shares are reserved for issuance pursuant to warrants, rights and
options heretofore granted by TTA, and (iii) 200,000 shares are reserved
for issuance by the board of directors and/or management of TTA and (b)
10,000,000 shares of preferred stock of which 9,850,000 shares are
unclassified and 150,000 shares are designated as Series A Convertible
Preferred Stock. No shares of preferred stock are outstanding.
(b) Except as disclosed on Disclosure Schedule 4.2(b), TTA has
not in the past two years repurchased or retired any shares of its capital
stock.
(c) All of the issued and outstanding shares of TTA Common Stock
have been duly authorized, validly issued, and are fully paid and non-
assessable, with no personal liability attaching to the ownership thereof.
(d) Disclosure Schedule 4.2 sets forth a list of all individuals
who hold stock options, the number of shares for which options have been
granted to such individuals and the exercise price for each option. Except
as set forth in Disclosure Schedule 4.2, TTA is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, purchase, or issuance
of any shares of its capital stock or any securities representing the right
to purchase or otherwise receive any shares of its capital stock or any
securities convertible into or representing the right to purchase or
subscribe for any such shares, and there are no agreements or
understandings to which TTA is a party with respect to voting any such
shares.
(e) Except as set forth in Section 4.2(a) above, there are no
outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, purchase, or issuance
of any shares of its capital stock or any securities representing the right
to purchase or otherwise receive any shares of its capital stock or any
securities convertible into or representing the right to purchase or
subscribe for any such shares, and there are no agreements or
understandings to which TTA is a party with respect to voting any such
shares.
(f) The authorized capital stock of GetNet as of the date hereof
consists of 10,000,000 shares of common stock, no par value per share, of
which 5,566,400 shares are duly issued and outstanding, fully paid and
nonassessable. All such shares of common stock are owned by TTA. There
are outstanding no options, convertible securities, warrants or other
rights to purchase or acquire capital stock of GetNet and there is no
commitment of TTA or GetNet to issue any of the same.
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(g) The common stock of TTA to be issued in the Merger will have
been duly authorized and, when issued in accordance with the Plan of
Merger, (i) will be validly authorized and issued and fully paid and
nonassessable and no stockholder of TTA will have any preemptive rights
thereto and (ii) will be registered under the Securities Act of 1933 ,as
amended, and the rules and regulations promulgated thereunder (the "1933
Act") and listed for trading on a national securities exchange of the
Nasdaq Stock Market.
4.3 REPORTS.
(a) TTA has previously delivered or made available to Arcada an
accurate and complete copy of each (a) report delivered by TTA to its
stockholders since its inception and (b) other communications (other than
general advertising materials) mailed by TTA to its stockholders since its
inception and no such report or communication, as of its date, contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
4.4 AUTHORITY. TTA has requisite corporate power and authority
to execute and deliver this Agreement and the Plan of Merger and, subject
to the TTA Stockholder Approval and applicable regulatory approvals, to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Plan of Merger and the consummation
of the transactions contemplated hereby and thereby have been duly and
validly approved by the Board of Directors of TTA. This Agreement has been
duly and validly executed and delivered by TTA. Assuming the due
authorization, execution and delivery hereof by the other parties hereto,
this Agreement constitutes the valid and binding obligation of TTA,
enforceable against it in accordance with its respective terms.
4.5 NO VIOLATION. Neither the execution and delivery of this
Agreement or the Plan of Merger nor the consummation by TTA of the
transactions contemplated hereby and thereby, nor compliance by TTA with
any of the terms or provisions hereof or thereof, including, without
limitation, TTA's reincorporation in the state of Washington will (i)
assuming TTA Stockholder Approval, violate any provision of the Articles or
bylaws of TTA, (ii) assuming the consents and approvals referred to in
Section 7.1 hereof are duly obtained, violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
TTA or any of its subsidiaries or any of their respective properties or
assets, or (iii) except as set forth on Disclosure Schedule 4.5, violate,
conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets
of TTA or any of its subsidiaries under any of the terms, conditions or
provisions of any note, bond, mortgage indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which TTA or any of
its subsidiaries is a party, or by which it or any of TTA's or its
subsidiaries' respective properties or assets may be bound or affected,
except with respect to (iii) above, for such violations, conflicts,
breaches, defaults, termination's, accelerations and encumbrances which
would not in the aggregate have a Material Adverse Effect on TTA.
7
4.6 CONSENTS AND APPROVALS. Except for (i) consents and
approvals of or filings, deliveries or registrations with the SEC or other
applicable governmental authorities, (ii) the approval of the stockholders
of TTA and (iii) the consents, approvals, filings or registrations set
forth on Disclosure Schedule 4.7, no consents or approvals of or filings or
registrations with any third party or public body or authority, except for
consents, approvals, filings or registrations where the failure to obtain
such consents or approvals or to make such filings or registrations would
not prevent or delay the Merger and would not in the aggregate have a
Material Adverse Effect on TTA, are necessary in connection with the
execution and delivery by TTA of this Agreement and the consummation of the
transactions contemplated hereby.
4.7 FINANCIAL STATEMENTS.
(a) TTA has previously delivered or made available to Arcada
copies of (i) the audited consolidated financial statements and unaudited
interim financial statements of TTA and any subsidiary of TTA included in
TTA's annual report on Form 10-KSB for TTA's fiscal year ended May 31, 1996
(the "May 1996 Financial Statements") and TTA's quarterly report on Form
10-QSB for TTA's quarter ended August 30, 1996 (the "August 1996 Financial
Statements") The TTA Financial Statements referred to herein (including
the related notes) have been prepared in accordance with generally accepted
accounting principals ("GAAP") consistently followed throughout the periods
covered thereby, and fairly and accurately present the consolidated
financial position of TTA as of the respective dates set forth therein and
the results of operations for the periods included therein, except that
interim unaudited financial statements are subject to normal year-end
adjustments.
(b) Each of the TTA Financial Statements referred to in Section
4.8(a) (including the related notes) has been prepared in accordance with
GAAP consistently applied during the periods involved (except as indicated
in the notes thereto). The books and records of TTA have been, and are
being, maintained in accordance with applicable legal and accounting
requirements and reflect only actual transactions.
4.8 BROKERAGE. Except for potential claims by Xxxxxx X. Xxxxxxx
or Xxxxx X. Xxxxxxx, Xx., there are no claims for investment banking fees,
brokerage commissions, finder's fees or similar compensation arising out of
or due to any act of TTA in connection with the transactions contemplated
by this Agreement.
4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. As of the date
hereof, except as disclosed in Disclosure Schedule 4.9, there has not been
any material adverse change in the business, operations, properties, assets
or financial condition of TTA or any of its subsidiaries from that
described in the TTA May 1996 Financial Statements or the TTA August 1996
Financial Statements, and, to the best of TTA's knowledge, no fact or
condition existed as of the date hereof that TTA had reason to believe
would cause such a material adverse change after the date hereof.
4.10 LITIGATION, ETC. As of the date hereof, except as disclosed
on Disclosure Schedule 4.10, there were no actions, suits, claims,
inquiries, proceedings or, to the knowledge of TTA, investigations before
any court, commission, bureau, regulatory, administrative or
8
governmental agency, arbitrator, body or authority pending or, to the
knowledge of TTA, threatened against TTA or any of its subsidiaries which
would reasonably be expected to result in any liabilities, including
defense costs, in excess of $5,000 in the aggregate. Except as disclosed
on Disclosure Schedule 4.10, neither TTA nor any of its subsidiaries is
subject to any order, judgment or decree and neither TTA nor any of its
subsidiaries is in default with respect to any such order, judgment or
decree.
4.11 TAXES AND TAX RETURNS.
(a) The amounts set up as provisions for taxes on the TTA May
1996 Financial Statements are sufficient for all material accrued and
unpaid federal, state, county and local taxes, interest and penalties of
TTA and each of its subsidiaries, whether or not disputed, for the period
ended May 31, 1996 and for all fiscal periods prior thereto. Neither TTA
nor any of its subsidiaries has entered into any agreements or
understandings with the Internal Revenue Service or other applicable taxing
authorities to extend or waive any statute of limitations or time for
assessment. Complete and correct copies of the income tax returns of TTA
and its subsidiaries for the three fiscal years ending May 31, 1996, as
filed with the Internal Revenue Service and all state, county and local
taxing authorities, together with all related correspondence and notices,
have previously been or will be delivered and made available to Arcada when
filed in November 1996.
(b) Except as set forth on Schedule 4.11(b), TTA and each of its
subsidiaries has timely and correctly filed all federal, state, county and
local tax and other returns and reports (collectively, "Returns") required
by applicable law to be filed (including, without limitation, estimated tax
returns, income tax returns, excise tax returns, sales tax returns, use tax
returns, property tax returns, franchise tax returns, information returns
and withholding, employment and payroll tax returns), except to the extent
that the failure to timely or correctly file such Returns does not result
in aggregate penalties or assessments of more than $25,000, and has paid
all taxes, levies, license and registration fees, charges or withholdings
of any nature whatsoever shown by such Returns to be owed, or which are
otherwise due and payable (hereinafter called "Taxes"), and to the extent
any material liabilities for Taxes have not been fully discharged, full and
complete reserves have been established on the TTA May 1996 Financial
Statements. Neither TTA nor any of its subsidiaries is in default in the
payment of any Taxes due or payable or any assessments received in respect
thereof except for Taxes which are being contested in good faith. No
additional assessments of Taxes are known to TTA to be proposed, pending or
threatened, other than Taxes for periods for which returns are not yet
filed.
(c) Neither TTA nor any of its subsidiaries has filed a consent
to the application of Section 341(f) of the Internal Revenue Code of 1986,
as amended.
9
4.12 EMPLOYEES; EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on Disclosure Schedule 4.12(a), as of
the date hereof, neither TTA nor any of its subsidiaries is a party to or
bound by any contract, arrangement or understanding (whether written or
oral) with respect to the employment or compensation of any officers,
employees or consultants and except as provided herein, and under those
Benefit Plans (as defined below) set forth on Disclosure Schedule 4.12(a),
consummation of the transactions contemplated by this Agreement will not
(either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming due
from TTA or any of its subsidiaries to any officer or employee thereof.
TTA has previously delivered or made available to Arcada true and complete
copies of all employment, consulting and deferred compensation agreements
that are in writing, to which TTA or any of its subsidiaries is a party.
(b) Except as set forth on Disclosure Schedule 4.12(b), as of
the date hereof, no officer or employee of TTA or any of its subsidiaries
is receiving aggregate remuneration bonus, salary and commissions) at a
rate which, if annualized, would exceed $40,000 in 1996.
(c) Except as disclosed on Disclosure Schedule 4.12(c), as of
the date hereof, there are not, and have not been at any time in the past
three years, any actions, suits, claims or proceedings before any court
(which have been served on TTA or any of its subsidiaries), commission,
bureau, regulatory, administrative or governmental agency, arbitrator, body
or authority pending or, to the best of TTA's knowledge, threatened by any
employees, former employees or other persons relating to the employment
practices or activities of TTA or its subsidiaries (except for threatened
actions which have subsequently been resolved). Neither TTA nor any of its
subsidiaries is a party to any collective bargaining agreement, and no
union organization efforts are pending or, to the best of TTA's knowledge,
threatened nor have any occurred during the last three years.
(d) TTA has made available to Arcada true and complete copies of
all personnel codes, practices, procedures, policies, manuals, affirmative
action programs and similar materials.
(e) With respect to all employee benefit plans, TTA represents
and warrants as follows:
(i) All employee benefit plans, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other pension, bonus, deferred compensation, stock
bonus, stock purchase, post-retirement medical, hospitalization, health and
other employee benefit plan, program or arrangement, whether formal or
informal, under which TTA or any of its subsidiaries has any obligation or
liability, or under which any employee or former employee has any rights to
benefits or any 'cafeteria plans,' as described in Section 125 of the
Internal Revenue Code of 1986, as amended (the "Code") (together, the
"Benefit Plans") are set forth on Disclosure Schedule 4.12(e)(i). Except
as set forth on Disclosure Schedule 4.12(e)(i), none of the Benefit Plans
is subject to Title IV of ERISA, is a 'multiemployer plan,' as such term is
defined in Section 3(37) and 4001(a)(3) of
10
ERISA and Section 414(f) of the Code, or is subject to the funding
requirements of Section 412 of the Code or Title I, Subtitle B, Part 3 of
ERISA.
(ii) In all material respects, except as discussed on
Disclosure Schedule 4.12(e)(ii), the terms of the Benefit Plans are, and
the Benefit Plans have been administered, in accordance with the
requirements of ERISA, the Code, applicable law and the respective plan
documents. Except as disclosed on Disclosure Schedule 4.12(e)(ii), none of
the Benefit Plans is under audit or is the subject of an investigation by
the Internal Revenue Service, the U.S. Department of Labor or any other
federal or state governmental agency. Except as disclosed on Disclosure
Schedule 4.12(e)(ii), all material reports and information required to be
filed with, or provided to, the United States Department of Labor, Internal
Revenue Service, the Pension Benefit Guaranty Corporation (the "PBGC") and
plan participants and beneficiaries with respect to each Benefit Plan have
been timely filed or provided. With respect to each Benefit Plan for which
an annual report has been filed, no material change has occurred with
respect to the matters covered by the most recent annual report since the
date thereof.
(iii) TTA is not aware of any facts regarding any
Benefit Plan which is an 'employee pension benefit plan' as defined in
Section 3(2) of ERISA (collectively, the "Employee Pension Benefit Plans")
that would present a significant risk that any Employee Pension Benefit
Plan would not be determined by the appropriate District Director of the
Internal Revenue Service to be 'qualified' within the meaning of Section
401(a) of the Code, or with respect to which any trust maintained pursuant
thereto is not exempt from federal income taxation pursuant to Section 501
of the Code, or with respect to which a favorable determination letter
could not be issued by the Internal Revenue Service with respect to each
such Employee Pension Benefit Plan.
(iv) Prior to the Closing, TTA shall deliver or make
available to Arcada complete and correct copies (if any) of (w) the most
recent Internal Revenue Service determination letter relating to each
Employee Pension Benefit Plan intended to be tax qualified under Section
401(a) and 501(a) of the Code, (x) the most recent annual report (Form 5500
Series) and accompanying schedules of each Benefit Plan, filed with the
Internal Revenue Service or an explanation of why such annual report is not
required, (y) the most current summary plan description for each Benefit
Plan, and (z) the most recent audited financial statements of each Benefit
Plan.
(v) With respect to each Benefit Plan, all contributions,
premiums or other payments due or required to be made to such plans as of
the Effective Time have been or will be made or accrued prior to the
Effective Time.
(vi) To the best of TTA's knowledge, there are not now, nor
have there been, any 'prohibited transactions', as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving TTA or any of
its subsidiaries, or any officer, director or employee of TTA or any of its
subsidiaries, with respect to the Benefit Plans that could subject TTA or
any other party-in-interest to the penalty or tax imposed under Section
502(i) of ERISA and Section 4975 of the Code.
11
(vii) As of the date hereof, no claim, lawsuit,
arbitration or other action has been instituted, asserted (and no such
lawsuit has been served on TTA or any of its subsidiaries) or, to the best
of TTA's knowledge, threatened by or on behalf of such Benefit Plan or by
any employee alleging a breach or breaches of fiduciary duty or violations
of other applicable state or federal law with respect to such Benefit
Plans, which could result in liability on the part of TTA or any of its
subsidiaries or a Benefit Plan under ERISA or any other law, nor is there
any known basis for successful prosecution of such a claim, and Arcada will
be notified promptly in writing of any such threatened or pending claim
arising between the date hereof and the Closing.
(viii) Except as may be required by the Consolidated
Omnibus Budget and Reconciliation Act of 1985, as amended ("COBRA"), no
Benefit Plan which is an employee welfare benefit plan (within the meaning
of Section 3(1) of ERISA) provides for continuing benefits or coverage for
any participant or beneficiary of a participant after such participant's
termination of employment nor does TTA or any of its subsidiaries have any
current or projected liability under any such plans.
(ix) Neither TTA nor any of its subsidiaries has maintained
or contributed to, and does not currently maintain or contribute to, any
severance pay plan. All payments (other than regular wages and vacation
pay) made to employees of TTA or any of its subsidiaries coincident with or
in connection with termination of employment since January 1, 1994 are
disclosed on Disclosure Schedule 4.12(e)(ix).
(x) No individual will accrue or receive any additional
benefits, service, or accelerated rights to payment or vesting of benefits
under any Benefit Plan, or otherwise obtain rights to any 'parachute
payment,' as defined in Section 280G(b)(2) of the Code, as a result of the
transactions contemplated by this Agreement.
(xi) TTA and each of its subsidiaries has complied in all
material respects with all of the requirements of COBRA.
4.13 TTA INFORMATION. The information relating to TTA and each
of its subsidiaries to be contained in the Proxy Statement/Prospectus
contemplated by Section l(e) hereof will not, at the time it is filed with
the applicable governmental authorities, as of the date thereof, or at the
date actions of TTA stockholders are taken with respect to the transactions
contemplated therein, contain any untrue statement of a material fact or
omit to state a material fact necessary to make such statements, in light
of the circumstances under which such statements were made, not misleading.
4.14 COMPLIANCE WITH APPLICABLE LAW.
(a) Except as set forth on Disclosure Schedule 4.14(a), TTA and
each of its subsidiaries holds all licenses, certificates, franchises,
permits and other governmental authorizations ("Permits") necessary for the
lawful conduct of its respective businesses and such Permits are in full
force and effect, and TTA and each of its subsidiaries is in all respects
12
complying therewith, except where the failure to possess or comply with
such Permits would not have a Material Adverse Effect on TTA.
(b) Except as set forth on Disclosure Schedule 4.14(b), TTA and
each of its subsidiaries is and for the past three years has been in
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations and orders applicable to the operation,
conduct or ownership of its business or properties except for any
noncompliance which is not reasonably likely to have in the aggregate a
Material Adverse Effect on TTA.
4.15 CONTRACTS AND AGREEMENTS.
As of the date hereof, except as disclosed in Disclosure Schedule
4.15, (i) neither TTA nor any of its subsidiaries is a party to or bound by
any commitment, contract, agreement or other instrument which involves or
could involve aggregate future payments by TTA or any of its subsidiaries
of more than $25,000, (ii) neither TTA nor any of its subsidiaries is a
party to nor was it bound by any commitment, contract, agreement or other
instrument which is material to the business, operations, properties,
assets or financial condition of TTA and (iii) no commitment, contract,
agreement or other instrument other than TTA's and its subsidiaries'
respective charter documents, to which TTA or any of its subsidiaries is a
party or by which TTA or any of its subsidiaries is bound, limits the
freedom of TTA or any of its subsidiaries to compete in any line of
business or with any person.
4.16 AFFILIATE TRANSACTIONS.
(a) Except as disclosed in Disclosure Schedule 4.16, and except
as specifically contemplated by this Agreement, since May 31, 1996, neither
TTA nor any of its subsidiaries has engaged in, or is not currently
obligated to engage in (whether in writing or orally), any transaction with
any Affiliated Person (as defined below) involving aggregate payments by or
to TTA or any of its subsidiaries of $30,000 or more during any consecutive
12 month period.
(b) For purposes of this Section 4.16, 'Affiliated Person'
means:
(i) a director, executive officer or Controlling Person (as
defined below) of TTA or any of its subsidiaries
(ii) a spouse of a director, executive officer or
Controlling Person of TTA or any of its subsidiaries;
(iii) a member of the immediate family of a director,
executive officer, or Controlling Person of TTA or any of its subsidiaries
who has the same home as such person;
(iv) any corporation or organization (other than TTA or any
of its subsidiaries) of which a director, executive officer or Controlling
Person of TTA or any of its subsidiaries (w) is a chief executive officer,
chief financial officer, or a person performing similar functions; (x) is
a general partner; (y) is a limited partner who, directly or indirectly,
either alone or with his spouse and the members of his immediate family who
are also Affiliated Persons,
13
owns an interest of five percent or more in the partnership (based on the
value of his contribution) or who, directly or indirectly through other
directors, executive officers and Controlling Persons of TTA or any of its
subsidiaries and their spouses and their immediate family members who are
also Affiliated Persons, owns an interest in 25 percent or more of the
partnership; or (z) directly or indirectly either alone or with his spouse
and the members of his immediate family who are also Affiliated Persons,
owns or controls ten percent or more of any class of equity securities, or
owns or controls, with other directors, executive officers, and Controlling
Persons of TTA or any of its subsidiaries and their spouses and their
immediate family members who are also Affiliated Persons, 25 percent or
more of any class of equity securities;
(v) any trust or estate in which a director, executive
officer, or Controlling Person of TTA or any of its subsidiaries or the
spouse of such person has a substantial beneficial interest or as to which
such person or his spouse serves as trustee or in a similar fiduciary
capacity.
(c) For purposes of this Section 4.16 'Controlling Person' means
any person or entity which, either directly or indirectly, or acting in
concert with one or more other persons or entities owns, controls or holds
with power to vote, or holds proxies representing ten percent or more of
the outstanding TTA Common Stock or of any subsidiary of TTA.
(d) For purposes of this Section 4.16, the term 'director' means
any director, trustee, or other person performing similar functions with
respect to any organization whether incorporated or unincorporated.
(e) For purposes of this Section 4.16, the term 'executive
officer' means the president, any executive vice president, any senior vice
president, the secretary, the treasurer, the comptroller, and any other
person performing similar functions with respect to any organization
whether incorporated or unincorporated.
4.17 DISCLOSURE. To the knowledge of TTA, no representation or
warranty of TTA contained in this Agreement, and no statement contained in
the Disclosure Schedules delivered by TTA hereunder, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make a statement herein or therein, in light of the circumstances
under which it was made, not misleading.
4.18 TITLE TO PROPERTY.
(a) REAL PROPERTY. Disclosure Schedule 4.18(a) contains a true
and correct description of all interests in real property (other than real
property security interests received in the ordinary course of business),
whether owned, leased or otherwise claimed, including a list of all leases
of real property, in which TTA or any of its subsidiaries has or claims an
interest as of the date hereof and any guarantees of any such leases by TTA
or any of its subsidiaries. True and complete copies of such leases have
previously been delivered or made available to Arcada, together with all
amendments, modifications, agreements or other writings related thereto.
Except as disclosed on Disclosure Schedule 4.18(a), each such lease is
legal, valid and binding as
14
between TTA or its subsidiaries and the other party or parties thereto, and
the occupant is a tenant or possessor in good standing thereunder, free of
any default or breach whatsoever and quietly enjoys the premises provided
for therein. Except as disclosed on Disclosure Schedule 4.18(a), TTA and
each of its subsidiaries has good, valid and marketable title to all real
property owned by it on the date hereof, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except
liens for current taxes not yet due and payable, and such encumbrances and
imperfections of title, if any, as do not materially detract from the value
of the properties and do not materially interfere with the present or
proposed use of such properties or otherwise materially impair such
operations. All real property and fixtures material to the business,
operations or financial condition of TTA or any of its subsidiaries are in
substantially good condition and repair.
(b) ENVIRONMENTAL MATTERS. Except as set forth on Disclosure
Schedule 4.18(b), to the knowledge of TTA, the real property owned or
leased by TTA or any of its subsidiaries on the date hereof does not
contain any underground storage tanks, asbestos, ureaformaldehyde,
uncontained polychlorinated biphenyls, or, except for materials which are
ordinarily used in office buildings and office equipment such as janitorial
supplies and do not give rise to financial liability therefor under the
hereafter defined Environmental Laws, releases of hazardous substances as
such terms may be defined by all applicable federal, state or local
environmental protection laws and regulations ("Environmental Laws"). As
of the date hereof (i) no part of any such real property has been listed,
or to the knowledge of TTA, proposed for listing on the National Priorities
List pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or on a registry or inventory of inactive
hazardous waste sites maintained by any state, and, (ii) except as set
forth on Disclosure Schedule 4.18(b), no notices have been received
alleging that TTA or any of its subsidiaries was a potentially responsible
person under CERCLA or any similar statute, rule or regulation. TTA knows
of no violation of law, regulation, ordinance (including, without
limitation, laws, regulations and ordinances with respect to hazardous
waste, zoning, environmental, city planning or other similar matters)
relating to its or any of its subsidiaries' respective properties, which
violations could have in the aggregate a Materially Adverse Effect on TTA.
(c) PERSONAL PROPERTY. Disclosure Schedule 4.18(c) contains a
true and correct list of (i) each item of machinery, equipment, or
furniture, including without limitation computers and vehicles, of TTA and
each of its subsidiaries, included on the TTA May 1996 Financial Statements
at a carrying value of, or, if acquired after May 31, 1996, for a purchase
price of, more than $50,000, (ii) each lease or other agreement under which
any such item of personal property is leased, rented, held or operated
where the current fair market value of such item is more than $25,000 and
(iii) all trademarks, trade names or service marks currently used, owned,
or registered for use by TTA or any of its subsidiaries. Except as
disclosed on Schedule 4,18(c), TTA and each of its subsidiaries has good,
valid and marketable title to all personal property owned by it, free and
clear of all liens, pledges, charges or encumbrances of any nature
whatsoever.
4.19 INSURANCE. Disclosure Schedule 4.19 contains a true and
complete list and a brief description (including name of insurer, agent,
coverage and expiration date) of all insurance policies in force on the
date hereof with respect to the business and assets of TTA and
15
each of its subsidiaries. TTA and each of its subsidiaries is in
compliance with all of the material provisions of its insurance policies
and are not in default under any of the terms thereof. Each such policy is
outstanding and in full force and effect and, except as set forth on
Disclosure Schedule 4.19, TTA or one of its subsidiaries is the sole
beneficiary of such policies. Al premiums and other payments due under any
such policy have been paid. TTA has previously delivered to, or made
available for inspection by, Arcada, each insurance policy to which TTA or
any of its subsidiaries is a party.
4.20 POWERS OF ATTORNEY. Neither TTA nor any of its subsidiaries
has any powers of attorney outstanding other than those in the ordinary
course of business with respect to routine matters.
4.21 SUFFICIENT RESOURCES. TTA has and will have available at
the Effective Time sufficient authorized but unissued shares of TTA Common
Stock, to enable it lawfully to satisfy its payment obligations pursuant to
this Agreement. TTA has and will have sufficient management and financial
resources to obtain the required regulatory approvals for the Merger. On
the date of this Agreement, there is no pending or, to the knowledge of
TTA, threatened legal or governmental proceeding, against TTA or any
subsidiary or affiliate of TTA which would affect TTA's or Newco's ability
to obtain any of the required regulatory approvals or satisfy any of the
other conditions required to be satisfied in order to consummate the
transactions contemplated by this Agreement. TTA will promptly notify
Arcada if any of the representations contained in this Section 4.21 cease
to be true and correct.
4.22 SEC FILINGS. (a) TTA has delivered to Arcada its annual
report on Form 10-KSB for TTA's fiscal year ended May 31, 1996 and TTA's
quarterly report of 10-QSB for TTA's first quarter ended August 31, 1996,
and all of Purchaser's other reports, statements, schedules and
registration statements filed with the Securities and Exchange Commission
(the "SEC") since its inception, (b) as of its filing date, each such
report or statement filed pursuant to the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (the "1934
Act"), complied as to form in all material respects with the 1934 Act and
did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading and (c) each such registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act as of the date
such statement or amendment became effective complied as to form in all
material respects with the 1933 Act and did not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
4.23 BANK ACCOUNTS, ETC. Set forth on SCHEDULE 4.23 hereto is a
true and complete list of all bank accounts, safe deposit boxes and lock
boxes of TTA and each of its subsidiaries, including, with respect to each
such account and lock box: (a) identification of all authorized
signatories, (b) identification of the business purpose of such account or
lock box, including identification of any accounts or lock boxes
representing escrow funds or otherwise subject to restriction; and (c)
identification of the amount on deposit as of September 30, 1996.
16
5. REPRESENTATIONS OF ARCADA: The 'Arcada Disclosure Schedules'
shall mean all of the disclosure schedules required by this Agreement,
dated as of the date hereof, which have been delivered to Arcada. Arcada
hereby represents and warrants to each of TTA and Newco as follows:
5.1 ORGANIZATION, POWER, GOOD STANDING, ETC.
(a) Arcada is a corporation duly organized, validly existing and
in good standing under the laws of the State of Washington. Arcada has all
the requisite corporate power and authority to own, lease and operate all
of its properties and assets and to carry on its business as currently
conducted. Arcada is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the nature of the business
conducted by it makes such licensing or qualification necessary and where
the failure to be so qualified would, individually or in the aggregate,
have a Material Adverse Effect on Arcada. Arcada has heretofore delivered
or made available to Arcada true and correct copies of its Articles of
Incorporation (the "Articles") and its bylaws as in effect on the date
hereof.
(b) There is no firm, corporation, partnership, joint venture or
similar organization which is consolidated with Arcada for financial
reporting purposes or any corporation a majority of the outstanding capital
stock of which is owned by Arcada. Disclosure Schedule 5.l(b) correctly
sets forth a list of each firm, corporation, partnership, joint venture or
similar organization in which Arcada has a direct or indirect controlling,
or 10 percent or greater, equity interest.
(c) The minute books of Arcada and its subsidiaries contain
materially complete and accurate records of all meetings held and other
corporate action taken, since its date of organization, by its stockholders
and Board of Directors.
(d) Except as set forth on Disclosure Schedule 5.1(d), Arcada
does not own (beneficially or otherwise) any capital stock or other equity
interest in any corporation or other entity.
(e) Arcada has previously delivered or made available for
inspection by, TTA, true and complete copies of all agreements to which it
is a party or by which its assets may be bound, (i) which relate to any
ownership interest by Arcada of an equity interest in any partnership,
joint venture, or similar enterprise or (ii) pursuant to which Arcada may
be required to transfer funds in respect of an equity interest to, make an
investment in, or guarantee or assume any debt, dividend or other
obligation of, any person or entity, partnership, joint venture or similar
enterprise.
5.2 CAPITALIZATION.
(a) The authorized capital stock of Arcada consists of 50,000
shares of common stock, all of which shares shall be issued and outstanding
as of the Effective Date.
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(b) Except as set forth on Schedule 5.2(b), Arcada has not in
the past two years repurchased or retired any shares of its capital stock.
(c) All of the issued and outstanding shares of Arcada Common
Stock have been duly authorized, validly issued, and are fully paid and
non-assessable, with no personal liability attaching to the ownership
thereof.
(d) Arcada is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character
calling for the transfer, purchase, or issuance of any shares of its
capital stock or any securities representing the right to purchase or
otherwise receive any shares of its capital stock or any securities
convertible into or representing the right to purchase or subscribe for any
such shares, and there are no agreements or understandings to which Arcada
is a party with respect to voting any such shares.
(e) There are no outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the transfer,
purchase, or issuance of any shares of its capital stock or any securities
representing the right to purchase or otherwise receive any shares of its
capital stock or any securities convertible into or representing the right
to purchase or subscribe for any such shares, and there are no agreements
or understandings to which Arcada is a party with respect to voting any
such shares.
5.3 REPORTS.
(a) Arcada has previously delivered or made available to TTA an
accurate and complete copy of each (a) report delivered by Arcada to its
stockholders since January, 1993, and (b) other communications (other than
general advertising materials) mailed by Arcada to its stockholders since
January, 1993 and no such report or communication, as of its date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.4 AUTHORITY. Arcada has requisite corporate power and
authority to execute and deliver this Agreement and the Plan of Merger and,
subject to the Arcada Stockholder Approval and applicable regulatory
approvals, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Plan of Merger and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly approved by the Board of Directors of Arcada. This
Agreement has been duly and validly executed and delivered by Arcada.
Assuming the due authorization, execution and delivery hereof by the other
parties hereto, this Agreement constitutes the valid and binding obligation
of Arcada, enforceable against it in accordance with its respective terms.
5.5 NO VIOLATION. Neither the execution and delivery of this
Agreement or the Plan of Merger nor the consummation by Arcada of the
transactions contemplated hereby and thereby, nor compliance by Arcada with
any of the terms or provisions hereof or thereof, will (i) assuming Arcada
Stockholder Approval, violate any provision of the Articles or bylaws of
Arcada, (ii) assuming the consents and approvals referred to in Section 7.1
hereof are duly obtained,
18
violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Arcada or any of its properties or
assets, or (iii) except as set forth on Disclosure Schedule 5.5, violate,
conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets
of Arcada under any of the terms, conditions or provisions of any note,
bond, mortgage indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Arcada is a party, or by which its
properties or assets may be bound or affected, except with respect to (iii)
above, for such violations, conflicts, breaches, defaults, termination's,
accelerations and encumbrances which would not in the aggregate have a
Material Adverse Effect on Arcada.
5.6 CONSENTS AND APPROVALS. Except for (i) consents and
approvals of or filings, deliveries or registrations with the SEC or other
applicable governmental authorities, (ii) the approval of the stockholders
of Arcada and (iii) the consents, approvals, filings or registrations set
forth on Disclosure Schedule 5.6, no consents or approvals of or filings or
registrations with any third party or public body or authority, except for
consents, approvals, filings or registrations where the failure to obtain
such consents or approvals or to make such filings or registrations would
not prevent or delay the Merger and would not in the aggregate have a
Material Adverse Effect on Arcada, are necessary in connection with the
execution and delivery by Arcada of this Agreement and the consummation of
the transactions contemplated hereby.
5.7 FINANCIAL STATEMENTS.
(a) Arcada has previously delivered or made available to TTA
copies of (i) the reviewed combined financial statements and unaudited
interim financial statements of Arcada and any subsidiary of Arcada for
fiscal year ended December 31, 1995 (the "December 1995 Financial
Statements") and Arcada's quarterly financial statements for the six months
ended June 30, 1996 (the "June 1996 Financial Statements") The Arcada
Financial Statements referred to herein (including the related notes) have
been prepared in accordance with GAAP consistently followed throughout the
periods covered thereby, and fairly and accurately present the consolidated
financial position of Arcada as of the respective dates set forth therein
and the results of operations for the periods included therein, except that
interim unaudited financial statements are subject to normal year-end
adjustments.
(b) Each of the Arcada Financial Statements referred to in
Section 5.8(a) (including the related notes) has been prepared in
accordance with GAAP consistently applied during the periods involved
(except as indicated in the notes thereto). The books and records of
Arcada have been, and are being, maintained in accordance with applicable
legal and accounting requirements and reflect only actual transactions.
5.8 BROKERAGE. There are no claims for investment banking fees,
brokerage commissions, finder's fees or similar compensation arising out of
or due to any act of Arcada in connection with the transactions
contemplated by this Agreement.
19
5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. As of the date
hereof, except as disclosed in Disclosure Schedule 5.9, there has not been
any material adverse change in the business, operations, properties, assets
or financial condition of Arcada or any of its subsidiaries from that
described in the Arcada December 1995 Financial Statements or the Arcada
June 1996 Financial Statements, and, to the best of Arcada's knowledge, no
fact or condition existed as of the date hereof that Arcada had reason to
believe would cause such a material adverse change after the date hereof.
5.10 LITIGATION, ETC. As of the date hereof, except as disclosed
on Disclosure Schedule 5.10, there were no actions, suits, claims,
inquiries, proceedings or, to the knowledge of Arcada, investigations
before any court, commission, bureau, regulatory, administrative or
governmental agency, arbitrator, body or authority pending or, to the
knowledge of Arcada, threatened against Arcada which would reasonably be
expected to result in any liabilities, including defense costs, in excess
of $5,000 in the aggregate. Except as disclosed on Disclosure Schedule
5.10, Arcada is not subject to any order, judgment or decree and Arcada is
not in default with respect to any such order, judgment or decree.
5.11 TAXES AND TAX RETURNS.
(a) The amounts set up as provisions for taxes on the Arcada
December 1995 Financial Statements are sufficient for all material accrued
and unpaid federal, state, county and local taxes, interest and penalties
of Arcada and each of its subsidiaries, whether or not disputed, for the
period ended December 31, 1995 and for all fiscal periods prior thereto.
Arcada has not entered into any agreements or understandings with the
Internal Revenue Service or other applicable taxing authorities to extend
or waive any statute of limitations or time for assessment. Complete and
correct copies of the income tax returns of Arcada for the three fiscal
years ending December 31, 1995, as filed with the Internal Revenue Service
and all state, county and local taxing authorities, together with all
related correspondence and notices, have previously been delivered or made
available to Arcada.
(b) Arcada has timely and correctly filed all federal, state,
county and local tax and other returns and reports (collectively,
"Returns") required by applicable law to be filed (including, without
limitation, estimated tax returns, income tax returns, excise tax returns,
sales tax returns, use tax returns, property tax returns, franchise tax
returns, information returns and withholding, employment and payroll tax
returns), except to the extent that the failure to timely or correctly file
such Returns does not result in aggregate penalties or assessments of more
than $25,000, and has paid all taxes, levies, license and registration
fees, charges or withholdings of any nature whatsoever shown by such
Returns to be owed, or which are otherwise due and payable (hereinafter
called "Taxes"), and to the extent any material liabilities for Taxes have
not been fully discharged, full and complete reserves have been established
on the Arcada December 1995 Financial Statements. Arcada is not in default
in the payment of any Taxes due or payable or any assessments received in
respect thereof except for Taxes which are being contested in good faith.
No additional assessments of Taxes are known to Arcada to be proposed,
pending or threatened, other than Taxes for periods for which returns are
not yet filed.
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(c) Arcada has not filed a consent to the application of Section
341(f) of the Internal Revenue Code of 1986, as amended.
5.12 EMPLOYEES; EMPLOYEE BENEFIT PLANS.
(a) Except as set forth on Disclosure Schedule 5.12(a), as of
the date hereof, Arcada is not a party to or bound by any contract,
arrangement or understanding (whether written or oral) with respect to the
employment or compensation of any officers, employees or consultants and
except as provided herein, and under those Benefit Plans (as defined below)
set forth on Disclosure Schedule 5.12(a), consummation of the transactions
contemplated by this Agreement will not (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether
of severance pay or otherwise) becoming due from Arcada to any officer or
employee thereof. Arcada has previously delivered or made available to
Arcada true and complete copies of all employment, consulting and deferred
compensation agreements that are in writing, to which Arcada is a party.
(b) Except as set forth on Disclosure Schedule 5.12(b), as of
the date hereof, no officer or employee of Arcada is receiving aggregate
remuneration bonus, salary and commissions) at a rate which, if annualized,
would exceed $40,000 in 1996.
(c) Except as disclosed on Disclosure Schedule 5.12(c), as of
the date hereof, there are not, and have not been at any time in the past
three years, any actions, suits, claims or proceedings before any court
(which have been served on Arcada), commission, bureau, regulatory,
administrative or governmental agency, arbitrator, body or authority
pending or, to the best of Arcada's knowledge, threatened by any employees,
former employees or other persons relating to the employment practices or
activities of Arcada (except for threatened actions which have subsequently
been resolved). Arcada is not a party to any collective bargaining
agreement, and no union organization efforts are pending or, to the best of
Arcada's knowledge, threatened nor have any occurred during the last three
years.
(d) Arcada has made available to TTA true and complete copies of
all personnel codes, practices, procedures, policies, manuals, affirmative
action programs and similar materials.
(e) With respect to all employee benefit plans, Arcada
represents and warrants as follows:
(i) All employee benefit plans, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other pension, bonus, deferred compensation, stock
bonus, stock purchase, post-retirement medical, hospitalization, health and
other employee benefit plan, program or arrangement, whether formal or
informal, under which Arcada has any obligation or liability, or under
which any employee or former employee has any rights to benefits or any
'cafeteria plans,' as described in Section 125 of the Internal Revenue Code
of 1986, as amended (the "Code") (together, the "Benefit Plans") are set
forth on Disclosure Schedule 5.12(e)(i). Except as set forth on Disclosure
Schedule 5.13(e)(i), none of the Benefit Plans is subject to Title IV of
ERISA, is a 'multiemployer plan,'
21
as such term is defined in Section 3(37) and 4001(a)(3) of ERISA and
Section 414(f) of the Code, or is subject to the funding requirements of
Section 412 of the Code or Title I, Subtitle B, Part 3 of ERISA.
(ii) In all material respects, except as discussed on
Disclosure Schedule 5.12(e)(ii), the terms of the Benefit Plans are, and
the Benefit Plans have been administered, in accordance with the
requirements of ERISA, the Code, applicable law and the respective plan
documents. Except as disclosed on Disclosure Schedule 5.12(e)(ii), none of
the Benefit Plans is under audit or is the subject of an investigation by
the Internal Revenue Service, the U.S. Department of Labor or any other
federal or state governmental agency. Except as disclosed on Disclosure
Schedule 5.12(e)(ii), all material reports and information required to be
filed with, or provided to, the United States Department of Labor, Internal
Revenue Service, the Pension Benefit Guaranty Corporation (the "PBGC") and
plan participants and beneficiaries with respect to each Benefit Plan have
been timely filed or provided. With respect to each Benefit Plan for which
an annual report has been filed, no material change has occurred with
respect to the matters covered by the most recent annual report since the
date thereof.
(iii) Arcada is not aware of any facts regarding any
Benefit Plan which is an 'employee pension benefit plan' as defined in
Section 3(2) of ERISA (collectively, the "Employee Pension Benefit Plans")
that would present a significant risk that any Employee Pension Benefit
Plan would not be determined by the appropriate District Director of the
Internal Revenue Service to be 'qualified' within the meaning of Section
401(a) of the Code, or with respect to which any trust maintained pursuant
thereto is not exempt from federal income taxation pursuant to Section 501
of the Code, or with respect to which a favorable determination letter
could not be issued by the Internal Revenue Service with respect to each
such Employee Pension Benefit Plan.
(iv) Prior to the Closing, Arcada shall deliver or make
available to TTA complete and correct copies (if any) of (w) the most
recent Internal Revenue Service determination letter relating to each
Employee Pension Benefit Plan intended to be tax qualified under Section
401(a) and 501(a) of the Code, (x) the most recent annual report (Form 5500
Series) and accompanying schedules of each Benefit Plan, filed with the
Internal Revenue Service or an explanation of why such annual report is not
required, (y) the most current summary plan description for each Benefit
Plan, and (z) the most recent audited financial statements of each Benefit
Plan.
(v) With respect to each Benefit Plan, all contributions,
premiums or other payments due or required to be made to such plans as of
the Effective Time have been or will be made or accrued prior to the
Effective Time.
(vi) To the best of Arcada's knowledge, there are not now,
nor have there been, any 'prohibited transactions', as such term is defined
in Section 4975 of the Code or Section 406 of ERISA, involving Arcada or
any of its subsidiaries, or any officer, director or employee of Arcada or
any of its subsidiaries, with respect to the Benefit Plans that could
subject Arcada or any other party-in-interest to the penalty or tax imposed
under Section 502(i) of ERISA and Section 4975 of the Code.
22
(vii) As of the date hereof, no claim, lawsuit,
arbitration or other action has been instituted, asserted (and no such
lawsuit has been served on Arcada) or, to the best of Arcada's knowledge,
threatened by or on behalf of such Benefit Plan or by any employee alleging
a breach or breaches of fiduciary duty or violations of other applicable
state or federal law with respect to such Benefit Plans, which could result
in liability on the part of Arcada or any of its subsidiaries or a Benefit
Plan under ERISA or any other law, nor is there any known basis for
successful prosecution of such a claim, and TTA will be notified promptly
in writing of any such threatened or pending claim arising between the date
hereof and the Closing.
(viii) Except as may be required by the Consolidated
Omnibus Budget and Reconciliation Act of 1985, as amended ("COBRA"), no
Benefit Plan which is an employee welfare benefit plan (within the meaning
of Section 3(1) of ERISA) provides for continuing benefits or coverage for
any participant or beneficiary of a participant after such participant's
termination of employment nor does Arcada have any current or projected
liability under any such plans.
(ix) Arcada has not maintained or contributed to, and does
not currently maintain or contribute to, any severance pay plan. All
payments (other than regular wages and vacation pay) made to employees of
Arcada coincident with or in connection with termination of employment
since January 1, 1994 are disclosed on Disclosure Schedule 5.12(e)(ix).
(x) No individual will accrue or receive any additional
benefits, service, or accelerated rights to payment or vesting of benefits
under any Benefit Plan, or otherwise obtain rights to any 'parachute
payment,' as defined in Section 280G(b)(2) of the Code, as a result of the
transactions contemplated by this Agreement.
(xi) Arcada has complied in all material respects with all
of the requirements of COBRA.
5.13 ARCADA INFORMATION. The information relating to Arcada to
be contained in the Proxy Statement/Prospectus contemplated by Section l(e)
hereof will not, at the time it is filed with the applicable governmental
authorities, as of the date thereof, or at the date actions of Arcada
stockholders are taken with respect to the transactions contemplated
therein, contain any untrue statement of a material fact or omit to state
a material fact necessary to make such statements, in light of the
circumstances under which such statements were made, not misleading.
5.14 COMPLIANCE WITH APPLICABLE LAW.
(a) Except as set forth on Disclosure Schedule 5.14(a), Arcada
holds all licenses, certificates, franchises, permits and other
governmental authorizations ("Permits") necessary for the lawful conduct of
its businesses and such Permits are in full force and effect, and Arcada is
in all respects complying therewith, except where the failure to possess or
comply with such Permits would not have a Material Adverse Effect on
Arcada.
23
(b) Except as set forth on Disclosure Schedule 5.14(b), Arcada
is and for the past three years has been in compliance with all foreign,
federal, state and local laws, statutes, ordinances, rules, regulations and
orders applicable to the operation, conduct or ownership of its business or
properties except for any noncompliance which is not reasonably likely to
have in the aggregate a Material Adverse Effect on Arcada.
5.15 CONTRACTS AND AGREEMENTS.
As of the date hereof, except as disclosed in Disclosure Schedule
5.15, (i) Arcada is not a party to or bound by any commitment, contract,
agreement or other instrument which involves or could involve aggregate
future payments by Arcada of more than $25,000, (ii) Arcada is not a party
to nor was it bound by any commitment, contract, agreement or other
instrument which is material to the business, operations, properties,
assets or financial condition of Arcada and (iii) no commitment, contract,
agreement or other instrument other than Arcada's charter documents, to
which Arcada is a party or by which Arcada is bound, limits the freedom of
Arcada to compete in any line of business or with any person.
5.16 AFFILIATE TRANSACTIONS.
(a) Except as disclosed in Disclosure Schedule 5.16, and except
as specifically contemplated by this Agreement, since May 31, 1996, Arcada
has not engaged in, or is not currently obligated to engage in (whether in
writing or orally), any transaction with any Affiliated Person (as defined
below) involving aggregate payments by or to Arcada of $30,000 or more
during any consecutive 12 month period.
(b) For purposes of this Section 5.16, 'Affiliated Person'
means:
(i) a director, executive officer or Controlling Person (as
defined below) of Arcada;
(ii) a spouse of a director, executive officer or
Controlling Person of Arcada;
(iii) a member of the immediate family of a director,
executive officer, or Controlling Person of Arcada who has the same home as
such person;
(iv) any corporation or organization (other than Arcada) of
which a director, executive officer or Controlling Person of Arcada (w) is
a chief executive officer, chief financial officer, or a person performing
similar functions; (x) is a general partner; (y) is a limited partner who,
directly or indirectly, either alone or with his spouse and the members of
his immediate family who are also Affiliated Persons, owns an interest of
five percent or more in the partnership (based on the value of his
contribution) or who, directly or indirectly through other directors,
executive officers and Controlling Persons of Arcada and their spouses and
their immediate family members who are also Affiliated Persons, owns an
interest in 25 percent or more of the partnership; or (z) directly or
indirectly either alone or with his spouse and the members of his immediate
family who are also Affiliated Persons, owns or controls ten percent
24
or more of any class of equity securities, or owns or controls, with other
directors, executive officers, and Controlling Persons of Arcada and their
spouses and their immediate family members who are also Affiliated Persons,
25 percent or more of any class of equity securities;
(v) any trust or estate in which a director, executive
officer, or Controlling Person of Arcada or the spouse of such person has
a substantial beneficial interest or as to which such person or his spouse
serves as trustee or in a similar fiduciary capacity.
(c) For purposes of this Section 5.16 'Controlling Person' means
any person or entity which, either directly or indirectly, or acting in
concert with one or more other persons or entities owns, controls or holds
with power to vote, or holds proxies representing ten percent or more of
the outstanding Arcada Common Stock.
(d) For purposes of this Section 5.16, the term 'director' means
any director, trustee, or other person performing similar functions with
respect to any organization whether incorporated or unincorporated.
(e) For purposes of this Section 5.16, the term 'executive
officer' means the president, any executive vice president, any senior vice
president, the secretary, the treasurer, the comptroller, and any other
person performing similar functions with respect to any organization
whether incorporated or unincorporated.
5.17 DISCLOSURE. To the knowledge of Arcada, no representation
or warranty of Arcada contained in this Agreement, and no statement
contained in the Disclosure Schedules delivered by Arcada hereunder,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make a statement herein or therein, in
light of the circumstances under which it was made, not misleading.
5.18 TITLE TO PROPERTY.
(a) REAL PROPERTY. Disclosure Schedule 5.18(a) contains a true
and correct description of all interests in real property (other than real
property security interests received in the ordinary course of business),
whether owned, leased or otherwise claimed, including a list of all leases
of real property, in which Arcada has or claims an interest as of the date
hereof and any guarantees of any such leases by Arcada. True and complete
copies of such leases have previously been delivered or made available to
TTA, together with all amendments, modifications, agreements or other
writings related thereto. Except as disclosed on Disclosure Schedule
5.18(a), each such lease is legal, valid and binding as between Arcada and
the other party or parties thereto, and the occupant is a tenant or
possessor in good standing thereunder, free of any default or breach
whatsoever and quietly enjoys the premises provided for therein. Except as
disclosed on Disclosure Schedule 5.18(a), Arcada has good, valid and
marketable title to all real property owned by it on the date hereof, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever, except liens for current taxes not yet due and payable,
and such encumbrances and imperfections of title, if any, as do not
materially detract from the value of the properties and do not materially
interfere with the present or proposed use of such properties or otherwise
materially impair such operations. All real property and fixtures
25
material to the business, operations or financial condition of Arcada are
in substantially good condition and repair.
(b) ENVIRONMENTAL MATTERS. Except as set forth on Disclosure
Schedule 5.18(b), to the knowledge of Arcada, the real property owned or
leased by Arcada on the date hereof does not contain any underground
storage tanks, asbestos, ureaformaldehyde, uncontained polychlorinated
biphenyls, or, except for materials which are ordinarily used in office
buildings and office equipment such as janitorial supplies and do not give
rise to financial liability therefor under the hereafter defined
Environmental Laws, releases of hazardous substances as such terms may be
defined by all applicable federal, state or local environmental protection
laws and regulations ("Environmental Laws"). As of the date hereof (i) no
part of any such real property has been listed, or to the knowledge of
Arcada, proposed for listing on the National Priorities List pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or on a registry or inventory of inactive hazardous waste sites
maintained by any state, and, (ii) except as set forth on Disclosure
Schedule 5.18(b), no notices have been received alleging that Arcada or any
of its subsidiaries was a potentially responsible person under CERCLA or
any similar statute, rule or regulation. Arcada knows of no violation of
law, regulation, ordinance (including, without limitation, laws,
regulations and ordinances with respect to hazardous waste, zoning,
environmental, city planning or other similar matters) relating to its
properties, which violations could have in the aggregate a Materially
Adverse Effect on Arcada.
(c) PERSONAL PROPERTY. Disclosure Schedule 5.18(c) contains a
true and correct list of (i) each item of machinery, equipment, or
furniture, including without limitation computers and vehicles, of Arcada,
included on the Arcada December 1995 Financial Statements at a carrying
value of, or, if acquired after December 31, 1995, for a purchase price of,
more than $50,000, (ii) each lease or other agreement under which any such
item of personal property is leased, rented, held or operated where the
current fair market value of such item is more than $25,000 and (iii) all
trademarks, trade names or service marks currently used, owned, or
registered for use by Arcada. Except as disclosed on Schedule 5,18(c),
Arcada has good, valid and marketable title to all personal property owned
by it, free and clear of all liens, pledges, charges or encumbrances of any
nature whatsoever.
5.19 INSURANCE. Disclosure Schedule 5.19 contains a true and
complete list and a brief description (including name of insurer, agent,
coverage and expiration date) of all insurance policies in force on the
date hereof with respect to the business and assets of Arcada. Arcada and
each of its subsidiaries is in compliance with all of the material
provisions of its insurance policies and are not in default under any of
the terms thereof. Each such policy is outstanding and in full force and
effect and, except as set forth on Disclosure Schedule 5.19, Arcada or one
of its subsidiaries is the sole beneficiary of such policies. All premiums
and other payments due under any such policy have been paid or arrangements
for payment are being made. Arcada has previously delivered to, or made
available for inspection by, Arcada, each insurance policy to which Arcada
or any of its subsidiaries is a party (other than insurance policies under
which Arcada is named as a loss payee or additional insured as a result of
its position as a secured lender).
26
5.20 POWERS OF ATTORNEY. Arcada does not have any powers of
attorney outstanding other than those in the ordinary course of business
with respect to routine matters.
5.21 BANK ACCOUNTS, Etc. Set forth on Schedule 5.21 hereto is a
true and complete list of all bank accounts, safe deposit boxes and lock
boxes of Arcada and each of its subsidiaries, including, with respect to
each such account and lock box: (a) identification of all authorized
signatories, (b) identification of the business purpose of such account or
lock box, including identification of any accounts or lock boxes
representing escrow funds or otherwise subject to restriction; and (c)
identification of the amount on deposit as of September 30, 1996.
6. COVENANTS OF THE PARTIES.
6.1 REDEMPTION OF REDEEMABLE WARRANTS. From and including the
date of this Agreement through the Effective Time, if the closing price or
trading price of the TTA Common Stock, as applicable, over thirty (30)
consecutive trading days averages at least $8.00 per share (as more
particularly described in the Warrant Agreement), TTA shall, within ten
(10) days of such event, exercise its redemption right and call all
outstanding Redeemable Warrants on the terms and in the manner set forth in
the Warrant Agreement.
6.2 REINCORPORATION IN WASHINGTON STATE. Immediately prior to
the Effective Time, TTA shall cause its state of incorporation to be
changed from California to Washington and to take any and all appropriate
action that may be necessary or desirable to maintain in full force and
effect TTA's qualification as a foreign corporation in all states where it
is so qualified.
6.3 CONDUCT OF THE BUSINESS OF TTA. During the period from the
date of this Agreement to the Effective Time, TTA will conduct the business
of TTA and will engage in transactions only in the ordinary course and
consistent with past practice and with prudent business practice, except
with the written consent of Arcada (which will not be unreasonably
withheld, delayed or conditioned). During such period, TTA will use its
best efforts to (x) preserve the business organizations of TTA intact, (y)
keep available to it and to Arcada the present services of the employees of
TTA, and (z) preserve for itself and for Arcada the goodwill of the
customers of TTA and others with whom business relationships exist. In
addition, without limiting the generality of the foregoing, TTA agrees that
from the date hereof to the Effective Time, except as otherwise consented
to or approved by Arcada in writing (which consent or approval shall not be
unreasonably withheld, delayed or conditioned) or as permitted or required
by this Agreement or as required by law (in which case TTA shall notify
Arcada in writing), TTA will not:
(a) change any provisions of its Articles or bylaws or any
similar governing documents of TTA
(b) change the number of shares of its authorized or issued
capital stock (other than issuance of stock as a result of the exercise of
options issued as of the date hereof and described on Disclosure Schedule
4.2) or issue, grant or amend any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to
the authorized or issued capital stock of TTA, or any securities
convertible into shares of such stock,
27
or split, combine or reclassify any shares of its capital stock, or
declare, set aside or pay any dividend, or other distributions (whether in
cash, stock or property or any combination thereof) in respect of the
capital stock of TTA, or redeem or otherwise acquire any shares of such
capital stock;
(c) except as permitted pursuant to Section 6.13 hereof, grant
any severance or termination pay to or enter into or amend any employment
agreement with, or increase the amount of payments or fees to, any of its
employees, officers or directors other than salary increases to employees
(other than those executing Employment Agreements) consistent with past
increases;
(d) make any capital expenditures in excess of (i) $40,000 per
project or related series of projects or (ii) $200,000 in the aggregate,
other than pursuant to binding commitments existing on the date hereof and
expenditures necessary to maintain existing assets in good repair;
(e) change in any material manner its pricing policies or any
other material business or customer policies;
(f) guarantee the obligations of any other persons except in the
ordinary course of business consistent with past practice;
(g) acquire assets other than those necessary in the conduct of
its business in the ordinary course;
(h) sell, transfer, assign, encumber or otherwise dispose of
assets other than has been customary in its ordinary course of business;
(i) enter into or amend or terminate any long-term (one-year or
more) contracts (including real property leases) except for contracts which
are in the ordinary course of business consistent with past practice
(j) enter into or amend any contract that calls for the payment
by TTA of $25,000 or more after the date of this Agreement (a "Material
Contract") that cannot be terminated on not more than 30 days' notice
without cause and without payment or loss of any material amount as a
penalty, bonus, premium or other compensation for termination;
(k) engage or participate in any material transaction or incur
or sustain any material obligation except for transactions otherwise
permitted under this Section 6.1 which are in the ordinary course of
business consistent with past practices and which are of similar kinds and
involve similar amounts;
(l) make any contributions to any Benefit Plans except in such
amounts and at such times as consistent with past practice;
(m) increase the number of full time equivalent employees of TTA
above 30;
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(n) except after having followed reasonable procedures with
respect to the investigation of potential environmental problems, which
procedures have been approved in writing by Arcada (which approval shall
not be unreasonably withheld, delayed or conditioned), acquire any real
property;
(o) renegotiate any debts or take any action to change the
characterization of any short term or long term debt; or
(o) agree to do any of the foregoing.
6.4 NO SOLICITATION. Neither TTA nor any of its directors,
officers, representatives, agents or other persons controlled by any of
them, shall, directly or indirectly encourage or solicit, or (except to the
extent that the directors of TTA in their good faith judgment after receipt
of advice of counsel determine that such response is reasonably required in
order to discharge their fiduciary duties) hold discussions or negotiations
with, or provide any information to, any person, entity or group other than
Arcada concerning any merger, sale of substantial assets not in the
ordinary course of business, sale of shares of capital stock or similar
transactions involving TTA. TTA will promptly communicate to Arcada the
terms of any proposal that it may receive in respect of any such
transaction. Notwithstanding the foregoing two sentences, if the board of
directors of TTA receives an unsolicited offer or inquiry with respect to
such a transaction, the board may respond to such offer if the board
determines in its good faith judgment (after receiving advice of counsel)
that such response is reasonably required in order to discharge its
fiduciary duties.
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6.5 CURRENT INFORMATION.
(a) No later than ten days after the date of this Agreement, TTA
and Arcada shall each designate an individual acceptable to the other party
(a "Designated Representative" and, together, the "Designated
Representatives") to be the primary point of contact between the parties.
During the period from the date of their designation to the Closing, the
Designated Representatives or their representatives shall confer on a
regular basis so that Arcada is kept advised as to the general status of
the ongoing operations of TTA. Without limiting the foregoing, TTA agrees
to confer with the Arcada Designated Representative regarding any proposed
significant changes to TTA's management policies and objectives. TTA
agrees to provide access to members of Arcada's acquisition team and to
work with them in order to plan, prepare for and facilitate the
coordination of the parties' (i) accounting, billing and other data
processing systems, (ii) billing structure, (iii) sales and marketing
systems and structures with each other as well as other matters arising
from the Merger. TTA will promptly notify the Arcada Designated
Representative or his or her representatives of any material change in the
normal course of business or in the operation of the properties of TTA or
of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or the
institution or the threat of any litigation involving TTA, and have kept
and will keep the Arcada Designated Representative or his or her
representatives fully informed of such events and the progress of any
already existing litigation. Without limiting the foregoing, TTA shall
immediately notify the Arcada Designated Representative if it appears that
there has occurred any change in its financial or other condition or any
other event that will or may affect TTA's ability to complete the Merger or
have a Material Adverse Effect on TTA.
6.6 ACCESS TO PROPERTIES AND RECORDS CONFIDENTIALITY.
(a) TTA shall permit Arcada reasonable access to its properties,
and shall disclose and make available to Arcada all books, papers and
records relating to the assets, stock, ownership, properties, obligations,
operations and liabilities of TTA, including but not limited to, all books
of account (including the general ledger), tax records, minute books of
directors and stockholders meetings, organizational documents, bylaws,
material contracts and agreements, filings with any regulatory authority,
accountants work papers, litigation files, plans affecting employees, and
any other business activities or prospects in which Arcada may have a
reasonable interest, including, without limitation, all loan files in each
case during normal business hours and upon reasonable notice. TTA shall
not be required to provide access to or disclose information where such
access or disclosure would jeopardize the attorney-client privilege of TTA
or would contravene any law, rule, regulation, order, judgment, decree or
binding agreement entered into prior to the date hereof. The parties will
use all reasonable efforts to make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) All information furnished by TTA to Arcada or the
representatives or affiliates of either pursuant to, or in any negotiation
in connection with, this Agreement shall be treated as the sole property of
TTA until consummation of the Merger and, if the Merger shall not occur,
Arcada and their affiliates, agents and advisers shall upon written request
return to TTA, all documents or other materials containing, reflecting,
referring to such information, and
30
shall keep confidential all such information and shall not disclose or use
such information for competitive purposes. The obligation to keep such
information confidential shall not apply to (i) any information which (w)
Arcada can establish by convincing evidence was already in its possession
(subject to no obligations of confidentiality) prior to the disclosure
thereof by TTA; (x) was then generally known to the public; (y) becomes
known to the public other than as a result of actions by Arcada or by the
directors, officers or employees or agents of either; or (z) was disclosed
to Arcada, or to the directors, officers or employees of either, solely by
a third party not bound by any obligation of confidentiality; or (ii)
disclosure in accordance with the federal securities laws, or pursuant to
an order of a court or agency of competent jurisdiction.
(c) All information furnished by Arcada to TTA or the
representatives or affiliates of TTA pursuant to, or in any negotiation in
connection with, this Agreement shall be treated as the sole property of
Arcada until consummation of the Merger and, if the Merger shall not occur,
TTA and its affiliates, agents and advisors shall upon written request
return to Arcada, all documents or other materials containing, reflecting,
referring to such information, and shall keep confidential all such
information and shall not disclose or use such information for competitive
purposes. The obligation to keep such information confidential shall not
apply to (i) any information which (w) TTA can establish by convincing
evidence was already in its possession (subject to no obligations or
confidentiality) prior to the disclosure thereof by TTA; (x) was then
generally known to the public; (y) becomes known to the public other than
as a result of actions by TTA or by the directors, officers or employees or
agents of TTA; or (z) was disclosed to TTA, or to the directors, officers
or employees of TTA, solely by a third party not bound by any obligation of
confidentiality; or (ii) disclosure in accordance with the federal
securities laws, federal banking laws, or pursuant to an order of a court
or agency of competent jurisdiction.
6.7 REPORTS.
(a) As soon as reasonably available, but in no event more than
45 days after the end of each fiscal quarter ending after the date hereof
(other than the last quarter of any fiscal year), TTA will deliver to
Arcada its quarterly report on Form 10-QSB, as filed under the 1934 Act.
As soon as reasonably available, but in no event more than 120 days after
the end of each fiscal year ending after the date of this Agreement, TTA
will deliver to Arcada its annual report on Form 10-KSB as filed under the
0000 Xxx.
6.8 REGULATORY MATTERS.
(a) The parties hereto will cooperate with each other and use
all reasonable efforts to prepare all necessary documentation, to effect
all necessary filings and to obtain all necessary permits, consents,
approvals and authorizations of all third parties and governmental bodies
necessary to consummate the transactions contemplated by this Agreement
including, without limitation, those that may be required from the SEC,
other regulatory authorities, or the holders of TTA Common Stock. Arcada
and TTA shall each have the right to review reasonably in advance all
information relating to Arcada or TTA, as the case may be, and any of their
respective subsidiaries, together with any other information reasonably
requested, which appears
31
in any filing made with or written material submitted to any governmental
body in connection with the transactions contemplated by this Agreement.
(b) Arcada and TTA shall furnish each other with all reasonable
information concerning themselves, their subsidiaries, directors, officers
and stockholders and such other matters as may be necessary or advisable in
connection with the Proxy Statement/Prospectus, or any other statement or
application made by or on behalf of Arcada or TTA, or any of their
respective subsidiaries to any governmental body in connection with the
Merger and the other transactions, applications or filings contemplated by
this Agreement.
(c) Arcada and TTA will promptly furnish each other with copies
of written communications received by Arcada or TTA or any of their
respective subsidiaries from, or delivered by any of the foregoing to, any
governmental body in respect of the transactions contemplated hereby.
6.9 APPROVAL OF TTA STOCKHOLDERS. TTA will (a) take all steps
necessary duly to call, give notice of, convene and hold a meeting of its
stockholders as soon as practicable for the purpose of voting on this
Agreement and the transactions contemplated hereby and with the consent of
Arcada (which consent shall not be unreasonably withheld, delayed or
conditioned), for such other purposes as may be necessary or desirable, (b)
include in the Proxy Statement/Prospectus the recommendation of TTA's Board
of Directors that the stockholders approve this Agreement and the other
transactions contemplated hereby, including, without limitation, the
reincorporation of TTA in the State of Washington, and such other matters
as may be submitted to its stockholders in connection with this Agreement,
(c) cooperate and consult with Arcada with respect to each of the foregoing
matters, and (d) use all reasonable efforts to obtain, as promptly as
practicable, the necessary approvals by TTA stockholders of this Agreement
and the transactions contemplated hereby, including, without limitation,
the reincorporation of TTA in the State of Washington, except, in each
case, where the directors of TTA determine in their good faith judgment
(after receiving advice of counsel) that they are required to do otherwise
in order to discharge their fiduciary duties.
6.10 APPROVAL OF ARCADA STOCKHOLDERS. Arcada will (a) take all
steps necessary duly to call, give notice of, convene and hold a meeting of
its stockholders as soon as practicable for the purpose of voting on this
Agreement and the transactions contemplated hereby and with the consent of
TTA (which consent shall not be unreasonably withheld, delayed or
conditioned), for such other purposes as may be necessary or desirable, (b)
include in the Proxy Statement/Prospectus the recommendation of Arcada's
Board of Directors that the stockholders approve this Agreement and the
other transactions contemplated hereby, and such other matters as may be
submitted to its stockholders in connection with this Agreement, (c)
cooperate and consult with TTA with respect to each of the foregoing
matters, and (d) use all reasonable efforts to obtain, as promptly as
practicable, the necessary approvals by Arcada stockholders of this
Agreement and the transactions contemplated hereby, except, in each case,
where the directors of TTA determine in their good faith judgment (after
receiving advice of counsel) that they are required to do otherwise in
order to discharge their fiduciary duties.
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6.11 FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
by this Agreement.
6.12 PUBLIC ANNOUNCEMENTS. Neither party will issue or
distribute any information to its shareholders or employees, any news
releases or any other public information disclosures with respect to this
Agreement or any of the transactions contemplated hereby without the
consent of the other party, except as may be otherwise required by law.
6.13 ASSIGNMENT OF CONTRACT RIGHTS. Arcada shall use its
reasonable efforts to obtain any consents, waivers or revisions necessary
to allow TTA to accede to all of the rights of Arcada under any existing
real property leases and all material personal property leases, licenses
and other contracts, which TTA wishes to have continue in effect after the
Effective Time, without incurring substantial costs in connection
therewith. TTA will offer its reasonable cooperation with Arcada in
obtaining such consents, waivers and revisions, it being understood that
the obligation to obtain such consents, waivers and revisions shall
nevertheless be the obligation of Arcada.
6.14 EMPLOYEES. TTA and Xxxxx Xxxxxxx shall have entered into a
mutually satisfactory employment agreement to be effective upon the Closing
of the Merger.
6.15 INDEMNIFICATION OF ARCADA DIRECTORS AND OFFICERS.
(a) TTA will use all reasonable efforts, in cooperation with
Arcada, to arrange for insurance coverage for prior acts for all current
and former directors and officers of Arcada, provided that such coverage
must be available from normal carriers at a reasonable cost in light of the
cost of similar policies under similar circumstances. TTA shall not cancel
such prior acts coverage for three years after the Effective Date.
(b) From and after the Effective Time, TTA will, to the extent
permitted by then applicable law, indemnify current and former directors,
officers and employees of Arcada (each an "Indemnified Party ") as though
they had been directors, officers and/or employees of TTA, for acts or
omissions occurring prior to, and including, the Effective Time.
Any Indemnified Party wishing to claim indemnification under this
provision shall, upon learning of any claim, action, suit, proceeding or
investigation (hereinafter a "Claim"), promptly notify TTA thereof. TTA
shall have the right to assume the defense of any such Claim and upon so
doing shall not thereafter be liable to such Indemnified Party for any
expenses, of other counsel or otherwise, subsequently incurred by such
Indemnified Party in connection with such Claim. If TTA elects not to
assume such defense, or counsel for the Indemnified Party advises that
there are issues which raise conflicts of interest between TTA and the
Indemnified Party, the Indemnified Party may retain counsel satisfactory to
such Indemnified Party and TTA will pay all reasonable fees and expenses of
such counsel incurred in defending the Claim; provided, however, that (i)
in the event that more than one Indemnified Party is involved in the same
33
Claim, TTA shall not be obligated to pay for more than one firm of counsel
for all Indemnified Parties in any one jurisdiction (unless counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnified Parties), (ii) the Indemnified Parties
will cooperate in the defense of the Claim, and (iii) TTA shall not be
liable for any settlement effected without its prior written consent. If,
upon the conclusion of the proceedings in any Claim, it is determined by
TTA that the Indemnified Party was not entitled to such indemnification,
such party shall be required to reimburse TTA for all cost expended in
defending such Indemnified Party.
(c) This Section 6.14 is intended to be for the benefit of, and
shall be enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on TTA and its successors and assigns.
6.16 CURRENT PUBLIC INFORMATION. TTA shall continue to satisfy
the current public information requirements of Rules 144 and 145 of the SEC
with respect to the TTA Common Stock, and to provide affiliates of Arcada
with such information as they may reasonably require and to otherwise
cooperate with them to facilitate sales of TTA Common Stock in compliance
with Rules 144 and 145 of the SEC.
6.17 RESOLUTION OF CERTAIN MATTERS. On or prior to the Closing,
TTA shall have:
(a) reached a final, binding settlement satisfactory to Arcada
and obtained unconditional releases from all adverse parties in connection
with the litigation matter set forth as item 8 to Disclosure Schedule 4.10
hereto;
(b) renegotiated, amended, canceled or otherwise modified to the
satisfaction of Arcada the agreements set forth as Service Commitments 1,
2, and 3 to Disclosure Schedule 4.15 hereto; and
(c) Achieved and furnished evidence, satisfactory to Arcada of
revenue of at least $100,000 per month attributable to TTA's internet
"backbone" operations.
6.18 PURCHASE ACCOUNTING. TTA and Arcada shall cooperate and
assist in the preparation of any and all materials reasonably required by
Arcada or TTA in connection with establishing appropriate values for assets
and liabilities of Touch Tone or Arcada for purchase accounting purposes.
7. CLOSING CONDITIONS.
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT.
The respective obligations of each party under this Agreement to consummate
the Merger shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions:
34
(a) This Agreement and the transactions contemplated hereby,
including, without limitation, the reincorporation of TTA in the State of
Washington, shall have been approved by the requisite vote of the
stockholders of TTA and Arcada.
(b) All necessary regulatory or governmental approvals and
consents required to consummate the transactions contemplated hereby shall
have been obtained and shall remain in full force and effect and all
statutory or regulatory waiting periods in respect thereof shall have
expired.
(c) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
(d) ANTITRUST LAW. Any applicable pre-merger notification
provisions of Section 7A of the Xxxxxxx Act shall have been complied with
by the parties hereto, and no other statutory or regulatory requirements
with respect to the Xxxxxxx Act shall be applicable. There shall be no
pending or threatened proceedings under any applicable antitrust law of the
State of Washington or California.
(e) SECURITIES LAWS. The shares of TTA Common Stock to be
issued to the stockholders of Arcada in exchange for their shares shall
have been qualified or registered for offering and sale under the federal
securities law and the state securities or Blue Sky laws of each
jurisdiction in which stockholders of Arcada reside, and no order
suspending the sale of such shares of TTA Common Stock in any such
jurisdiction shall have been issued prior to the Effective Time and no
proceedings for that purpose shall have been instituted or shall be
contemplated; provided, that TTA shall not have been obligated to execute
or file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not qualified. As
soon as reasonably practicable, Arcada shall advise TTA of each
jurisdiction in which stockholders of Arcada reside.
7.2 CONDITIONS TO THE OBLIGATIONS OF TTA UNDER THIS AGREEMENT.
The obligations of TTA under this Agreement shall be further subject to the
satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived by TTA:
(a) (i) Each of the obligations or covenants of Arcada required
to be performed by it on or prior to the Closing pursuant to the terms of
this Agreement shall have been duly performed and complied with in all
material respects.
(ii) Each of the representations and warranties of Arcada
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time as
though made at and as of the Effective Time except as to any representation
or warranty which specifically relates to an earlier date, which shall be
true and correct as of such earlier date, except in the case of such
representations and warranties, where the failure to be true would not have
a Material Adverse Effect on Arcada.
35
(b) Any consents, waivers, clearances, approvals and
authorizations of regulatory or governmental bodies that are necessary in
connection with the consummation of the transactions contemplated hereby
shall have been obtained, and none of such consents, waivers, clearances,
approvals or authorizations shall contain any term or condition that is a
term or condition that has not heretofore been normally imposed in such
transactions and which would have a Material Adverse Effect on Arcada or
TTA.
(c) TTA shall have received an opinion, dated the Effective
Date, from Cairncross & Hempelmann, counsel to Arcada, substantially to the
effect set forth in Exhibit E hereto.
(d) Since the date of this Agreement there shall have been no
Material Adverse Effect with respect to Arcada (except for changes
resulting from market and economic conditions which generally affect the
telecommunications industry as a whole including, without limitation,
changes in law or regulation or interpretations thereof); provided,
however, that the following expenses and adjustments shall be excluded in
determining whether a material adverse change has occurred: (i) fees and
expenses relating to the consummation of the transactions contemplated
hereby, (ii) charges for severance and other payments to officers and
employees made or expected to be made in connection with the transactions
contemplated hereby, and (iii) costs and expenses related to any
transactions of the type set forth in Section 6.1 undertaken by Arcada with
the prior written consent of TTA.
(e) Dissenters' rights shall not have been preserved by
stockholders of Arcada with respect to more than five percent of the
outstanding shares of Arcada Common Stock and each affiliate of Arcada
shall have delivered to Arcada stock certificates evidencing all shares of
Arcada Common Stock owned by such affiliate as provided in Section l(f)
hereof and delivered to TTA assurance that such affiliate has voted for the
Merger, together with any other assurances requested by TTA, that such
affiliates will not have dissenters' rights.
(g) Arcada shall have furnished TTA with such certificates of
its officers and such other documents to evidence fulfillment of the
conditions set forth in this Section 7.2 as TTA may reasonably request.
7.3 CONDITIONS TO THE OBLIGATIONS OF ARCADA UNDER THIS
AGREEMENT. The obligations of Arcada under this Agreement shall be further
subject to the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived by Arcada:
(a) Each of the obligations or covenants of TTA and Newco
required to be performed by them at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied with in
all material respects.
(b) Each of the representations and warranties of TTA and Newco
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time as
though made at and as of the Effective Time except as to any representation
or warranty which specifically relates to an earlier date, which shall be
36
true and correct as of such earlier date, except in the case of such
representations and warranties, where the failure to be true would not have
a Material Adverse Effect on TTA.
(c) The amount of TTA's unrestricted working capital (as
determined in accordance with GAAP) at the Closing shall be at least
$1,500,000.
(d) Arcada shall have received an opinion, dated the date of the
Closing, from Xxxx X. Xxxxx, Esq., counsel to TTA and Newco, substantially
to the effect set forth in Exhibit G hereto.
(e) Each of Xxxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxx, Xxxxxxx X.
Xxxxxxx and Xxxxxxxx X. Xxxxxxxx shall have resigned as Directors of TTA
effective as of the Closing Time.
(f) Xxxxxxx X. Xxxxxx, as the sole remaining Director of TTA,
shall have appointed Xxxxxx X. Xxxxxxxxxx, Xxxxx Xxxxxxxxxx, Xxxxx X.
Xxxxxxx and an individual to be designated by Arcada on or prior to the
Closing to fill the vacancies on TTA's Board of Directors created by the
resignations called for by Section 7.3(d) above;
(g) All of the officers of TTA shall have resigned, effective as
of the Effective Time;
(h) Since the date of this Agreement, there shall have been no
Material Adverse Effect with respect to TTA (except for changes resulting
from market and economic conditions which generally affect the
telecommunications industry as a whole including, without limitation,
changes in law or regulation or changes in interpretations thereof).
(i) TTA shall have furnished Arcada with such certificates of
its officers or others and such other documents to evidence fulfillment of
the conditions set forth in this Section 7.3 as Arcada may reasonably
request.
(j) TTA shall have instructed its transfer agent with respect to
the issuance of TTA Common Stock to the Arcada stockholders at least two
days prior to Closing.
(k) Arcada shall have received the statements referred to in
Section 1(b)(iii) hereof.
8. TERMINATION, AMENDMENT AND WAIVER.
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger
by the TTA stockholders:
(a) by mutual written consent of all the parties hereto;
(b) by any party hereto (i) if the Effective Time shall not have
occurred on or prior to March 1, 1997 unless the failure of such occurrence
shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements and conditions
37
set forth herein to be performed or observed by such party at or before the
Effective Time; (ii) 10 days after written certification of the vote of
TTA's stockholders is delivered to Arcada indicating that such stockholders
failed to adopt the resolution to approve this Agreement and the
transactions contemplated hereby at the stockholders' meeting (or any
adjournment thereof) contemplated by Section l(d) hereof; or (iii) 10 days
after written certification of the vote of Arcada' shareholders is
delivered to TTA indicating that such stockholders failed to adopt the
resolution to approve this Agreement and the transactions contemplated
hereby at the stockholders' meeting (or any adjournment thereof)
contemplated by Section 1(d) hereof;
(c) by Arcada (i) if at the time of such termination there shall
have been a material adverse change in the consolidated financial condition
of TTA from that set forth in TTA's May 1996 Financial Statements and
August 1996 Financial Statements (except for changes resulting from market
and economic conditions which generally affect the telecommunications
industry as a whole, including changes in regulation), it being understood
that any of the matters set forth in TTA's Disclosure Schedules as of the
date of this Agreement or any of the matters described in clauses (i), (ii)
or (iii) of Section 7.2(d) are not deemed to be a material adverse change
for purposes of this paragraph (c); or (ii) if there shall have been any
material breach of any covenant of TTA hereunder and such breach shall not
have been remedied within 45 days after receipt by TTA of notice in writing
from Arcada specifying the nature of such breach and requesting that it be
remedied.
(d) by TTA (i) if at the time of such termination there shall
have been a material adverse change in the consolidated financial condition
of Arcada from that set forth in the December 1995 Financial Statements
(except for changes resulting from market and economic conditions which
generally affect the telecommunications industry as a whole), it being
understood that any of the matters set forth in Arcada's Disclosure
Schedules as of the date of this Agreement are not deemed to be a material
adverse change for purposes of this paragraph (d); or (ii) if there shall
have been any material breach of any covenant of Arcada hereunder and such
breach shall have not been remedied within 45 days after receipt by Arcada
of notice in writing from TTA specifying the nature of such breach and
requesting that it be remedied or (iii) if the directors of TTA, after
receiving advice of counsel, determine in their good faith judgment that
they are required to do so in order to discharge their fiduciary duties,
shall withdraw or modify or resolve to withdraw or modify its
recommendation that stockholders vote in favor of the transactions
contemplated hereby.
8.2 BREAK-UP FEE.
(a) The parties hereby acknowledge that, in negotiating and
executing this Agreement and in taking the steps necessary or appropriate
to effect the transactions contemplated hereby, Arcada has incurred and
will incur direct and indirect monetary and other costs (including without
limitation attorneys' fees and costs, costs of Arcada management and
employee time and potential damage to Arcada's business and franchises as
a result of the announcement of the pending Merger), will forego discussion
with other potential merger candidates and will forego various business
activities which it would have otherwise undertaken if it remained an
independent institution. To compensate Arcada for such costs and to induce
it to forego initiating discussion with other potential merger candidates,
(i) if this Agreement
38
terminates because TTA (or Newco) does not use all reasonable efforts to
consummate the transactions contemplated by this Agreement in accordance
with the terms of this Agreement (unless a condition set forth in Section
7.3 is not satisfied and such nonsatisfaction has not been the result of
the failure of TTA (or Newco) to use all reasonable efforts to consummate
this Agreement in accordance with the terms of this Agreement), (ii) if TTA
terminates this Agreement for any reason other than the grounds for
termination set out in Section 8.1(a), 8.1(b) or 8.1(d) or (iii) if Arcada
terminates this Agreement pursuant to Section 8.1(c)(ii), then TTA shall
pay to Arcada on demand (and in no event more than three days after such
demand) in immediately available funds, Two Hundred Thousand Dollars
($200,000.00).
(b) The parties hereby acknowledge that, in negotiating and
executing this Agreement and in taking the steps necessary or appropriate
to effect the transactions contemplated hereby, TTA has incurred and will
incur direct and indirect monetary and other costs (including without
limitation attorneys' fees and costs, costs of TTA management and employee
time and potential damage to TTA's business and franchises as a result of
the announcement of the pending Merger), will forego discussion with other
potential merger candidates and will forego various business activities
which it would have otherwise undertaken if it remained an independent
institution. To compensate TTA for such costs and to induce it to forego
initiating discussion with other potential merger candidates, (i) if this
Agreement terminates because Arcada does not use all reasonable efforts to
consummate the transactions contemplated by this Agreement in accordance
with the terms of this Agreement (unless a condition set forth in Section
7.2 is not satisfied and such nonsatisfaction has not been the result of
the failure of Arcada to use all reasonable efforts to consummate this
Agreement in accordance with the terms of this Agreement), (ii) if Arcada
terminates this Agreement for any reason other than the grounds for
termination set out in Section 8.1(a), 8.1(b) or 8.1(d) or (iii) if TTA
terminates this Agreement pursuant to Section 8.1(c)(ii), then Arcada shall
pay to TTA on demand (and in no event more than three days after such
demand) in immediately available funds, Two Hundred Thousand Dollars
($200,000.00).
(c) Notwithstanding the foregoing, the parties hereto hereby
acknowledge and agree that non-compliance with the provisions of Section
6.17(a) or Section 7.3(c) above is not the basis for any party hereto to be
entitled to the break-up fee set forth in this Section 8.3.
8.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement by any party, this Agreement shall forthwith become void (other
than Section 6.4(b) hereof, which shall remain in full force and effect)
and, except as and to the extent provided in Section 8.2, there shall be no
further liability on the part of any party or its officers or directors
except for the liability of TTA under Section 6.6(b).
39
8.4 AMENDMENT, EXTENSION AND WAIVER. Subject to applicable law,
at any time prior to the consummation of the Merger, whether before or
after approval thereof by the stockholders of TTA, the parties may (a)
amend this Agreement (including the Plan of Merger incorporated herein),
(b) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (c) waive any inaccuracies in the
representations and warranties of any other party contained herein or in
any document delivered pursuant hereto, or (d) waive compliance with any of
the agreements or conditions contained herein; provided, however, that
after any approval of the Merger by the TTA and Arcada stockholders, there
may not be, without further approval of such stockholders, any amendment or
waiver of this Agreement (or the Plan of Merger) that reduces the amount or
changes the form of consideration to be delivered to the TTA stockholders
or Arcada stockholders, respectively. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. Any agreement on the part of a party hereto to any extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party, but such waiver or failure to insist on strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
9. MISCELLANEOUS.
9.1 EXPENSES. All legal and other costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be borne by the party incurring such costs and expenses unless
otherwise specified in this Agreement.
9.2 SURVIVAL. Except for the covenants of Sections 6.13, 6.14,
6.15, 6.16 and 6.17, the respective representations and warranties,
covenants and agreements set forth in this Agreement and all Disclosure
Schedules shall not survive the Effective Time.
9.3 NOTICES. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by delivery, by
registered or certified mail (return receipt requested) or by cable,
telecopier, or telex to the respective parties as follows:
(a) If to TTA, to:
Touch Tone America, Inc.
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
40
With a copy to:
Xxxx Xxxxx, Esq.
000 - 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
(b) If to Arcada, to:
Arcada Communications, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx Xxxxxxx
With a copy to:
Cairncross & Hempelmann
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx
or such other address as shall be furnished in writing by any party to the
others in accordance herewith, except that notices of change of address
shall only be effective upon receipt.
9.4 PARTIES IN INTEREST. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other parties.
Nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by
reason of this Agreement (except for Sections 1, 6.13, 6.14, 6.15, 6.16 and
6.17, which are intended to benefit third party beneficiaries).
9.5 ENTIRE AGREEMENT. This Agreement, including the documents
and other writings referred to herein or delivered pursuant hereto,
contains the final expression of the parties with respect to its subject
matter. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties other than those expressly
set forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties, both written and oral,
with respect to its subject matter.
9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
9.7 GOVERNING LAW. This Agreement, in all respects, including
all matters of construction, validity and performance, is governed by the
internal laws of the state of Washington as applicable to contracts
executed and delivered in Washington by citizens of such state to be
performed wholly within such state without giving effect to the principles
of conflicts of laws thereof. This Agreement is being delivered in
Seattle, Washington.
41
[This Space Intentionally Blank]
42
9.8 HEADINGS. The Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
TOUCH TONE AMERICA, INC.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Its:
ARCADA COMMUNICATIONS, INC.
By: /s/ XXXXX XXXXXXX
---------------------------------
Its:
TOUCH TONE/ARCADA, INC.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Its:
43
FIRST AMENDMENT TO AGREEMENT FOR MERGER
This First Amendment dated as of November 19, 1996 to that certain
Agreement for Merger dated November 13, 1996 (the "Merger Agreement"), is
by and among Touch Tone America, a California corporation ("TTA"), Touch
Tone/Arcada, Inc., a Washington corporation and wholly-owned subsidiary of
TTA ("Newco"), and S.V.V. Sales, Inc., a Washington corporation d/b/a
Arcada Communications, Inc. ("Arcada"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed to them in
the Merger Agreement.
TTA, Newco and Arcada hereby desire to amend certain portions of the
Merger Agreement.
In consideration of the above and the mutual covenants, terms and
conditions set forth below, TTA, Newco and Arcada hereby agree as follows:
1. AMENDMENTS TO MERGER AGREEMENT
A. Section 1(b) of the Merger Agreement is hereby amended by
adding a new Section 1(b)(iii) at the end thereof as follows:
"(iii) Notwithstanding the foregoing, TTA shall, at the
written request of Arcada (the "Adjustment Notice"), reduce the number
of shares of TTA Common Stock to be received in the Merger for each
share of Arcada Common Stock by (a) the number of shares as specified
in the Adjustment Notice ("Adjustment Shares") divided by (b) 50,000.
At the Effective Time, TTA shall issue the Adjustment Shares to the
individuals and in the amounts as specified in the Adjustment Notice;
provided however, that in no event shall the aggregate Merger
Consideration exceed the Merger Consideration as it exists without
giving effect to this Section 1(b)(iii); and provided further that TTA
shall be under no obligation to cause any shares issued pursuant to
such Adjustment Notice to be registered under the 1933 Act or to
otherwise to comply with the provisions of Section 1(d)(iv) hereof
with respect to such shares."
B. Section 6 of the Merger Agreement is hereby amended by
adding a new Section 6.19 at the end thereof as follows:
"6.19 LOCKUP. Arcada shall cause each of its Shareholders who
receive TTA Common Stock in the Merger to covenant and agree that they
shall not sell any such shares of TTA Common Stock, except in
according with the following limits:
TTA Common Stock Not
Restriction Period Subject to Lockup
------------------ --------------------
Commencing on November 19, 1996
(the "Lock-up Date") Until the
six-month anniversary of the Up to an aggregate of 250,000
Lock-up Date shares
1
Commencing on the six-month
anniversary of the Lock-up Date Up to an aggregate of 500,000
until the one year anniversary shares (including sales in
of the Lock-up Date prior periods)
Commencing on the one year
anniversary of the Lock-up Date Up to an aggregate of
until the two year anniversary 1,000,000 shares (including
of the Lock-up sales in prior periods)
On and after the two year
anniversary of the Lock-up Date All shares of TTA Common Stock
It is understood and agreed that the number of shares of TTA
Common Stock exempt from the "lock-up" pursuant to the foregoing
schedule shall be cumulative such that any shares not sold in one
period may be sold in any subsequent period without reducing the
aggregate number of shares of TTA Common Stock which may be sold in
such period(s)."
C. Section 6 of the Merger Agreement is hereby amended by
adding a new Section 6.20 at the end thereof as follows:
"6.20 ASSURANCE LETTERS. TTA shall have used its best efforts
to cause each of the directors, executive officers and each of the ten
(10) largest beneficial owners of TTA Common Stock on the date hereof
to execute a letter substantially in the form of Exhibit B hereto
providing for, among other things, the agreement of each such person
to vote in favor of the Merger Agreement."
D. The Merger Agreement is hereby amended by adding a new
Exhibit B at the end thereof in the form attached hereto as Annex 1.
2. MISCELLANEOUS
A. RATIFICATION. The parties hereto hereby ratify and approve
the Merger Agreement, as amended hereby, and the parties hereto acknowledge
that all of the terms and provisions of the Merger Agreement as amended
hereby, are and remain in full force and effect.
B. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
C. GOVERNING LAW. This Amendment, in all respects, including
all matters of construction, validity and performance, is governed by the
internal laws of the state of Washington as applicable to contracts
executed and delivered in Washington by citizens of such state to be
performed wholly within such state without giving effect to the principles
of conflicts of laws thereof. This agreement is being delivered in
Seattle, Washington.
2
The parties hereto have executed this First Amendment as of the date
first set forth above.
TOUCH TONE AMERICA, INC.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Its:
S.V.V. SALES, INC.
By: /s/ XXXXX XXXXXXX
---------------------------------
Its:
TOUCH TONE/ARCADA, INC.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Its:
3
Annex 1
4
EXHIBIT B
November __, 1996
S.V.V. Sales, Inc.
0000 0xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxx
President
Ladies and Gentlemen:
I have been advised by Touch Tone America, Inc. that you require certain
assurances and representations in connection with the Agreement ("Touch
Tone") for Merger dated November 13, 1996 (the "Merger Agreement") by and
among Touch Tone, S.V.V. Sales, Inc. d/b/a Arcada Communications, Inc.
("Arcada") and Touch Tone/Arcada, Inc. ("Merger Sub"), which provides for
the merger of Arcada with and into Merger Sub (the "Merger"). In
connection with the Merger:
1. I agree to vote all shares of Touch Tone Common Stock owned by me
to approve and adopt the Merger at any Touch Tone shareholders' meeting,
one of the purposes of which is to vote on the Merger.
2. I further agree to vote all shares of Touch Tone Common Stock
owned by me to approve and adopt the merger of Touch Tone with and into
Touch Tone Washington, Inc. (the "Reincorporation Merger"), which merger
will have the effect of reincorporating Touch Tone under the laws of the
State of Washington, at any Touch Tone shareholders' meeting, one of the
purposes of which is to vote on the Reincorporation Merger.
3. I further agree that until the Merger is consummated or until the
Merger Agreement is terminated, whichever is sooner, I will not sell or
transfer any shares of Touch Tone Common Stock.
If the Merger Agreement is terminated, I will have no further obligations
under this letter after the date of such termination.
[TO BE INSERTED IN LETTERS FROM TOUCH TONE OFFICERS OR DIRECTORS]It is
expressly understood and acknowledged by the parties hereto that nothing
contained herein is intended to restrict me
from voting on any matter, or otherwise from acting, in my capacity as a
director or officer of Touch Tone (as opposed to my capacity as a
shareholder in which capacity my actions are restricted by this letter)
with respect to any matters, including but not limited to, the general
management or over-all operation of Touch Tone, or any other exercise of my
fiduciary responsibilities.
I confirm that I am sophisticated in business and financial matters and
have been provided with all information about Arcada which I have
requested.
Very truly yours,
_____________________
