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AGREEMENT AND PLAN OF MERGER
AMONG
XXX.XXX, INC.,
LONG WHARF MERGECO, INC.
AND
TYCHO NETWORKS, INC.
Dated as of November 30, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..................................................1
1.1 The Merger..................................................1
1.2 Effective Time..............................................2
1.3 Closing.....................................................2
1.4 Directors and Officers......................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS....................................2
2.1 Effect on Capital Stock.....................................2
2.2 Stock Options, Warrants and Other Equity Rights.............3
ARTICLE III PAYMENT FOR SHARES; DISSENTING SHARES.......................4
3.1 Payment for Shares of Tycho Preferred Stock.................4
3.2 Post-Closing Adjustments....................................5
3.3 Appraisal Rights............................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DSL AND MERGERCO..........6
4.1 Corporate Organization......................................7
4.2 Authority for Transaction...................................7
4.3 No Consent..................................................7
4.4 Brokerage or Finder's Fees..................................7
4.5 Material Misstatements or Omissions.........................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF TYCHO.....................8
5.1 Corporate Organization......................................8
5.2 Authority for Transaction...................................8
5.3 No Consent..................................................8
5.4 Financial Statements........................................8
5.5 Liabilities.................................................9
5.6 Absence of Material Adverse Change..........................9
5.7 Title to Assets; Leases.....................................9
5.8 Accounts Receivable.........................................9
5.9 Contracts and Commitments...................................9
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5.10 Indebtedness...............................................10
5.11 Intellectual Property......................................10
5.12 Taxes......................................................10
5.13 Litigation.................................................11
5.14 Labor and Employee Relations...............................11
5.15 Employee Benefit Plans.....................................12
5.16 Compliance with Laws.......................................12
5.17 Environmental Matters......................................12
5.18 Land Use...................................................13
5.19 Joint Ventures.............................................13
5.20 Insurance..................................................13
5.21 Books and Records..........................................14
5.22 Powers of Attorney.........................................14
5.23 No Guarantees..............................................14
5.24 Brokerage and Finder's Fees................................14
5.25 Material Misstatements or Omissions........................14
5.26 Year 2000 Compatibility....................................14
5.27 Company Subsidiaries.......................................15
5.28 Capitalization.............................................15
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.....................16
6.1 Conduct of Business by Tycho...............................16
ARTICLE VII ADDITIONAL AGREEMENTS......................................17
7.1 Stockholders'Consent.......................................17
7.2 Additional Agreements......................................18
7.3 Fees and Expenses..........................................18
7.4 No Solicitations; Bridge Notes.............................18
7.5 Access to Information......................................19
7.6 Public Announcements.......................................19
7.7 Employee Benefit Arrangements..............................19
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7.8 Notification...............................................20
7.9 TyFone Divestiture.........................................20
7.10 Consulting Agreements......................................20
7.11 [Intentionally omitted]....................................20
7.12 Severance Obligations......................................20
ARTICLE VIII CONDITIONS TO THE MERGER...................................22
8.1 Conditions to the Obligations of Each Party to Effect
the Merger.................................................22
(a) Stockholder Approval..................................22
(b) Regulatory Approvals..................................22
(c) No Injunctions, Orders or Restraints; Illegality......22
8.2 Conditions to Obligations of DSL and MergerCo..............22
(a) Representations and Warranties........................23
(b) Performance and Obligations of Tycho..................23
(c) Consents, Etc.........................................23
(d) No Injunction.........................................23
(e) Material Adverse Change...............................23
(f) Resignations..........................................23
(g) TyFone Divestiture....................................23
(h) Options, Etc..........................................23
(i) Opinion of Counsel....................................23
(j) Consulting and Employment Agreement Cancellation
Agreements............................................24
(k) Termination of Investor Rights Agreement..............24
(l) Supermajority Stockholder Vote........................24
8.3 Conditions to Obligations of Tycho.........................24
(a) Representations and Warranties........................24
(b) Performance of Obligations of DSL and MergerCo........24
(c) Opinion of Counsel....................................24
(d) Consulting, Employment and Severance Agreements.......24
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ARTICLE IX SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION............................................24
9.1 Survival of Representations and Warranties.................24
9.2 Indemnification............................................25
(a) Agreement to Indemnify................................25
(b) Expiration of Indemnification.........................25
(c) Hold Back.............................................25
(d) Offset................................................25
(e) Claims Upon Executives'Hold Back or Executives'Offset
Amount................................................26
(f) Resolution of Conflicts; Arbitration..................26
(h) Agent of the Executives; Power of Attorney............26
(i) Indemnification of the Agent..........................27
(j) Third Party Claims....................................27
(k) Apportionment of Liability; Maximum Liability.........27
(l) Remedies..............................................28
ARTICLE X TERMINATION, AMENDMENT AND WAIVER..........................29
10.1 Termination................................................29
10.2 Effect of Termination......................................30
10.3 Amendment..................................................30
10.4 Extension; Waiver..........................................30
ARTICLE XI MISCELLANEOUS..............................................30
11.1 Notices....................................................30
11.2 Entire Agreement; No Third-Party Beneficiaries;
Section Headings...........................................31
11.3 Confidentiality............................................32
11.4 Assignment.................................................32
11.5 Applicable Law.............................................32
11.6 Definitions................................................32
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LIST OF EXHIBITS
Exhibit A-1 -- Form of NewCo Bridge Note
Exhibit A-2 -- Form of NewCo Severance Note
Exhibit B -- Form of Retention Bonus Agreement
Exhibit C -- TyFone Assets
Exhibit D -- Form of Consulting Agreements
Exhibit E -- Form of Seller's Counsel Opinion
Exhibit F -- Form of Buyer's Counsel Opinion
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 30th
day of November, 1999, by and among TYCHO NETWORKS, INC., a Delaware corporation
having its principal office at 000 Xxxxxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000
("Tycho"), XXX.XXX, INC., a Delaware corporation having its principal office at
000 Xxxx Xxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxxx ("DSL"), and LONG WHARF MERGECO,
INC., a Delaware corporation and wholly-owned subsidiary of DSL ("MergerCo").
RECITALS:
WHEREAS, the respective Boards of Directors of DSL, MergerCo and Tycho
have approved the merger of MergerCo with and into Tycho (the "Merger") in
accordance with the Delaware General Delaware Corporation Law (the "Delaware
Corporation Law") upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of Tycho has, in light of and subject
to the terms and conditions set forth in this Agreement, determined that the
Merger is in the best interests of Tycho and its stockholders, and resolved to
approve and adopt this Agreement and the transactions contemplated by this
Agreement, including the Merger (collectively, the "Transactions"), and to
recommend approval and adoption by the stockholders of Tycho of this Agreement
and the Transactions; and
WHEREAS, DSL, MergerCo and Tycho desire to make certain
representations, warranties, covenants and agreements in connection with the
Transactions, and also to prescribe various conditions to the Transactions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, DSL, MergerCo and Tycho agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereinafter defined), Tycho and MergerCo shall
consummate the Merger pursuant to which (a) MergerCo shall be merged with and
into Tycho, and the separate corporate existence of MergerCo shall thereupon
cease, (b) Tycho shall be the surviving corporation in the Merger (sometimes
referred to in this Agreement as the "Surviving Corporation") and shall continue
to be governed by the laws of the State of Delaware and (c) the separate
corporate existence of Tycho with all its rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger. The certificate of
incorporation of Tycho (the "Certificate of Incorporation"), as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and the bylaws of Tycho (the
"Bylaws") as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, by such Certificate of Incorporation and
such Bylaws. The Merger shall have the effects specified in the Delaware
Corporation Law.
1.2 Effective Time. As promptly as practicable after all of the
conditions set forth in Article VIII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of same, MergerCo and
Tycho shall duly execute and file a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in accordance with
the Delaware Corporation Law. The Merger shall become effective at such time as
the Certificate of Merger, accompanied by payment of the applicable filing fee,
has been examined by and received the endorsed approval of the Secretary of
State of the State of Delaware (the "Effective Time").
1.3 Closing. The closing of the Merger (the "Closing") shall take place
at such time and on a date to be specified by the parties, which shall be no
later than November 30, 1999 (the "Closing Date"), at the offices of Day, Xxxxx
& Xxxxxx LLP, CityPlace I, Xxxxxxxx, Xxxxxxxxxxx 00000, unless another date or
place is agreed to by the parties.
1.4 Directors and Officers. The directors and officers of MergerCo
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of common
stock, par value $0.001 per share, of Tycho (the "Tycho Common Stock") or Series
A preferred stock, par value $0.001 per share, of Tycho (the "Tycho Preferred
Stock") or any shares of capital stock of MergerCo:
(a) Each share of common stock, par value $.01 per share, of MergerCo
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock, par value
$0.001 per share, of the Surviving Corporation following the Merger.
(b) Each share of Tycho Common Stock issued and outstanding or held in
the treasury of Tycho immediately prior to the Effective Time shall
automatically be cancelled and retired and shall cease to exist, and no cash or
other consideration shall be delivered or deliverable in exchange for such
shares of Tycho Common Stock. The holders of certificates previously evidencing
series of Tycho Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to the Tycho Common Stock except as
provided by law.
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(c) Each share of Tycho Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares owned by Tycho
and (ii) Dissenting Shares (as hereinafter defined)) shall be converted into the
right to receive the following consideration (collectively, the "Merger
Consideration"), upon surrender and exchange of the Preferred Certificate (as
hereinafter defined) representing such shares of Tycho Preferred Stock:
(1) $0.100 per share, subject to any adjustment required by
Section 3.2 below, payable in cash to the holder of such shares of Tycho
preferred stock, without any interest thereon (the "Cash Consideration"); and
(2) The right to purchase an amount of preferred stock of NewCo
(as hereinafter defined), equal to the product of (i) 1.5, times (ii) the
remainder of (A) $0.3125 minus (B) the Cash Consideration, which amount is
currently estimated to be $0.319, subject to any adjustment required by Section
3.2 below, exercisable upon the closing of the Qualified NewCo Financing (as
hereinafter defined) at a price of $0.001 per share for such preferred stock
(the "Call Consideration").
(d) All such shares of Tycho Preferred Stock, when converted as
provided in Section 2.1(c), shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
Preferred Certificate previously evidencing such shares shall thereafter
represent only the right to receive the applicable Merger Consideration. The
holders of Preferred Certificates previously evidencing shares of Tycho
Preferred Stock outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to the Tycho Preferred Stock except as otherwise
provided in this Agreement or by law and, upon the surrender of Preferred
Certificates in accordance with the provisions of Section 3.1, shall only
represent the right to receive for their shares of Tycho Preferred Stock, the
applicable Merger Consideration, without any interest thereon.
2.2 Stock Options, Warrants and Other Equity Rights.
(a) Each option (collectively, the "Options") granted under Tycho's
1997 Stock Plan (the "Stock Option Plan"), each outstanding warrant for Tycho
Preferred Stock (collectively, the "Warrants") and each other option, warrant,
call or other right to subscribe for securities or rights exercisable for or
convertible into or exchangeable for, or contracts, commitments or arrangements
by which Tycho is or may be required to issue or sell, additional shares of the
capital stock of Tycho (collectively, "Equity Rights"), which is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time
shall, at the Effective Time, be (i) canceled in their entirety or (ii) in the
case of those convertible promissory notes listed in the Disclosure Letter,
amended to cancel the convertibility features of such promissory notes. Except
as set forth in clause (ii) of the preceding sentence, Tycho shall take all
actions necessary to ensure that (i) all Options, Warrants and Equity Rights
shall terminate and be cancelled as of the Effective Time and thereafter be of
no further force or effect and (ii) no Options, Warrants or Equity Rights are
granted after the date of this Agreement.
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(b) The Stock Option Plan shall terminate as of the Effective Time, and
the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other Equity Right in respect of the capital stock of
Tycho or any of its subsidiaries shall be of no further force or effect and
shall be deemed to be deleted as of the Effective Time, and no holder of an
Option, a Warrant or an Equity Right or any participant in the Stock Option Plan
or any other plan, program or arrangement shall have any rights under the Stock
Option Plan, or other plan, program or arrangement to acquire any equity
securities of Tycho, the Surviving Corporation or any subsidiary of Tycho or the
Surviving Corporation.
ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES
3.1 Payment for Shares of Tycho Preferred Stock.
(a) Promptly after the Effective Time, DSL shall mail to each record
holder of certificates (the "Preferred Certificates") that immediately prior to
the Effective Time represented shares of Tycho Preferred Stock a form of letter
of transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Preferred Certificates shall pass, only upon proper
delivery of the Preferred Certificates to DSL and instructions for use in
surrendering such Preferred Certificates and receiving the Merger Consideration
in respect of such shares.
(b) In effecting the payment of the Merger Consideration with respect
to shares of Tycho Preferred Stock represented by Preferred Certificates
entitled to payment of the Merger Consideration pursuant to Section 2.1(c) (the
"Cashed Shares"), upon the surrender of each such Preferred Certificate, DSL
shall promptly pay the holder of such Preferred Certificate (collectively, the
"Cashed Stockholders") an amount equal to (i) the Merger Consideration,
multiplied by (ii) the number of Cashed Shares, in consideration for such Cashed
Shares. Upon such payment, such Preferred Certificate shall forthwith be
canceled.
(c) Until surrendered in accordance with paragraph (b) above, each such
Preferred Certificate (other than Preferred Certificates representing (i) shares
of Tycho Preferred Stock held in the treasury of Tycho or by any wholly-owned
subsidiary of Tycho and (ii) Dissenting Shares) shall represent solely the right
to receive the Merger Consideration relating to such Preferred Certificates. No
interest or dividends shall be paid or accrued on the Merger Consideration. If
the Merger Consideration (or any portion of the Merger Consideration) is to be
delivered to any person other than the person in whose name the Preferred
Certificate formerly representing shares of Tycho Preferred Stock surrendered is
registered, it shall be a condition to such right to receive such Merger
Consideration that the Preferred Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
surrendering such shares of Tycho Preferred Stock shall pay to DSL any transfer
or other taxes required by reason of the payment of the Merger Consideration to
a person other than the
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registered holder of the Preferred Certificate surrendered, or shall establish
to the satisfaction of DSL that such tax has been paid or is not applicable.
(d) No dividends or other distributions with respect to shares of Tycho
Preferred Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Preferred Certificate with respect to the shares of
Tycho Preferred Stock represented by such Preferred Certificate.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Tycho Preferred
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Preferred Certificates formerly representing the shares of
Tycho Preferred Stock are presented to DSL or the Surviving Corporation, they
shall be surrendered and canceled in return for the payment of the Merger
Consideration relating to such Preferred Certificates, as provided in this
Article III.
3.2 Post-Closing Adjustments.
(a) The estimated Closing Date Liabilities, as defined in Section 11.6,
are set forth in the disclosure letter delivered by Tycho to DSL
contemporaneously herewith (the "Disclosure Letter"). On the Closing Date, the
estimated Closing Date Liabilities and the amount of Cash Consideration set
forth in Section 2.1(c) above shall be further adjusted by the parties hereto,
to the extent necessary to accurately estimate the Closing Date Liabilities as
of the Closing.
(b) Within forty-five (45) days following the Closing, DSL shall
prepare and deliver to the Agent for the Executives (as hereinafter defined)
designated pursuant to Section 9.2(h) hereof a statement (the "Closing
Statement") showing any required adjustments to the Closing Date Liabilities
(the "Closing Statement Adjustments") as of the Closing Date. In the event that
DSL and the Agent, using their best efforts, are unable to agree upon the
Closing Statement Adjustments within sixty (60) days following the Closing Date,
or such additional period as may be agreed upon by them, DSL and the Agent shall
submit a list of the disputed issues to a partner of KPMG Peat Marwick (the
"Accounting Firm") for resolution. DSL and the Agent shall request that the
disputed issues be resolved as promptly as possible by the Accounting Firm. The
decision of the Accounting Firm shall be final and binding only as to the
determination of the Closing Statement Adjustments provided for in this Section
3.2. The parties agree that the Closing Statement Adjustments shall be prepared
solely for the purpose of determining the post-closing adjustments, if any, to
the Merger Consideration or to the Employment Agreement Cancellation Payments,
as defined in Section 7.12, as the case may be. DSL and the Agent, on behalf of
the Executives, shall each pay one-half of the costs and expenses of the
Accounting Firm in resolving the disputed issues, if any.
(c) In the event that the total Closing Date Liabilities set forth on
the final Closing Statement are less than the total set forth in the Disclosure
Letter, the aggregate Merger Consideration shall be increased by the amount of
the difference and shall be promptly paid by DSL to the Cashed Stockholders. In
the event that the total Closing
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Date Liabilities set forth on the final Closing Statement are greater than the
total set forth in the Disclosure Letter, the aggregate Employment Agreement
Cancellation Payments shall be reduced by the amount of the excess liabilities;
provided, however, that such reduction shall not exceed the aggregate amount of
the Executives' Hold Back, as defined in Section 9.2(c), plus the Executives'
Offset Amount, as defined in Section 9.2(d).
(d) If the aggregate Merger Consideration is reduced as a result of the
post-closing adjustments, DSL shall be entitled to first retain, from and out of
the Executives' Hold Back, the amount of such reduction. If the Merger
Consideration is reduced by an amount in excess of the Executives' Hold Back,
then DSL shall next be entitled to offset the amount of such excess against the
payments due to the Executives pursuant to Section 7.12(c), up to the full
amount of the Executives' Offset Amount.
3.3 Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the contrary, shares
of Tycho Preferred Stock which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of Tycho Preferred Stock who
have demanded and exercised any appraisal rights in the manner provided under
the Delaware Corporation Law and, as of the Effective Time, have neither
effectively withdrawn nor lost their appraisal rights under the Delaware
Corporation Law (the "Dissenting Shares"), shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, unless and until
such holder shall have failed to exercise or shall have effectively withdrawn or
lost such holder's appraisal rights under the Delaware Corporation Law. If such
holder shall have so failed to exercise or shall have effectively withdrawn or
lost such appraisal rights, such holder's shares of Tycho Preferred Stock shall
thereupon be deemed to have been converted into and to have become exchangeable
for, at the Effective Time, the right to receive the Merger Consideration,
without any interest thereon.
(b) Tycho shall give DSL prompt notice of any demands received by Tycho
for appraisal pursuant to Section 262 of the Delaware Corporation Law,
withdrawals of such demands, and any other instruments served pursuant to the
Delaware Corporation Law and received by Tycho. Tycho shall not, except with the
prior written consent of DSL or as otherwise required by applicable law, make
any payment with respect to any such demands for appraisal or offer to settle or
settle any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DSL AND MERGERCO
DSL and MergerCo hereby jointly and severally represent and warrant to
Tycho as follows and acknowledge and confirm that Tycho is relying upon such
representations and warranties in connection with the execution, delivery and
performance of this Agreement, notwithstanding any investigation made by Tycho
or on its behalf:
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4.1 Corporate Organization. DSL is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and is duly authorized to conduct business as a foreign corporation in the State
of Connecticut. MergerCo is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
4.2 Authority for Transaction. The execution and delivery of this
Agreement by each of DSL and MergerCo, and the consummation of the Transactions,
have been duly and validly authorized by each of DSL and MergerCo by all
necessary action, corporate or otherwise. This Agreement is the legal, valid and
binding obligation of each of DSL and MergerCo, enforceable against each of DSL
and MergerCo in accordance with its terms. Neither the execution and delivery of
this Agreement by DSL and MergerCo, nor the performance by DSL and MergerCo of
their obligations hereunder, will violate the certificate of incorporation or
bylaws of either DSL or MergerCo or will result in a violation or breach of, or
constitute a default under, any indenture, mortgage, deed of trust or other
contract, license or other agreement to which DSL or MergerCo is a party or by
which either of them or their assets is bound, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to DSL or MergerCo.
4.3 No Consent. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local Governmental Authority (as hereinafter defined) is
required on the part of DSL or MergerCo in connection with the execution or
delivery of this Agreement or the consummation of the Transactions.
4.4 Brokerage or Finder's Fees. Neither DSL nor MergerCo has employed
any broker, finder or agent, or agreed to pay or incurred any brokerage fee,
finder's fee or commission with respect to the Transactions. DSL shall
indemnify, defend and hold harmless each of Tycho, the Cashed Stockholders and
the Executives, as defined in Section 7.12, from any claim by any broker or
finder engaged by DSL for brokers' or finders' fees. Neither DSL nor MergerCo
has dealt with any person purporting to act in the capacity of a broker, finder
or agent with respect hereto as a result of which any claim for a fee can be
made against Tycho or the Cashed Stockholders other than the broker identified
by Tycho in the Disclosure Letter.
4.5 Material Misstatements or Omissions. No representation or warranty
by DSL or MergerCo in this Agreement, or any document, statement, certificate or
schedule furnished or to be furnished to Tycho by, or on behalf of, DSL or
MergerCo pursuant hereto contains, or will when furnished contain, any untrue
statement of a material fact, or omits, or will then omit to state, a material
fact necessary to make the statement of facts not materially misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TYCHO
Tycho represents and warrants to each of DSL and MergerCo as follows
and acknowledges and confirms that each of DSL and MergerCo is relying upon such
representations and warranties in connection with the execution, delivery and
performance of this Agreement, notwithstanding any investigation made by DSL or
MergerCo or on either of their behalf:
5.1 Corporate Organization. Tycho is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and is duly qualified as a foreign corporation in the State of California. Tycho
has all necessary corporate power and authority to own and use its properties
and assets and to operate its business as presently conducted, and Tycho holds
all permits, licenses, orders and approvals of all federal, state and local
governmental or regulatory bodies necessary and required therefor.
5.2 Authority for Transaction. The execution and delivery of this
Agreement by Tycho, and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by all necessary action, corporate
or otherwise, except that the consummation of the Merger requires the consent of
the Tycho stockholders as set forth in the Disclosure Letter. This Agreement is
the legal, valid and binding obligation of Tycho and, with respect to the
provisions of Section 9.2 and upon approval by the Tycho stockholders as set
forth in the Disclosure Letter, each of the Cashed Stockholders, enforceable
against them in accordance with its terms. Neither the execution and delivery of
this Agreement by Tycho, nor the performance by Tycho of its obligations
hereunder, will violate Tycho's certificate of Incorporation or Bylaws or will
result in a violation or breach of, or constitute a default under, any
indenture, mortgage, deed of trust or other contract, license or other agreement
to which Tycho is a party or by which it or any of its assets or properties is
bound, or of any provision of any federal or state judgment, writ, decree,
order, statute, rule or governmental regulation applicable to Tycho.
5.3 No Consent. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local Governmental Authority is required on the part of Tycho
or, to the Knowledge of Tycho, the Cashed Stockholders in connection with the
execution or delivery of this Agreement or the consummation of the Transactions.
5.4 Financial Statements. Tycho has delivered to Buyer its audited
financial statements for the period ending December 31, 1998, including the
notes thereto, and the unaudited financial statements for the period ended
October 31, 1999 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP (as hereinafter defined)
consistently applied, except that the unaudited financial statements do not
contain the footnotes required by GAAP, and fairly and
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accurately present the financial condition and results of the operations of
Tycho and its business as of the dates and for the periods indicated.
5.5 Liabilities. To the Knowledge (as hereinafter defined) of Tycho and
the Stockholders, Tycho has no liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, other than
those set forth in the Disclosure Letter.
5.6 Absence of Material Adverse Change. Since October 31, 1999, there
has not been with respect to the business of Tycho, nor have any facts come to
the attention of Tycho that Tycho or its business will experience, any Material
Adverse Change, and no facts have come to the attention of Tycho that any
Material Adverse Change has occurred to Tycho.
5.7 Title to Assets; Leases.
(a) Tycho has good and marketable title to all assets owned by it, a
valid leasehold interest in all assets leased by it, and valid and enforceable
rights to use all other assets used by it in connection with its business, in
each case, except as set forth in the Disclosure Letter, free and clear of all
Liens (as hereinafter defined). The Disclosure Letter sets forth (i) all assets
used by Tycho in its business that are not owned or leased by Tycho, (ii) the
identity of the owner of such assets and (iii) the nature of the right of Tycho
to use such assets.
(b) The Disclosure Letter lists all leases and lease purchase
agreements to which Tycho is a party. Each such agreement is valid, binding and
in full force and effect; and no event of default or event or condition that,
after notice or lapse of time or both, would constitute a violation, breach or
event of default thereunder on the part of Tycho, or to the Knowledge of Tycho,
any other party thereto, has occurred or will occur upon or in connection with
the closing of the Transactions.
5.8 Accounts Receivable. All accounts receivable of Tycho arose only
from bona fide transactions in the ordinary course of Tycho's business. No
amount included in the accounts receivable of Tycho as of the Closing Date has
been released for an amount less than the value at which it was included or is
or will be regarded as unrecoverable in whole or in part, except to the extent
there shall have been an appropriate reserve therefor. Such receivables are not
subject to any counterclaim, refusal to pay or setoff.
5.9 Contracts and Commitments. The Disclosure Letter lists all written
and oral agreements, contracts, indebtedness, liabilities and other obligations
to which Tycho is a party or to which it is bound which (a) are for a term
longer than twelve (12) months; (b) involve receipts or expenditures by Tycho
greater than Twelve Thousand Five Hundred Dollars ($12,500) in any twelve-month
period; (c) involve the mortgage, pledge, grant or creation of a lien or
security interest or other encumbrance on any of Tycho's assets; (d) require
Tycho to indemnify any other party for any liability; (e) was not entered into
in the ordinary course of business; or (f) is otherwise material to Tycho.
Copies of such written, and summaries of such oral, agreements, contracts,
indebtedness,
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liabilities and obligations have been delivered to DSL. Each of the contracts or
agreements listed in the Disclosure Letter is valid, binding and in full force
and effect; and no event of default or event or condition that, after notice or
lapse of time or both, would constitute a violation, breach or event of default
thereunder on the part of Tycho, or to the Knowledge of Tycho, any other party
thereto, has occurred. Other than as set forth in the Disclosure Letter, none of
such contracts or agreements contain any change-of-control or other provisions
that would be triggered by this Agreement or the consummation of the
Transactions.
5.10 Indebtedness. Except as set forth in the Disclosure Letter, Tycho
does not have any obligations for money borrowed or owed or under any guarantees
and does not have any agreements or arrangements to borrow money or to enter
into any such guarantee.
5.11 Intellectual Property.
(a) The Disclosure Letter hereto lists all of Tycho's intellectual
property, including but not limited to registered and unregistered trademarks,
trade names, service marks, certification marks, domain names, copyrights and
registration applications for the above, patents and patent applications, and
licenses to and from third parties relating to any of the above (the
"Intellectual Property").
(b) Tycho owns or has valid and enforceable license(s) to use all the
Intellectual Property and pays no royalty with respect thereto. Each such
license is valid, binding and in full force and effect; and no event of default
or event or condition that, after notice or lapse of time or both, would
constitute a violation, breach or event of default thereunder on the part of
Tycho, or to the Knowledge of Tycho, any other party thereto, has occurred. Each
license which is not a perpetual license is so identified in the Disclosure
Letter.
(c) Tycho employs procedures in the daily operation of its business to
maintain the proprietary nature of, and owns and has the right to use, all
material trade secrets, including know-how, inventions, designs, processes,
computer software and documentation for such software and technical data
required for or incident to the development, manufacture, operation and sale of
all products and services sold or proposed to be sold by Tycho in connection
with its business, free and clear of any Liens, including without limitation,
all claims of current and former employees, consultants, officers, directors and
stockholders of Tycho.
5.12 Taxes
(a) All returns, reports and other forms related to Taxes (as
hereinafter defined) required to be filed by Tycho on or before the Closing Date
have been filed, in accordance with all applicable laws (after taking into
account extensions duly obtained), and no penalties or other charges are due or
will become due with respect to the late filing of any such return, report or
form. Copies of all such returns, reports and other forms have been delivered by
Tycho to DSL. All Taxes due have been paid, provided for
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in reserves, or properly protested or will be so paid, reserved for or protested
by Tycho. No audit of any such return, report or form is pending or, to the
Knowledge of Tycho, threatened. Tycho is not a party to any pending action or
proceeding by any Governmental Authority for assessment or collection of Taxes,
and no claim for assessment or collection of Taxes has been asserted or, to the
Knowledge of Tycho, threatened against Tycho. All deposits required by law to be
made by Tycho with respect to employees' withholding taxes have been duly made.
(b) No Taxes are or will become payable by Tycho as a consequence of
the execution, delivery or performance of this Agreement, other than Taxes based
upon the net income of the parties. Tycho shall be responsible for and shall
promptly pay any such Taxes which become payable with respect thereto.
(c) As used in this Agreement, "Taxes" (or "Tax" where the context
requires) shall mean all federal, state, county, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated, excise,
value added, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, employment,
unemployment compensation, payroll-related and property taxes, imposts, customs
duties and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest or penalties with respect thereto.
5.13 Litigation. Other than as set forth in the Disclosure Letter,
there is no action, suit, grievance or proceeding pending or, to the Knowledge
of Tycho, threatened against Tycho at law, in equity, by way of arbitration or
before any governmental or quasi-governmental department, commission, board or
agency. To the Knowledge of Tycho, there are no existing facts or conditions
which are likely to give rise to any charge, claim, litigation, proceeding or
investigation by any third party that, if resolved adversely to Tycho, would
have a Material Adverse Effect on Tycho, nor are there any facts or conditions
which are likely to give rise to any order of condemnation, appropriation or
other taking of any of Tycho's material assets.
5.14 Labor and Employee Relations. Other than as set forth in the
Disclosure Letter, no current officer or employee of Tycho ("Employee") is a
party to any employment agreement or union or collective bargaining agreement,
and no union has been certified or recognized as the collective bargaining
representative of any of such Employees or has attempted to engage in
negotiations with Tycho regarding terms and conditions of employment. No unfair
labor practice charge, work stoppage, picketing or other such activity relating
to labor matters has occurred or is pending. To the Knowledge of Tycho, there
are no current or threatened attempts to organize or establish any labor union
to represent any Employees. Tycho is in compliance in all material respects with
all requirements of federal, state and local laws (including the common laws)
and regulations governing employment relationships, including without limitation
anti-discrimination laws, wage and hour laws, labor relations laws and
occupational safety and health laws, and no suits, charges or administrative
proceedings relating to any such law or regulation are pending or, to the
Knowledge of Tycho, have been threatened. No Employee has given any notice or,
to the Knowledge of Tycho, made any threat or
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otherwise revealed an intent, to cancel or otherwise terminate his or her
relationship with Tycho. Prior to the Effective Time, Tycho shall terminate or
cause to be terminated all employment agreements set forth in the Disclosure
Letter (the "Employment Agreements") and as of the Closing Date, subject to the
provisions of Section 7.7 below, all Employees shall be terminable at will by
the Surviving Corporation.
5.15 Employee Benefit Plans. All of the employee benefit plans (as
defined in Section 3(3) of ERISA (as hereinafter defined)), multi-employer plans
(as defined in Section 4001(a)(3) of ERISA), and compensation programs and
employment arrangements which are maintained, or contributed to, by Tycho for
the Employees are listed in the Disclosure Letter ("Employee Benefit Plans").
All obligations of Tycho to contribute to such Employee Benefit Plans on behalf
of Employees for the calendar years prior to 1999 have been satisfied, and all
obligations of Tycho to contribute to such plans on behalf of Employees for the
most recent period ending on the Closing Date will be satisfied by Tycho. Tycho
does not maintain or sponsor, and is not required to make contributions to, any
written or oral pension, profit sharing, thrift, deferred compensation, bonus,
incentive, stock purchase, severance, hospitalization, insurance or other
similar plan, agreement or arrangement relating to employee benefits for any
Employee or to former employees of Tycho. To the Knowledge of Tycho, the
Employee Benefit Plans in all material respects conform to and have been
administered in compliance with their terms and applicable laws and regulations
(including, but not limited to, ERISA), and no condition exists with respect to
any Employee Benefit Plan that could have a Material Adverse Effect on Tycho,
DSL or MergerCo.
5.16 Compliance with Laws. Tycho has in all material respects duly
complied with all applicable laws, rules, regulations and orders of federal,
state and local governments, including, but not limited to, Environmental Laws
(as hereinafter defined), and Tycho is not in default with respect to any order,
judgment, writ, injunction, decree, award, rule or regulation of any court,
governmental or regulatory body or arbitrator, and to the Knowledge of Tycho, no
event of default or event or condition that, after notice or lapse of time or
both, would constitute a violation, breach or event of default thereunder has
occurred or will occur as a result of the Transactions.
5.17 Environmental Matters.
(a) All facilities and property whether currently or heretofore owned,
operated or leased by Tycho (including facilities or properties subleased to a
third party) were, during any period of ownership, operation or leasing
(including subleasing to a third party) by Tycho, and, to the extent currently
owned, operated or leased by Tycho, continue to be, in compliance in all
material respects with all applicable federal, state or local statutes, laws,
ordinances, codes, rules, regulations, guidelines or any binding determinations
of any federal, state or local governmental agency (including consent decrees
and administrative orders) relating to protection of the environment or public
or worker health and safety (collectively, "Environmental Laws").
(b) Except as set forth in the Disclosure Letter, (i) Tycho's past and
present operations have complied and are in compliance in all material respects
with all
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applicable Environmental Laws; (ii) Tycho has obtained all environmental, health
and safety governmental permits required for the operation of its business, and
all such governmental permits are in good standing and Tycho is in compliance
with all material terms and conditions of such permits; (iii) none of Tycho, nor
any of Tycho's properties or its past or present operations, is subject to any
ongoing investigation by, order from or agreement with any person (including,
without limitation, any prior owner or operator of Tycho property) respecting
(A) any Environmental Laws, (B) any remedial action or (C) any claim of losses
and expenses arising from the release or threatened release of a contaminant
into the environment; and (iv) Tycho is not subject to any judicial or
administrative proceeding, order, judgment, decree or settlement alleging or
addressing a violation of or liability under any Environmental Laws.
(c) To the Knowledge of Tycho, Tycho is not subject to the
environmental liabilities of any third party, whether by contractual agreement
or operation of law.
5.18 Land Use. The past and current use by Tycho of 000 Xxxxxxx Xxxxxx,
Xxxxx Xxxx, Xxxxxxxxxx 00000 and each other location where Tycho maintains an
office (the "Premises") complies in all material respects with and in no
material way violates, (a) any applicable statute, law, regulation, rule,
ordinance or order of any kind whatsoever (including, without being limited to,
any building, fire, subdivision and zoning statute, law, code, ordinance, rule,
regulation, approval or order, or urban redevelopment plan or other governmental
or quasi-governmental requirement) affecting the Premises or any part thereof,
(b) any building or occupancy permit, (c) any condition, easement, right-of-way,
covenant, agreement or restriction of record affecting or otherwise relating to
the Premises, or (d) any material term or provision of any lease. No current use
by Tycho of the Premises is dependent on a nonconforming use or other
governmental approval, license or permit the absence of which would materially
limit Tycho or its business as currently operated. There is no pending or, to
the Knowledge of Tycho, threatened condemnation of all or any part of the
Premises. There are no occupancy rights (written or oral), leases or tenancies
presently affecting the Premises, other than as set forth in the Disclosure
Letter.
5.19 Joint Ventures. Tycho is not a participant, as a partner or
otherwise, in any joint venture or common or pooled risk business enterprises.
5.20 Insurance. Tycho and all of its assets and properties are covered
by such fire, casualty, environmental liability and other insurance policies
issued by reputable insurers as are customarily obtained to cover comparable
assets and properties by businesses in the region in which Tycho and its assets
and properties are located, in amounts, scope and coverage which are reasonable
in light of existing conditions. There are no outstanding written requirements
or written recommendations by any insurance company that issued a policy to
Tycho, by any Board of Fire Underwriters or other body exercising similar
functions or by any Governmental Authority requiring or recommending any repairs
or other work to be done on or with respect to any of Tycho's material assets or
requiring or recommending any equipment or facilities to be installed on or in
connection with any of Tycho's assets.
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5.21 Books and Records. The books of account and other financial and
corporate records of Tycho, as presented to DSL, are complete and correct in all
material respects and are maintained in accordance with good business practices.
5.22 Powers of Attorney. No person has any power of attorney to act on
behalf of Tycho other than such powers to so act as normally pertain to the
officers of Tycho.
5.23 No Guarantees. None of the obligations or liabilities of Tycho is
guaranteed by or subject to a similar contingent obligation of any other person.
5.24 Brokerage and Finder's Fees. Other than as set forth in the
Disclosure Letter, Tycho has not employed any broker, finder or agent, or agreed
to pay or incurred any brokerage fee, finder's fee or commission with respect to
the Transactions. Tycho has not dealt with any other person purporting to act in
the capacity of a broker, finder or agent with respect hereto as a result of
which any claim for a fee can be made against DSL or MergerCo. Tycho and each of
the Cashed Stockholders shall indemnify, defend and hold harmless each of DSL
and MergerCo from any claim for brokers' or finders' fees from such brokers, and
Tycho shall pay and fully discharge all obligations to the broker set forth in
the Disclosure Letter at or prior to the Closing.
5.25 Material Misstatements or Omissions. No representation or warranty
by Tycho in this Agreement, or any document, statement, certificate or schedule
furnished or to be furnished to DSL or MergerCo by Tycho, or on behalf of Tycho
pursuant hereto contains, or will when furnished contain, any untrue statement
of a material fact, or omits, or will then omit to state, a material fact
necessary to make the statement of facts contained therein not materially
misleading.
5.26 Year 2000 Compatibility. Except as and to the extent described in
the Disclosure Letter, all computer-based systems and equipment containing
embedded computer chips (the "Systems") used by Tycho in the operation of its
business are "Millennium Compliant" (as hereinafter defined). For purposes of
this Agreement, "Millennium Compliant" means:
(i) the functions, calculations and other computing processes of the
Systems (collectively, "Processes") perform in a consistent manner
regardless of the date in time on which the Processes are actually
performed and regardless of the date input to the system, whether
before, on or after January 1, 2000 and whether or not the dates are
affected by leap years;
(ii) each System accepts, calculates, compares, sorts, extracts,
stores, sequences and otherwise processes date inputs and date values,
and returns and displays date values in a consistent manner regardless
of the dates used, whether before, on or after January 1, 2000; and
(iii) each System will function without interruptions caused by the
date in time on which the Processes are actually performed or by the
date input to the system, whether before, on or after January 1, 2000.
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5.27 Company Subsidiaries.
(a) The Disclosure Letter sets forth a complete and accurate list of
all subsidiaries of Tycho together with their respective jurisdictions of
incorporation or organization. Each subsidiary of Tycho is wholly-owned,
directly or in-directly, by Tycho. All of the outstanding shares of capital
stock of the subsidiaries of Tycho that are corporations are validly issued,
fully paid and nonassessable. Except as set forth in the Disclosure Letter, as
of the Closing Date, all of the outstanding shares of capital stock of, or other
ownership interests in, each of Tycho's subsidiaries are owned by Tycho or by a
wholly-owned subsidiary of Tycho in all cases free and clear of any Liens,
claims, charges or encumbrances. No subsidiary of Tycho has outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating such subsidiary to issue, transfer or sell
any of its securities.
(b) Except for Tycho's subsidiaries, subject to the provisions of
Section 7.9 below, Tycho does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital stock or securities
convertible into capital stock of any other corporation, and (ii) any
participating interest in any partnership, joint venture or other non-corporate
business enterprises.
5.28 Capitalization.
(a) As of the Closing Date, the authorized capital stock of Tycho
consists of 6,450,000 shares of preferred stock, par value $0.001 per share, all
of which shares have been designated as Series A preferred stock; and 13,550,000
shares of Tycho Common Stock. As of the date of this Agreement, there are, and
as of the Closing Date, there will be:
(i) 6,025,728 shares of Tycho Preferred Stock issued and outstanding;
and
(ii) 3,597,500 shares of Tycho Common Stock issued and outstanding.
Such shares constitute, and as of the Closing Date will constitute, all of the
issued and outstanding shares of capital stock of Tycho.
(b) All outstanding shares of capital stock of Tycho have been duly
authorized by all necessary corporate action, have been validly issued and are
fully paid and nonassessable. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class or series
of authorized capital stock of Tycho are as set forth in the Certificate of
Incorporation, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. The Disclosure Letter provides an
accurate list of (A) all stockholders owning the issued and outstanding Tycho
Preferred Stock and Tycho Common Stock, together with the number held by each,
and (B) all of the holders of Options, Warrants and Equity Rights, together with
the number held by each.
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(c) As of the Effective Time, there will be no outstanding securities
convertible into or exchangeable for capital stock of Tycho or Options, Warrants
or other rights to purchase or subscribe for capital stock of Tycho, or any of
Tycho's subsidiaries, or contracts, commitments, agreements, understandings or
arrangements of any kind to which Tycho or any of Tycho's subsidiaries is a
party relating to the issuance of any capital stock of Tycho or any of Tycho's
subsidiaries, any such convertible or exchangeable securities or any such
options, warrants or rights.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by Tycho. During the period from the date of
this Agreement to the Effective Time, except as otherwise contemplated by this
Agreement, Tycho shall, and shall cause each of Tycho's subsidiaries to, carry
on their respective businesses in the usual, regular and ordinary course,
consistent with past practice, and use their best efforts to preserve intact
their present business organizations, keep available the services of their
present advisors, managers, officers and employees and preserve their
relationships with customers, suppliers, licensors and others having business
dealings with them and continue existing contracts as in effect on the date of
this Agreement (for the term provided in such contracts), and renew such
contracts that become due for renewal in the ordinary course of business.
Without limiting the generality of the foregoing, neither Tycho nor any of
Tycho's subsidiaries will (except as expressly permitted by this Agreement or as
contemplated by the Transactions or to the extent that DSL or MergerCo shall
otherwise consent in writing):
(a) (i) declare, set aside or pay any dividend or other distribution
(whether in cash, stock, property or any combination of the foregoing) in
respect of any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or (iii) repurchase, redeem or otherwise acquire any of its
securities;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (including indebtedness having the right to
vote) or equity equivalents (including, without limitation, stock appreciation
rights);
(c) other than the TyFone Divestiture (described below), acquire, sell,
lease, encumber, transfer or dispose of any assets outside the ordinary course
of business which are material (in relation to the total amount of the assets in
the category of assets acquired or disposed of) to Tycho or any of Tycho's
subsidiaries (whether by asset acquisition, stock acquisition or otherwise),
except pursuant to obligations in effect on the date of this Agreement;
(d) (i) incur any amount of indebtedness for borrowed money, guarantee
any indebtedness, issue or sell debt securities or warrants or rights to acquire
any debt securities, guarantee (or become liable for) any debt of others, make
any loans, advances
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or capital contributions, mortgage, pledge or otherwise encumber any material
assets, create or suffer any material Lien thereupon, in each case other than in
the ordinary course of business consistent with prior practice or (ii) incur any
short-term indebtedness for borrowed money, except, in each such case, pursuant
to credit facilities in existence on the date of this Agreement;
(e) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
any payment, discharge or satisfaction (i) in the ordinary course of business
consistent with past practice, or (ii) in connection with the Transactions;
(f) change any of the accounting principles or practices used by it
(except as required by GAAP, in which case written notice shall be provided to
DSL and MergerCo prior to any such change);
(g) except as required by law or as otherwise required pursuant to this
Agreement, (i) enter into, adopt, amend or terminate any Employee Benefit Plan,
(ii) enter into, adopt, amend or terminate any agreement, arrangement, plan or
policy between Tycho or any of Tycho's subsidiaries and one or more of their
directors or officers, or (iii) increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any Employee Benefit Plan or arrangement as in effect as of the date
of this Agreement;
(h) adopt any amendments to the Certificate of Incorporation or Bylaws,
except as expressly provided by the terms of this Agreement;
(i) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(j) settle or compromise any litigation (whether or not commenced prior
to the date of this Agreement) other than settlements or compromises or
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise does not exceed $10,000; or
(k) enter into an agreement to take any of the foregoing actions.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Stockholders' Consent.
(a) Tycho, acting through Tycho's Board of Directors, shall, in
accordance with applicable law:
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(i) use its best efforts to obtain the necessary approval of this
Agreement and the Transactions by its stockholders; and
(ii) recommend that the stockholders of Tycho vote in favor of the
approval of this Agreement and the Transactions.
7.2 Additional Agreements. Subject to the terms and conditions provided
in this Agreement, each of the parties to this Agreement agrees to use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the Transactions and to cooperate with each other in
connection with the foregoing, including the taking of such actions as are
necessary to obtain any necessary consents, approvals, orders, exemptions and
authorizations by or from any public or private third party, including without
limitation any that are required to be obtained under any federal, state or
local law or regulation or any contract, agreement or instrument to which Tycho
or any subsidiary of Tycho is a party or by which any of their respective
properties or assets are bound, and to cause any Liens encumbering the assets
set forth on Exhibit C hereto (other than any Lien in favor of DSL) to be
terminated within a reasonable time after the Closing.
7.3 Fees and Expenses. Except as set forth in Sections 9.2(e) and 10.2
of this Agreement, whether or not the Merger is consummated, all fees, costs and
expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such costs or expenses.
7.4 No Solicitations; Bridge Notes.
(a) From the date of this Agreement, neither Tycho nor any of its
directors, stockholders or advisors shall, directly or indirectly, entertain or
solicit any indication of interest in or proposal involving, or agree to
consummate, any sale, transfer, merger or recapitalization of Tycho or any
securities of Tycho or, in connection with any such indication of interest,
proposal or transaction, consider or respond to any inquiry or cooperate with or
furnish or cause to be furnished to any person any information concerning Tycho.
Tycho will immediately advise DSL if any such indication or proposal is
received.
(b) The parties acknowledge that, in consideration of the
non-solicitation covenant described in this Section 7.4, DSL has heretofore
provided to Tycho a bridge loan in the principal amount of $250,000, evidenced
by a secured promissory note dated November 4, 1999 payable by Tycho to DSL (the
"Tycho Bridge Note"). Immediately prior to the Closing, Tycho, in its sole
discretion, shall (i) satisfy and repay in full its obligations under the Tycho
Bridge Note or (ii) request DSL to cancel and surrender, and DSL shall so cancel
and surrender, the Tycho Bridge Note in exchange for a secured, convertible
promissory note, in substantially the form attached hereto as Exhibit A-1,
payable to DSL from NewCo, as defined in Section 7.9, in the aggregate principal
amount of $250,000 (the "NewCo Bridge Note"). The NewCo Bridge Note shall be
converted into preferred stock of NewCo in connection with the Qualified NewCo
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Financing, as more fully described in the NewCo Bridge Note, provided such
Qualified NewCo Financing shall occur on or before December 31, 2000. In the
event that a Qualified NewCo Financing shall occur after December 31, 2000 but
on or before March 31, 2001, DSL shall have the option to convert the NewCo
Bridge Note into preferred stock of NewCo in connection with the Qualified NewCo
Financing. If the NewCo Bridge Note is not so converted, it shall be due and
payable on March 31, 2001.
(c) In the event that this Agreement is terminated pursuant to Section
10.1(a), (b), or (d), and Tycho agrees to any proposal with a third party
regarding a merger, consolidation or other business combination, or the
acquisition of all or substantially all of the capital stock or all or
substantially all of the assets of Tycho, within three (3) months of such
termination of this Agreement, Tycho shall (i) reimburse DSL for all actual
expenses incurred in connection with the negotiation of the Transactions and the
preparation of this Agreement and the other documents, agreements and
instruments in connection therewith, including but not limited to reasonable
attorneys' fees, such reimbursement not to exceed $125,000, and (ii) satisfy and
repay in full its obligations under the Tycho Bridge Note.
7.5 Access to Information. From the date of this Agreement until the
Effective Time, Tycho shall, and shall cause each of Tycho's subsidiaries and
each of Tycho's and Tycho's subsidiaries' officers, employees and agents to,
afford to DSL and to the officers, employees and agents of DSL complete access
at all reasonable times to such officers, employees, agents, properties, books,
records and contracts, and shall furnish DSL such financial, operating and other
data and information as DSL may reasonably request.
7.6 Public Announcements. Any public announcement with respect to this
Agreement, the proposed Merger or the consummation of the Merger shall be made
only with the prior approval of DSL.
7.7 Employee Benefit Arrangements.
(a) DSL shall cause the Surviving Corporation to offer employment to
each of Tycho's employees listed in the Disclosure Letter other than Xxxxx X.
Xxxxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxx Xxxxxxxx, at a salary equal to or in
excess of such employee's salary as set forth in the Disclosure Letter. Each
employee who accepts employment with the Surviving Corporation shall be eligible
to participate in DSL's standard employee programs and plans, including but not
limited to any employee benefit and welfare plans, insurance and pension plans,
stock option plans and stock purchase plans currently maintained or provided by
DSL, to the extent permitted by such plans.
(b) DSL agrees to pay to all non-Executive employees listed in the
Disclosure Letter who accept employment with the Surviving Corporation and
continue in the employ of the Surviving Corporation through the expiration of
the Transition Period, a retention bonus in the amount of twenty-five percent
(25%) of the greater of (i) such employee's annual salary as of November 1, 1999
or (ii) such employee's annual salary upon the expiration of the Transition
Period (the "Retention Bonus"). Any such
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employee who is (A) terminated without "cause" or (B) "constructively"
terminated prior to the expiration of the Transition Period, in each case as
defined in the Retention Bonus Agreements described in Section 7.7(c) below,
shall be entitled to payment of the Retention Bonus.
(c) Upon the Closing Date, DSL shall execute and deliver to each
non-Executive employee listed in the Disclosure Letter who accepts employment
with the Surviving Corporation a written agreement, in substantially the form
attached hereto as Exhibit B, conveying to each such employee the rights set
forth above in this Section 7.7 (the "Retention Bonus Agreements").
7.8 Notification. Each of Tycho and DSL shall, after obtaining
knowledge of the occurrence, non-occurrence or threatened occurrence or
non-occurrence of any fact or event that would cause or constitute a material
breach or failure of any of the representations and warranties, covenants or
conditions set forth in this Agreement, or in the case of Tycho that would
reasonably be expected to constitute or result in a Material Adverse Effect to
such party, notify the other parties in writing of such fact or event with
reasonable promptness.
7.9 TyFone Divestiture. Prior to the Closing Date, Tycho shall organize
a new corporation by the name of TeleStruct Corporation under the laws of the
State of Delaware ("NewCo") and transfer to NewCo the TyFone Business Plan and
those assets set forth on Exhibit C hereto (the "TyFone Divestiture"). The
initial directors of NewCo shall be Xxxxx Xxxxxxxxx, Xxxxxx Xxxxxxxx and Xxxxxxx
X. Xxxxxxx. The initial President shall be Xxxxx Xxxxxxxxx, the initial
Treasurer shall be Xxxxxx Xxxxxxxx and the initial Secretary shall be Xxxxxxx X.
Xxxxxxx. The consideration payable by NewCo to Tycho for the assets acquired in
the TyFone Divestiture shall consist of one dollar ($1.00) and certain rights to
acquire preferred stock of NewCo in the Qualified NewCo Financing, including
without limitation the aggregate Call Consideration, the NewCo Severance Note
and the NewCo Bridge Loan Note. During the Transition Period, DSL shall provide
to Messrs. Xxxxxxxxx and Diamond reasonably sufficient office space and internet
access at the premises of the Surviving Corporation located at 000 Xxxxxxx
Xxxxxx, Xxxxx Xxxx, Xxxxxxxxxx to enable NewCo to implement the TyFone Business
Plan. Messrs. Xxxxxxxxx and Diamond shall be required to abide by DSL's employee
codes of conduct, internet use policies and other policies generally applicable
to employees of DSL and other persons using DSL facilities during the period
that such individuals are located at such premises.
7.10 Consulting Agreements. At the Closing, each of Xxxxx X. Xxxxxxxxx
and Xxxxxxx X. Xxxxxxx shall enter into consulting agreements with the Surviving
Corporation in substantially the form attached hereto as Exhibit D (the
"Consulting Agreements").
7.11 [Intentionally omitted].
7.12 Severance Obligations. The parties acknowledge that Tycho possess
certain contingent liabilities under its current employment agreements (the
"Executive
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Employment Agreements") with those executive employees listed in the Disclosure
Letter (the "Executives") relating to the severance payment and other provisions
of such Executive Employment Agreements (collectively, the "Severance
Obligations"), which DSL will require to be discharged and satisfied effective
as of the Closing. The parties agree that the Severance Obligations will be
discharged and satisfied as set forth below, in consideration for the payment to
the Executives of an aggregate of $809,500, as set forth in the Disclosure
Letter (the amount payable to each Executive, an "Employment Agreement
Cancellation Payment" and, collectively, the "Employment Agreement Cancellation
Payments") in the following manner:
(a) Prior to the Closing Date, Tycho and each of the Executives shall
enter into an Employment Agreement Cancellation Agreement (collectively, the
"Employment Agreement Cancellation Agreements"). The Employment Agreement
Cancellation Agreements shall provide for the payment to the Executives, subject
to applicable withholding requirements, (i) at the Closing, of an amount equal
to the difference between (A) the amount set forth in the Disclosure Letter,
minus (B) the product of (1) the Executive's Allocated Share, as defined in the
Disclosure Letter, times (2) the Executives' Hold Back, (ii) upon expiration of
the Hold Back Period, the full amount of the Executive's allocable Share of the
Executives' Hold Back that is not subject to claims made under Section 3.2
and/or Section 9.2 hereof, and (iii) upon the expiration of the Transition
Period, as defined in Section 11.6, the remaining amount of the Employment
Agreement Cancellation Payment, as set forth in the Disclosure Letter, minus any
portion of the Executives' Offset Amount that is subject to claims made under
Section 3.2 and/or Section 9.2 hereof. It is understood and agreed that the
amount of the Employment Agreement Cancellation Payments to be paid at the
Closing and the amount of the Executives' Hold Back, plus applicable FICA
contributions relating to such amounts, will be included in the Closing Date
Liabilities set forth in the Disclosure Letter.
(b) The Employment Agreement Cancellation Agreements shall also provide
for the agreement by the Executives to the application of the Executives' Hold
Back and the Executives' Offset Amount to satisfy (i) the indemnification
obligations of the Executives as set forth in Section 9.2, and (ii) obligations
of the Executives to contribute to the reduction of the Merger Consideration, as
set forth in Section 3.2(d) hereto.
(c) Effective upon the Closing, DSL shall assume the obligation to pay
to the Executives the remaining amount of the Employment Agreement Cancellation
Payments, as set forth in the Disclosure Letter, upon the expiration of the
Transition Period, plus applicable FICA contributions relating to such amount,
but subject to the right of offset as set forth in Section 9.2(d), in
consideration for the issuance to DSL by NewCo of a secured, convertible
promissory note of NewCo in the principal amount of $451,000, in substantially
the form attached hereto as Exhibit B-2 (the "NewCo Severance Note"), which note
shall be converted into preferred stock of NewCo in connection with the
Qualified NewCo Financing, as more fully described in the NewCo Severance Note,
provided such Qualified NewCo Financing shall occur on or before December 31,
2000. In the event that a Qualified NewCo Financing shall occur after December
31, 2000 but on or before March 31, 2001, DSL shall have the option to convert
the NewCo Severance Note into preferred stock of NewCo in connection with the
Qualified NewCo Financing.
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If the NewCo Severance Note is not so converted, it shall be due and payable on
March 31, 2001.
(d) The Employment Agreement Cancellation Agreements shall provide
that, in consideration for the Employment Agreement Cancellation Payments
described above, effective as of the Closing each term and provision of the
Executive Employment Agreements shall be cancelled, discharged and of no further
force or effect.
(e) Each Executive shall be responsible to bear fifty percent (50%) of
any FICA contributions owed by Tycho or assumed by DSL as a result of the
Employment Agreement Cancellation Payment to such Executive provided for in
Section 7.12(c) and DSL shall be entitled to offset an amount equal to fifty
percent (50%) of such contributions from such Employment Agreement Cancellation
Payments, in each case net of any FICA contribution Tycho or DSL would otherwise
be obligated to make on behalf of such Executive during the taxable year in
which such contribution is paid.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver, where permissible, at or prior to the Closing
Date, of each of the following conditions:
(a) Stockholder Approval. This Agreement and the Transactions,
including the Merger, shall have been approved and adopted by the affirmative
vote of the stockholders of Tycho to the extent required by the Delaware
Corporation Law and the Certificate of Incorporation.
(b) Regulatory Approvals. All necessary approvals, authorizations and
consents of any governmental or regulatory entity required to consummate the
Merger shall have been obtained and remain in full force and effect, and all
waiting periods relating to such approvals, authorizations and consents shall
have expired or been terminated.
(c) No Injunctions, Orders or Restraints; Illegality. No preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission (an "Injunction") nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Authority shall be in effect
which would (i) make the consummation of the Merger illegal, or (ii) otherwise
restrict, prevent or prohibit the consummation of any of the Transactions,
including the Merger.
8.2 Conditions to Obligations of DSL and MergerCo. The obligations of
DSL and MergerCo to effect the Merger are further subject to the following
conditions:
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(a) Representations and Warranties. The representations and warranties
of Tycho set forth in this Agreement shall be true and correct in all material
respects (except to the extent such representations and warranties expressly
relate to a specific date) as of the Closing Date as though made on and as of
the Closing Date, and DSL shall have received a certificate to such effect
signed on behalf of Tycho by its chief executive officer.
(b) Performance and Obligations of Tycho. Tycho shall have performed
all obligations required to be performed by it under this Agreement, including,
without limitation, the covenants contained in Articles 6 and 7 of this
Agreement and shall have paid the fees and expenses described in Section 7.3
(other than the legal fees and expenses of Pillsbury, Madison & Sutro LLP to the
extent set forth in the Disclosure Letter which shall be paid by DSL on Tycho's
behalf by wire transfer on the Closing Date).
(c) Consents, Etc. Any consent, authorization, order or approval of (or
filing or registration with) any governmental commission, board, other
regulatory body or other third party required to be made or obtained by Tycho or
its stockholders or any of Tycho's subsidiaries or Affiliates in connection with
the execution, delivery and performance of the Agreement shall have been
obtained or made, except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration, would not
reasonably be expected to have a material adverse effect on Tycho or its
business as presently conducted.
(d) No Injunction. There shall not have been entered any order in any
action or proceeding by any state or Federal government or by any Governmental
Authority which prohibits or limits the ownership or operation by Tycho (or any
of Tycho's subsidiaries) of any portion of Tycho or Tycho's subsidiaries'
business, properties or assets which is material to Tycho and Tycho's
subsidiaries as a whole, or compels Tycho (or any subsidiary of Tycho) to
dispose of or hold separate any portion of Tycho or Tycho's subsidiaries'
business, properties or assets which is material to Tycho and Tycho's
subsidiaries as a whole.
(e) Material Adverse Change. There shall not have occurred any Material
Adverse Change concerning Tycho and Tycho's subsidiaries taken as a whole.
(f) Resignations. Each of the directors and officers of Tycho shall
have delivered his or her resignation from such positions to DSL as of the
Closing Date.
(g) TyFone Divestiture. Tycho shall have completed the TyFone
Divestiture in substantially the manner set forth in Section 7.9 herein.
(h) Options, Etc. The Options, Warrants and Equity Rights shall have
been surrendered to, and canceled by, Tycho. The Stock Option Plan shall have
been terminated.
(i) Opinion of Counsel. Tycho shall have delivered an opinion of its
counsel in substantially the form attached hereto as Exhibit E.
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(j) Consulting and Employment Agreement Cancellation Agreements. Tycho
shall have (i) delivered to DSL the Consulting Agreements and (ii) cancelled the
Employment Agreements. The Severance Obligations shall have been amended in
accordance with Section 7.12 herein.
(k) Termination of Investor Rights Agreement. The Investor Rights
Agreement dated June 17, 1998, as amended, between Tycho and certain of its
stockholders shall have been terminated.
(l) Supermajority Stockholder Vote. Holders of not less than 90% of the
outstanding shares of each of the Tycho Common Stock and the Tycho Preferred
Stock shall have approved the Merger and the consummation of the transactions
contemplated by this Agreement.
8.3 Conditions to Obligations of Tycho. The obligation of Tycho to
effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of DSL and MergerCo set forth in this Agreement shall be true and correct in all
material respects (except to the extent such representations and warranties
expressly relate to a specific date) as of the Closing Date as though made on
and as of the Closing Date, and Tycho shall have received a certificate to such
effect signed on behalf of DSL by its Chief Financial Officer and on behalf of
MergerCo by its chief executive officer.
(b) Performance of Obligations of DSL and MergerCo. Each of DSL and
MergerCo shall have performed all obligations required to be performed by it
under this Agreement, including, without limitation, the covenants contained in
Article 7 of this Agreement.
(c) Opinion of Counsel. DSL shall have delivered an opinion of its
counsel in substantially the form attached hereto as Exhibit F.
(d) Consulting, Employment and Severance Agreements. DSL shall have (i)
executed and delivered to Messrs. Xxxxxxxxx and Diamond the Consulting
Agreements, (ii) executed and delivered to each of the non-Executive employees
listed in the Disclosure Letter who accept employment with the Surviving
Corporation the Retention Bonus Agreements and (iii) assumed or guaranteed the
obligations of Tycho under the Employment Agreement Cancellation Agreements in
accordance with Section 7.12 herein.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations and Warranties. The representations and
warranties set forth in Sections 5.12 and 5.17 herein shall survive the Merger
until the expiration of the applicable statutes of limitation. All other
representations and
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warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger for a period of ninety (90) days following
the Effective Time.
9.2 Indemnification.
(a) Agreement to Indemnify. By their approval of this Agreement, the
Cashed Stockholders, jointly but not severally, and by their execution of the
Employment Agreement Cancellation Agreements, the Executives, jointly but not
severally (in each case subject to the limitations set forth below), agree to
indemnify and hold DSL and its Affiliates harmless against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation (hereinafter individually a "Loss"
and collectively "Losses"), incurred by DSL or its Affiliates as a result of any
inaccuracy or breach of a representation or warranty contained in Article V
herein, or any failure by Tycho to perform or comply with any covenant contained
herein required to be performed by it on or before the Closing.
(b) Expiration of Indemnification. The indemnification obligations of
the Cashed Stockholders and the Executives under paragraph (a) above shall
terminate ninety (90) days following the Effective Time, but shall not terminate
as to any Loss (or a potential claim by an appropriate party) (i) asserted in
good faith in writing prior to such date, or (ii) as a result of any inaccuracy
or breach of any of the representations and warranties contained (A) in Section
5.12 herein with respect to which such indemnification obligations shall
terminate upon the expiration of the applicable statute of limitations, or (B)
Section 5.17 herein with respect to which such indemnification obligations shall
terminate upon the seventh anniversary of the Closing Date.
(c) Hold Back. As security for the indemnity provided for in paragraph
(a) above, DSL shall transfer to and hold in a segregated trust account $200,000
of the Employment Agreement Cancellation Payments described in Section 7.12(a)
(the "Executives' Hold Back"), for a period of ninety (90) days following the
Effective Time (the "Hold Back Period"), plus such additional period of time
that any claim validly delivered to Agent prior to the end of the Hold Back
Period by DSL for indemnity pursuant to this Section 9.2 shall remain
unresolved. Upon compliance with and subject to the limitations under the terms
hereof, DSL shall be entitled to obtain indemnity from the Executives' Hold Back
for all Losses incurred by DSL or its Affiliates as a result of any inaccuracy,
breach or failure set forth in paragraph (a) above.
(d) Offset. As further security for the indemnity provided for in
paragraph (a) above, DSL shall be entitled to offset an aggregate amount of
$50,000 from the Employment Agreement Cancellation Payments payable by DSL to
the Executives as set forth in Section 7.12(c) (the "Executives' Offset
Amount"). Such right of offset shall continue during the Hold Back Period, plus
such additional period of time that any claim validly delivered to the Agent
prior to the end of the Hold Back Period by DSL for indemnity pursuant to this
Section 9.2 shall remain unresolved. Upon compliance with and subject to the
limitations under the terms hereof, DSL shall be entitled to obtain indemnity by
resort to the Executives' Offset Amount for all Losses incurred by DSL or
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its affiliates as a result of any inaccuracy, breach or failure set forth in
paragraph (a) above.
(e) Claims Upon Executives' Hold Back or Executives' Offset Amount. In
the event that DSL wishes to obtain indemnity from the Executives' Hold Back or
the Executives' Offset Amount, DSL shall deliver to the Agent designated
pursuant to Section 9.2(h) hereof, on or before the last day of the Hold Back
Period, a certificate signed by an officer of DSL (an "Officer's Certificate")
specifying in reasonable detail the individual items of Loss included in the
request for indemnity and the nature of the misrepresentation, breach of
warranty or claim to which such item is related.
(f) Resolution of Conflicts; Arbitration. At the time of delivery of
any Officer's Certificate to the Agent, and for a period of ten (10) days after
such delivery, the Agent may object to the claim made in the Officer's
Certificate in a written statement delivered to DSL. If the Agent shall so
object to the claim, the Agent and DSL shall attempt in good faith to agree upon
the rights of the respective parties with respect to such claim. If no such
agreement can be reached after good faith negotiation, either DSL or the Agent
may demand arbitration of the matter, and in such event the matter shall be
settled by arbitration conducted by three arbitrators. DSL and the Agent shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of a majority of the arbitrators so selected as
to the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and DSL shall be
required to act in accordance with such decision and make or withhold payments
out of the Executives' Hold Back or the Executives' Offset Amount in accordance
therewith. Judgment upon any award rendered by the arbitrators may be entered in
any court having jurisdiction. Any such arbitration shall be held in New Haven,
Connecticut under the rules then in effect of the American Arbitration
Association. In any arbitration hereunder in which any claims or the amount
thereof stated in the Officer's Certificate is at issue, DSL shall be deemed to
be the non-prevailing party in the event that the arbitrators award DSL one-half
(1/2) or less of the disputed amount; otherwise, the Executives shall be deemed
to be the non-prevailing party. The non-prevailing party to an arbitration shall
pay its own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including without
limitation, attorneys' fees and costs, incurred by the other party to the
arbitration.
(g) Distribution of Executives' Hold Back Upon Termination of Hold Back
Period. Promptly following termination of the Hold Back Period, DSL shall
deliver to the Executives their respective amounts of the Executives' Hold Back,
minus any amounts retained by DSL pursuant to Section 3.2 hereof and any amount
subject to an unresolved claim pursuant to Section 9.2(e) above.
(h) Agent of the Executives; Power of Attorney. In the event that the
Merger is approved by the vote of Tycho's stockholders, effective upon such
vote, and without further act of any Executive, Xxxxxxx Xxxxxxx (the "Agent")
shall be constituted and appointed as agent and attorney-in-fact for the
Executives, for and on behalf of the Executives, to give and receive notices and
communications, to authorize any indemnity
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of DSL from the Executives' Hold Back or the Executives' Offset Amount in
satisfaction of claims by DSL, to object to such indemnity, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Agent for the accomplishment of the foregoing. Such agency may be changed by the
Executives from time to time upon not less than ten (10) days prior written
notice to DSL; provided that the Agent may not be removed unless a majority of
the Executives agree to such removal and to the identity of the substituted
Agent. No bond shall be required of the Agent, and the Agent shall receive no
compensation for his or her services. Notices or communications to or from the
Agent shall constitute notice to or from each of the Executives.
(i) Indemnification of the Agent. The Agent shall not be liable for any
act done or omitted hereunder as Agent while acting in good faith and in the
exercise of reasonable judgment. The Executives shall jointly and severally
indemnify the Agent and hold the Agent harmless against any loss, liability or
expense incurred without negligence or bad faith on the part of the Agent and
arising out of or in connection with the acceptance or administration of the
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Agent. A decision, act, consent or instruction of
the Agent shall constitute a decision of all the Executives, and shall be final,
binding and conclusive upon each of the Executives, and DSL may rely upon any
decision, act, consent or instruction of the Agent as being the decision, act,
consent or instruction of each and all of the Executives. DSL is hereby relieved
from any liability to any person for any acts done by it in accordance with such
decision, act, consent or instruction of the Agent.
(j) Third Party Claims. In the event DSL becomes aware of a third-party
claim which DSL believes may result in a demand against the Executives' Hold
Back or the Executives' Offset Amount, DSL shall notify the Agent of such claim,
and the Agent and the Executives shall be entitled, at their expense, to
participate in any defense of such claim. DSL shall have the right in its sole
discretion to settle any such claim; provided, however, that except with the
consent of the Agent, which consent shall not be unreasonably withheld, no
settlement of any such claim with third-party claimants shall alone be
determinative of the amount of liability of the Executives. In the event that
the Agent has consented to any such settlement and acknowledged that the claim
is a valid claim against the Executives' Hold Back or the Executives' Offset
Amount, the Agent shall have no power or authority to object to the amount of
any claim by DSL against the Executives' Hold Back or the Executives' Offset
Amount for indemnity with respect to such settlement.
(k) Apportionment of Liability; Maximum Liability. The liability of the
Cashed Stockholders for any indemnification to which DSL may be entitled shall
be apportioned among the Cashed Stockholders in proportion to the amount of
Merger Consideration paid to each of them at the Closing. The liability of the
Executives for any indemnification to which DSL may be entitled shall be
apportioned among the Executives in accordance with the Executive's Allocated
Share. Except as provided in paragraph (l) below, the total liability of the
Executives shall not exceed the Executives'
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Hold Back plus the Executives' Offset Amount. Other than as set forth in
paragraph (l) below, DSL agrees that it will look solely to the Executives' Hold
Back and the Executives' Offset Amount for the satisfaction of its claims under
the indemnity provided herein and agrees that no Cashed Stockholder shall be
personally liable with respect to such claims, and that no Executive shall be
personally liable with respect to such claims beyond the interest of such
Executive in the Executives' Hold Back and the Executives' Offset Amount.
Notwithstanding anything to the contrary in this Article IX, to the extent that
DSL acquires any amounts of the Executives' Hold Back and the Executives' Offset
Amount pursuant to the exercise of its rights under this section 9.2, the
Executives shall not have any rights of contribution from or against the Cashed
Stockholders, or any of them.
(l) Remedies. Except as otherwise provided in this paragraph (l),
resort to the Executives' Hold Back and the Executives' Offset Amount shall be
the sole and exclusive remedy of DSL for any breaches by Tycho of its
representations, warranties and covenants set forth in this Agreement. The
existence of this Section 9.2 and of the rights and restrictions set forth
herein do not apply to, nor limit any other potential remedies of DSL with
respect to, (i) breaches of any representation or warranty set forth in Sections
5.12 or 5.17, or (ii) any fraudulent misrepresentations or fraudulent breaches
of any of the representations and warranties made in Article V hereof. In the
event DSL or its Affiliates incur any Losses by reason of breaches of any
representation or warranty set forth in Sections 5.12 or 5.17 or any fraudulent
misrepresentations or fraudulent breaches of any of the representations or
warranties made in Article V hereof, DSL agrees that (A) DSL will first resort
to the Executives' Hold Back and the Executives' Offset Amount, until such
amounts are exhausted, prior to seeking further indemnification from the Cashed
Stockholders or the Executives, and (B) subject to the foregoing (i.e., without
prejudice to DSL's rights to resort to the full Executives' Hold Back and the
Executives' Offset Amount), DSL shall apportion all such Losses on a pro rata
basis between, on the one hand, the Executives as a group and, on the other
hand, the Cashed Stockholders as a group. For purposes of clause (B) above, the
pro rata portion of the Executives shall mean the ratio consisting of the
aggregate Employment Agreement Cancellation Payments payable to the Executives,
divided by the sum of the aggregate Employment Agreement Cancellation Payments
and aggregate Cash Consideration (which pro rata portion shall be reduced by all
amounts of Executives' Hold Back and Executives' Offset Amount actually received
by DSL pursuant to the exercise of its indemnity rights), and the pro rata
portion of the Cashed Stockholders shall mean the ratio consisting of the
aggregate Cash Consideration payable to the Cashed Stockholders, divided by the
sum of the aggregate Employment Agreement Cancellation Payments and aggregate
Cash Consideration. Notwithstanding anything to the contrary set forth herein,
it is understood and agreed that the maximum liability of any Cashed Stockholder
or Executive for any Losses incurred by DSL or its Affiliates by reason of
breaches of any representation or warranty set forth in Section 5.12 or 5.17, or
fraudulent misrepresentations or fraudulent breaches of any of the
representations and warranties made in Article V shall be limited to (1) in the
case of a Cashed Stockholder, such Cashed Stockholder's proportional amount of
the Cash Consideration, and (2) in the case of an Executive, the Employment
Agreement Cancellation Payment received or scheduled to be received by such
Executive, except in either case to the extent any such
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Loss is directly attributable to a fraudulent misrepresentation or fraudulent
breach of representation and warranty by such Cashed Stockholder or Executive,
in which case the liability of the Executive committing the fraud (and no other
Executives) shall not be so limited.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after stockholder approval of this
Agreement:
(a) by the mutual written consent of DSL, MergerCo and Tycho;
(b) by either of Tycho or DSL and MergerCo:
(i) if the stockholders of Tycho shall have failed to give any required
approval by the Closing Date; or
(ii) if any Governmental Authority shall have issued an Injunction or
taken any other action (which Injunction or other action the parties to
this Agreement shall use their best efforts to lift), which permanently
restraints, enjoins or otherwise prohibits the Merger, and such
Injunction or other action shall have become final and non-appealable;
or
(iii) if, without any material breach by the terminating party of its
obligations under this Agreement, the Merger shall not have occurred on
or before December 7, 1999; provided, however, that no party shall
terminate this Agreement prior to December 30, 1999 if the Merger has
not occurred by reason of the pendency of a non-final Injunction, and
DSL, MergerCo and Tycho shall use their best efforts to have any such
Injunction stayed or reversed;
(c) by Tycho:
(i) if DSL or MergerCo shall have breached in any material respect any
of their respective representations, warranties, covenants or other
agreements contained in this Agreement, which breach cannot be or has
not been cured within fifteen (15) calendar days after the giving of
written notice to DSL or MergerCo except, in any case, for such
breaches which would not adversely affect the rights of Tycho or its
stockholders (or any of them) hereunder and are not reasonably likely
to affect adversely DSL's or MergerCo's ability to consummate the
Merger; or
(ii) if, within ten (10) business days after receipt by DSL of notice
from Tycho that all of the conditions set forth in Article III have
been satisfied or waived, the Merger shall not have been consummated;
and
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(d) by DSL and MergerCo if Tycho shall have breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach cannot be or has not been cured within
fifteen (15) calendar days after the giving of written notice to Tycho and the
Agent.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1, this Agreement shall forthwith become null
and void, and have no effect, without any liability on the part of any party to
this Agreement or such party's Affiliates, trustees, directors, officers or
stockholders, and all rights and obligations of any party to this Agreement
shall cease except for the agreements contained in Section 7.3 and Articles 10
and 11; provided, however, that nothing contained in this Section 10.2 shall
relieve any party from liability for any fraud or willful breach of this
Agreement.
10.3 Amendment. This Agreement may be amended by DSL, MergerCo and
Tycho and the Agent by an instrument in writing signed by DSL, MergerCo and
Tycho at any time before or after any approval of this Agreement by the
stockholders of Tycho and MergerCo, but in any event following authorization by
MergerCo's Board of Directors and Tycho's Board of Directors; provided, however,
that after any such stockholder approval, no amendment shall be made which by
law requires further approval by stockholders without obtaining such approval.
10.4 Extension; Waiver. At any time prior to the Closing, the parties
to this Agreement may, to the extent legally allowed, (a) mutually agree to
extend the time for the performance of any of the obligations or other acts of
the other parties to this Agreement, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any documents
delivered pursuant to this Agreement and (c) waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to this Agreement to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been received upon the
earlier of actual receipt thereof or, with respect to delivery by facsimile, the
date sent by confirmed facsimile, with respect to delivery by overnight courier
or Express mail, the day following delivery to such overnight courier or the
U.S. Postal Service and, with respect to delivery by registered or certified
mail, the third day following such delivery to the U.S. Postal Service, postage
prepaid, and addressed as follows:
(a) If to Tycho:
Tycho Networks, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
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Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
President and CEO
With a copy to:
Pillsbury Madison & Sutro LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: L. Xxxxxxx Xxxxxxxx, Esq.
(b) If to DSL, MergerCo or the Surviving Corporation:
XXX.xxx, Inc.
000 Xxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxx
Manager, Strategic Planning
and
Xxxxxxx Xxxxxxxx, Esq.
Vice President and General Counsel
With a copy to:
Day, Xxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(c) If to the Agent or any Executive:
Xxxxxxx Xxxxxxx
000 Xxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Tel. No. (000) 000-0000
11.2 Entire Agreement; No Third-Party Beneficiaries; Section Headings.
This Agreement and the other agreements, documents and instruments executed and
delivered pursuant hereto constitute the entire agreement between the parties,
and there are no agreements or commitments with respect to the transactions
contemplated herein except as set forth in this Agreement; this Agreement
supersedes any prior offer, agreement or understanding between the parties with
respect to the Transactions contemplated herein. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto any rights or remedies
under or by reason of this Agreement. The captions in this Agreement
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are for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
11.3 Confidentiality. Except as may be required by law, Tycho shall
not, and shall not permit its officers, directors, stockholders and agents to,
directly or indirectly, disclose, discuss, announce or otherwise divulge to any
third party, the existence or terms of the negotiations between the parties,
this Agreement or the Transactions contemplated herein, without, in each case,
the prior written consent of DSL; provided, however, that the Transactions
contemplated by this Agreement may be disclosed by Tycho to a third party whose
consent or notification is required by the terms of any contracts between Tycho
and such third party, subject to appropriate nondisclosure obligations.
11.4 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the heirs, successors and permitted assigns of the parties hereto.
This Agreement may not be assigned by any party without the other parties' prior
written consent.
11.5 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (excluding application of
any choice of law doctrines that would make applicable the law of any other
state) and, where appropriate, applicable federal law.
11.6 Definitions. In addition to those terms defined elsewhere in this
Agreement, as used in this Agreement, and unless the context requires a
different meaning, the following terms have the meaning indicated below:
"Affiliate" - as to any party, any Person (i) directly or indirectly
controlling, controlled by, or under common control with, such party, (ii)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in such party or (iii) five percent (5%) or more of whose voting stock
or other equity interest is directly or indirectly owned or held by such party.
For purposes of this definition, "control" (including with correlative meanings,
the terms "controlling," "controlled by," and under "common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Closing Date Liabilities" shall mean the total liabilities of Tycho as
of the Closing Date as determined in accordance with GAAP, applied on a basis
consistent with the most recent regularly prepared financial statements of Tycho
(except that the footnotes required by GAAP need not be provided), plus total
off-balance sheet liabilities of Tycho as of the Closing Date (including without
limitation all remaining payments under equipment leases to which Tycho is a
party and the amount of any purchase option payment at the conclusion of such
leases), except as expressly set forth in that section of the Disclosure Letter
entitled "Closing Date Liabilities".
"Executive's Allocated Share" shall mean the percentage set forth
opposite such Executive's name in the Disclosure Letter.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended.
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"GAAP" - generally accepted accounting principles in effect from time
to time within the United States.
"Governmental Authority" - the government of any nation, state, city,
locality or other political subdivision of any of the foregoing, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual would be expected to discover or otherwise
become aware of such fact or other matter in the course of performing with
reasonable diligence his or her duties as an officer or director, as the case
may be, of Tycho.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who currently is serving
as a director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
"Lien" - any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding Tycho Preferred Stock and equity related
preferences) including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, or any financing lease having
substantially the same economic effect as any of the foregoing.
"Material Adverse Change" or "Material Adverse Effect" - any change or
changes, or effect or effects, that individually or in the aggregate is or is
likely to have a material adverse effect upon the business, operations, assets
or financial condition of Tycho or any of its subsidiaries on an individual
basis or taken as a whole.
"Person" - any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Qualified NewCo Financing" - shall mean the first round of preferred
stock equity financing of NewCo pursuant to which at least $3,000,000 is raised
by NewCo from one or more third-party investors, exclusive of DSL or any of the
management or stockholders of Tycho as of the date of this Agreement.
"Transition Period" - the period of time between the Closing Date and
the six (6) month anniversary of the Closing Date.
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[Signature Page Follows]
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its duly authorized representative as of the date and year first written
above.
TYCHO NETWORKS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
XXX.XXX, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
LONG WHARF MERGECO, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
Solely as a party to Section 9.2:
_______________________________________
Xxxxxxx Xxxxxxx, as Agent
Solely as a party to Sections 2.1(c)(2), 7.4(b) and 7.12(c):
TELESTRUCT CORPORATION
By:____________________________________
Name:
Title:
Schedules and Exhibits Omitted in Accordance
With item 601(b)(2) of Regulation S-K
------------------------------------------------
XXx.xxx, Inc. will furnish supplementally a copy of any omitted exhibit or
schedule to the Securities and Exchange Commission upon request; provided,
however, that DSL,net, Inc. may request confidential treatment pursuant to Rule
24b-2 of the Exchange Act for any schedule or exhibit so furnished.
=============================== ==========================================
Exhibit A-1 Form of NewCo Bridge Note
------------------------------- ------------------------------------------
Exhibit A-2 Form of NewCo Severance Note
------------------------------- ------------------------------------------
Exhibit B Form of Retention Bonus Agreement
------------------------------- ------------------------------------------
Exhibit C TyFone Assets
------------------------------- ------------------------------------------
Exhibit D Form of Consulting Agreements
------------------------------- ------------------------------------------
Exhibit E Form of Seller's Counsel Opinion
------------------------------- ------------------------------------------
Exhibit F Form of Buyer's Counsel Opinion
------------------------------- ------------------------------------------
=============================== ==========================================
