1
EXHIBIT 4.01
NOTE AND SECURITY AGREEMENT DATED AS OF MAY 7, 1999
by and between
Tekelec, IEX Corporation and the Significant Stockholders of IEX Corporation
2
TEKELEC,
IEX CORPORATION,
AND
SIGNIFICANT STOCKHOLDERS OF COMPANY
NOTE and Security Agreement
Dated as of May 7, 1999
================================================================================
3
TABLE OF CONTENTS
ARTICLE ONE..............................................................................................................2
SECTION 1.1. Definitions.....................................................................................2
ARTICLE TWO..............................................................................................................9
SECTION 2.1. Delivery of the Notes at the Closing............................................................9
SECTION 2.2 Escrow Notes....................................................................................11
SECTION 2.3 Payments........................................................................................11
ARTICLE THREE...........................................................................................................12
SECTION 3.1. Interest Rate; When Payable....................................................................12
SECTION 3.2. Default Rate...................................................................................12
SECTION 3.3. Waiver of Usury Laws...........................................................................13
ARTICLE FOUR............................................................................................................13
SECTION 4.1. Investment Representations.....................................................................13
SECTION 4.2. Source of Consideration........................................................................14
ARTICLE FIVE............................................................................................................14
SECTION 5.1. Limits on Resales of Notes.....................................................................14
SECTION 5.2. Subordination of Notes and Claims..............................................................16
ARTICLE SIX.............................................................................................................17
SECTION 6.1. Prohibition on Dividends and Distributions of Company..........................................17
SECTION 6.2. Prohibition of Equity Issuances of the Company.................................................17
4
SECTION 6.3. Prohibition of Liens on Company Assets.........................................................18
SECTION 6.4. Restriction on Certain Transactions; Asset Sales by the Company................................18
SECTION 6.5. Limitation on Other Company Indebtedness.......................................................19
SECTION 6.6 Affiliate Transactions with Company.............................................................20
SECTION 6.7. SEC Filings....................................................................................21
SECTION 6.8 Identification of Senior Indebtedness and Designated Senior Indebtedness........................21
ARTICLE SEVEN...........................................................................................................21
SECTION 7.1. Agreement of Subordination.....................................................................21
SECTION 7.2. Payments to Significant Stockholders...........................................................22
SECTION 7.3. Subrogation of Notes...........................................................................25
SECTION 7.4. Authorization to Effect Subordination..........................................................27
SECTION 7.5. No Impairment of Subordination.................................................................27
SECTION 7.6. Senior Indebtedness of Parent Entitled to Rely.................................................28
ARTICLE EIGHT...........................................................................................................28
SECTION 8.1. Failure to Make Payments When Due..............................................................28
SECTION 8.2 Default in Other Agreements.....................................................................28
SECTION 8.3. Other Defaults Under Agreements...............................................................29
SECTION 8.4. Involuntary Bankruptcy: Appointment of Receiver, etc...........................................29
2
5
SECTION 8.5. Voluntary Bankruptcy; Appointment of Receiver, etc.............................................30
SECTION 8.6. Dissolution....................................................................................30
SECTION 8.7. Judgments and Attachments......................................................................30
ARTICLE NINE............................................................................................................31
SECTION 9.1. Appointment....................................................................................31
SECTION 9.2. Powers: General Immunity.......................................................................32
SECTION 9.3 Right to Indemnity..............................................................................34
SECTION 9.4. Payee of Note Treated as Owner.................................................................34
SECTION 9.5. Successor Agent................................................................................34
ARTICLE TEN.............................................................................................................35
SECTION 10.1 Security........................................................................................35
SECTION 10.2. Rights and Remedies Upon Event of Default......................................................38
SECTION 10.3. Termination....................................................................................39
ARTICLE ELEVEN..........................................................................................................40
SECTION 11.1. Ratable Sharing................................................................................40
SECTION 11.2. Set Off........................................................................................41
SECTION 11.3. Governing Law..................................................................................41
SECTION 11.4. Assignment; Successors and Assigns.............................................................41
SECTION 11.5. Severability...................................................................................41
3
6
SECTION 11.6. Counterparts...................................................................................42
SECTION 11.7. Other Remedies.................................................................................42
SECTION 11.8. Amendment and Waivers..........................................................................42
SECTION 11.9. Expenses.......................................................................................43
SECTION 11.10. Attorneys' Fees...............................................................................43
SECTION 11.11. Notices.......................................................................................43
SECTION 11.12. Construction of Agreement.....................................................................45
SECTION 11.13. Further Assurances............................................................................45
SECTION 11.14. Other Waivers.................................................................................45
SECTION 11.15. Entire Agreement..............................................................................45
SECTION 11.16. Submission to Jurisdiction; Waiver of Jury Trial..............................................46
4
7
NOTE AND SECURITY AGREEMENT
THIS NOTE AND SECURITY AGREEMENT ("Agreement") is entered into as of
May 7, 1999 among Tekelec, a California corporation ("Parent"), IEX Corporation,
a Nevada corporation and upon the effectiveness of the Merger (as defined below)
a wholly-owned subsidiary of Parent (the "Company"), and the parties listed on
the signature pages hereof (each individually referred to herein as a
"Significant Stockholder" and collectively as "Significant Stockholders").
RECITALS
A. Parent, Eagle ▇▇▇▇▇▇▇▇ Corporation, a Delaware corporation
("Newco"), the Company and certain of the Significant Stockholders have entered
into an Agreement and Plan of Reorganization dated as of April 20, 1999 (the
"Merger Agreement"), pursuant to which Newco, a new corporation organized as a
wholly-owned subsidiary of Parent, will be merged with and into the Company in a
reverse triangular merger (the "Merger"), with the Company to be the surviving
corporation of the Merger, all pursuant to the terms and conditions of the
Merger Agreement, the Articles of Merger and the provisions of applicable law.
B. Upon the effectiveness of the Merger, all the shares of common stock
of the Company ("Company Common Stock") that are outstanding immediately prior
to the effectiveness of the Merger will be converted into the right to receive
an amount of cash from Parent and, for Significant Stockholders, subordinated
Secured Promissory Notes issued jointly and severally by Parent and the Company
("Obligors") in the form of Exhibit A hereto (each individually referred to
herein as a "Note" and collectively as the "Notes") on the basis determined in
the Merger Agreement, the Articles of Merger and this Agreement.
C. Obligors' obligations to Significant Stockholders under the Notes
(the "Obligations") will be secured by (a) a pledge of the common stock of the
Company by Parent and (b) the grant by the Company of a security interest in all
assets and properties of the Company, pursuant to the terms and conditions of
this Agreement and the Notes (the "Financing Documents").
8
D. The Obligors and Significant Stockholders desire to provide for and
set forth herein the terms and conditions governing such secured financing by
the Significant Stockholders.
AGREEMENT
NOW THEREFORE, for and in consideration of the mutual covenants and the
representations and warranties set forth herein, it is mutually covenanted and
agreed among the parties hereto as follows:
ARTICLE ONE
Definitions
SECTION 1.1 Definitions.
"Affiliated Transferee" has the meaning assigned to that term in
Section 5.1 hereof.
"Aggregate Amounts Due" has the meaning assigned to that term in
Section 11.1 hereof.
"Agreement" means this Agreement, as amended or supplemented from
time to time in accordance with its terms.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Business Day" means a day that is not a Saturday, a Sunday or a day
on which banking institutions in Los Angeles, California are not required to be
open.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with generally accepted accounting principles, is accounted for as a
capital lease on the balance sheet of that Person.
2
9
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including
securities convertible into such corporate stock.
"Certificates" has the meaning assigned to that term in Section 2.1
hereof.
"Closing" has the meaning assigned to that term in Section 2.1
hereof.
"Closing Date" has the meaning assigned to that term in Section 2.1
hereof.
"Co-Agent" has the meaning assigned to that term in Section 9.1
hereof and includes any successor Co-Agent appointed pursuant to Section 9.5
hereof.
"Collateral" has the meaning assigned to that term in Section 10.1
hereof.
"Designated Senior Indebtedness" means (i) any and all indebtedness
under Parent's Credit Agreement with Imperial Bank (as it may be amended,
restated, extended, restructured or modified), now or hereafter outstanding and
(ii) any other Senior Indebtedness of Parent in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which Parent is a party) expressly provides that such
Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes of
this Agreement (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Indebtedness to
exercise the rights of the Designated Senior Indebtedness).
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended from time to time.
"Escrow Agent" has the meaning assigned to that term in Section 2.1
hereof.
"Escrow Agreement" has the meaning assigned to that term in Section
2.2 hereof.
"Escrow Notes" has the meaning assigned to that term in Section 2.1
hereof.
"Events of Default" has the meaning assigned to that term in Article
8 hereof.
3
10
"Extended Maturity Date(s)" has the meaning assigned to that term in
Section 2.1 hereof.
"First Extended Maturity Date" has the meaning assigned to that term
in Section 3.1 hereof.
"Indebtedness," as applied to any Person, means (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or
similar instruments, (iii) all obligations under (w) securities repurchase
agreements, (x) interest rate swaps, caps, collars, options and similar
arrangements, (y) any foreign exchange contract, currency swap contract, futures
contract, currency option contract or other foreign currency hedge, and (z)
credit swaps, caps, floors, collars and similar arrangements, (iv) obligations
incurred, assumed or guaranteed in connection with the acquisition by it or a
Subsidiary of any business, property or assets (except Purchase Money Debt
classified as accounts payable under generally accepted accounting principles),
(v) obligations as lessee under Capital Leases and liabilities under any
financing lease or so-called "synthetic" lease transaction entered into, (vi)
reimbursement obligations in respect of letters of credit, bank guarantees or
bankers' acceptances, and (vii) obligations under direct or indirect guarantees
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vi) above.
"Indemnity Section" has the meaning assigned to that term in Section
2.2 hereof.
"Initial Maturity Date" has the meaning assigned to that term in
Section 2.1 hereof.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest), financing statement or similar
document, and any option, trust or other preferential arrangement having the
practical effect of any of the foregoing.
4
11
"Material Assets" means assets of the Company having a book value in
excess of fifteen percent (15%) of the total book value of the Company's assets.
"Maturity Date" has the meaning assigned to that term in Section 2.1
hereof.
"Net Cash Proceeds" means with respect to any asset sale by any
Person, cash or cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiror of
debt or other obligations relating to such properties or assets) therefrom by
such Person, net of (A) all legal, title and recording tax expenses, commissions
and other fees for services provided by non-affiliated Persons and expenses
incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a consequence of such asset sale, (B) all payments made by
such Person or its Subsidiaries on any debt which is secured by such assets in
accordance with the terms of any Lien upon or with respect to such assets or
which must by the terms of such Lien, or in order to obtain a necessary consent
to such asset sale or by applicable law, be repaid out of the proceeds from such
asset sale and (C) appropriate amounts to be provided by such Person or any
Subsidiary thereof, as the case may be, as a reserve as required by generally
accepted accounting principles against any liabilities associated with such
assets and retained by such Person or any Subsidiary thereof, as the case may
be, after such asset sale, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such asset sale, in each case as determined by the board of
directors, in its reasonable good faith judgment evidenced by a resolution of
the board of directors; provided, however, that any reduction in such reserve
within twelve months following the consummation of such asset sale will be
treated for all purposes in the Financing Documents as a new asset sale at the
time of such reduction with Net Cash Proceeds equal to the amount of such
reduction.
"Payment Blockage Notice" has the meaning assigned to that term in
Section 7.2 hereof.
"Permitted Encumbrances" means the following types of Liens:
5
12
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which are not, at the time, delinquent or are being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by generally accepted accounting principles shall have been
made therefor;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law incurred
in the ordinary course of business for sums not yet delinquent or that are being
contested in good faith, if such reserve or other appropriate provision, if any,
as shall be required by generally accepted accounting principles shall have been
made therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(iv) Liens securing Purchase Money Debt if the only collateral
for such Purchase Money Debt is the assets acquired therewith;
(v) leases or subleases granted to others not interfering in
any material respect with the ordinary conduct of business;
(vi) easements, rights-of-way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary conduct
of business;
(vii) any interest or title of a lessor or sublessor under any
lease;
(viii) Liens arising from filing Uniform Commercial Code
financing statements relating solely to leases;
6
13
(ix) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods; and
(x) Liens existing on the date of this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Pro Rata Share" means (i) with respect to all payments,
computations and other matters relating to the Note of any Significant
Stockholder, the percentage obtained by dividing (x) the outstanding principal
amount owing under such Note to such Significant Stockholder by (y) the
aggregate principal amount owing under all Notes to all Significant
Stockholders.
"Purchase Money Debt" of any Person means debt of such Person
secured by a Lien on real or personal property of such Person which debt (a)
constitutes all or a part of the purchase price or construction cost of such
property or (b) is incurred prior to, at the time of or within 180 days after
the acquisition or substantial completion of such property for the purpose of
financing all or any part of the purchase price or construction cost thereof;
provided, however, that (w) the debt so incurred does not exceed 100% of the
purchase price or construction cost of such property and related expenses, (x)
such Lien does not extend to or cover any property other than such item of
property and any improvements on such item and proceeds thereof, (y) the
purchase price or construction cost for such property is or should be included
in "addition to property, plant and equipment" in accordance with generally
accepted accounting principles, and (z) the purchase or construction of such
property is not part of any acquisition of a Person or business unit or line of
business.
"Requisite Stockholders" means Significant Stockholders (or their
respective successors or assigns) having or holding more than fifty percent
(50%) of the aggregate outstanding principal amount of the Notes.
"Representatives" has the meaning assigned to that term in Section
9.1 hereof.
7
14
"Right of First Refusal" has the meaning assigned to that term in
Section 5.1 hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Senior Indebtedness" means, without duplication, the principal and
unpaid interest (including all interest accruing subsequent to the commencement
of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding), and, to
the extent not included in the foregoing, all amounts payable as fees, costs,
expenses, liquidated damages, indemnities, repurchase and other put obligations
and other amounts to the extent accrued or due or in connection with all present
and future (i) indebtedness of Parent for borrowed money, (ii) obligations of
Parent evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of Parent under (w) securities repurchase agreements, (x) interest
rate swaps, caps, collars, options and similar arrangements, (y) any foreign
exchange contract, currency swap contract, futures contract, currency option
contract or other foreign currency hedge, and (z) credit swaps, caps, floors,
collars and similar arrangements, (iv) obligations incurred, assumed or
guaranteed by Parent in connection with the acquisition by it or a Subsidiary of
any business, property or assets (except Purchase Money Debt classified as
accounts payable under generally accepted accounting principles), (v)
obligations of Parent as lessee under Capital Leases and liabilities under any
financing lease or so-called "synthetic" lease transaction entered into by
Parent, (vi) reimbursement obligations of Parent in respect of letters of
credit, bank guarantees or bankers' acceptances, (vii) obligations of Parent
under direct or indirect guarantees in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clauses (i) through (vi) above; provided that Senior
Indebtedness shall not include: (a) any indebtedness or obligations of the kinds
referred to in clause (i) through (vii) above (collectively, "Debt") as to
which, in the instrument or agreement creating or evidencing the same or
pursuant to which the same is outstanding, it is expressly provided that such
Debt shall be subordinated in right of payment to any other Debt of Parent,
unless such instrument or agreement expressly provides that such Debt shall be
senior in
8
15
right of payment to the Notes; (b) any Debt of Parent as to which, in the
instrument or agreement creating or evidencing the same or pursuant to which the
same is outstanding, it is expressly provided that such Debt shall not be senior
in right of payment to, or is pari passu in right of payment with, or ranks
junior in right of payment to, the Notes; (c) Debt of Parent in respect of the
Notes; and (d) any Debt of Parent to any Subsidiary or other affiliate of
Parent. Notwithstanding the foregoing, Senior Indebtedness shall not at any time
exceed the difference between (a) $150,000,000 and (b) the outstanding aggregate
principal amount of the Notes.
"Stockholders" has the meaning assigned to that term in Section 8.7
hereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, joint venture or other business entity of which more
than fifty percent (50%) of the total voting power of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
the Person or Persons (whether directors, managers, trustees or other Persons
performing similar functions) having the power to direct or cause the direction
of the management and policies thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof.
ARTICLE TWO
The Notes
SECTION 2.1 Delivery of the Notes at the Closing.
Subject to the terms and conditions set forth herein and in the
Merger Agreement and Articles of Merger, Obligors hereby jointly and severally
agree to execute in favor of the Significant Stockholders, and the Significant
Stockholders hereby agree to accept from Obligors, $100,000,000 aggregate
principal amount of the Notes. The Obligations, including without limitation all
principal and accrued but unpaid interest, shall be due and payable in full on
the Maturity Date, but shall be subject to prepayment at any time by Parent or
the Company without penalty. The "Maturity Date" shall be that date which is the
earliest to occur of: (a) the later to occur of the Initial Maturity Date or the
latest Extended Maturity Date; or (b) the date on which
9
16
the entire unpaid principal amount and all accrued interest on each outstanding
Note is declared or otherwise becomes immediately due and payable in full under
Article 8 hereof. The "Initial Maturity Date" shall be November 7, 1999;
provided, however, the Maturity Date may be extended by Obligors for successive
three (3) month periods ("Extended Maturity Date(s)") if (a) at least
$20,000,000 of the aggregate principal amount of the Notes, plus accrued but
unpaid interest, has been paid (free of claims or liability for disgorgement to
the extent provided under Article 7 hereof) on or prior to the Initial Maturity
Date and an additional $20,000,000 of the aggregate principal amount of the
Notes, plus accrued but unpaid interest, has been paid (free of claims or
liability for disgorgement to the extent provided under Article 7 hereof) on or
prior to each successive Extended Maturity Date and (b) no Event of Default
shall exist hereunder at the Initial Maturity Date and on any Extended Maturity
Date. Any principal payments made pursuant to the preceding sentence (to extend
the Maturity Date) shall be made to satisfy outstanding principal under the
Notes actually held by the Significant Stockholders (i.e., Notes other than the
Escrow Notes), until such Notes are paid in full; any payments thereafter shall
be applied to the Escrow Notes. The Maturity Date shall not be later than
December 31, 2000.
On the Closing Date, subject to the terms and conditions of this
Agreement, the Merger Agreement and the Articles of Merger, and in reliance on
the representations and warranties herein set forth, Obligors shall deliver to
the Significant Stockholders the Notes, except that an amount equal to 10% of
the gross consideration payable to Significant Stockholders under the Merger
Agreement in aggregate principal amount of the Notes shall be delivered on
behalf of the Significant Stockholders, and in accordance with the Merger
Agreement, to the Escrow Agent as Escrow Notes (as such terms are defined in the
Merger Agreement), all of which Notes (including without limitation the Escrow
Notes) shall be dated the Closing Date and have other appropriate insertions;
and the Significant Stockholders shall deliver to Parent the Certificates (as
defined in the Merger Agreement) as provided in Section 1.5 of the Merger
Agreement. The "Closing Date" and the "Closing" shall be as set forth in Section
6 of the Merger Agreement.
10
17
SECTION 2.2 Escrow Notes.
The Escrow Notes delivered to the Escrow Agent at the Closing in
accordance with the Merger Agreement shall be "Notes" for purposes of this
Agreement and be in form and substance identical to the Notes actually received
by the Significant Stockholders, except that the Escrow Notes may contain
additional terms and conditions consistent with the provisions of Articles 1 and
10 of the Merger Agreement, and the Escrow Agreement (as defined in the Merger
Agreement). The Escrow Notes shall be governed by this Agreement, except as set
forth in Article 10 of the Merger Agreement (the "Indemnity Section") and the
Escrow Agreement, the terms of which Indemnity Section and Escrow Agreement
shall control over and supersede any contrary provisions of this Agreement or
any other Financing Document.
SECTION 2.3 Payments.
Except as otherwise provided in this Agreement, the Indemnity
Section and the Escrow Agreement, payments on the Notes shall be made by Parent
and/or the Company to Significant Stockholders by lump sum wire transfer to an
account maintained and designated by Co-Agents, who shall be solely responsible
for disbursing requisite funds therefrom to each Significant Stockholder or
other Note holder. Each such transfer by Obligors to Co-Agents shall constitute
payment to each Significant Stockholder of its Pro Rata Share thereof on the
date of such transfer for all purposes hereunder, including, without limitation,
Articles 2, 3 and 8, and no Event of Default shall result from any delay of
Co-Agents in disbursing funds to Significant Stockholders. Each Significant
Stockholder shall provide Parent and the Company with its address and telephone
and facsimile numbers and shall promptly advise Obligors of any change of such
address or numbers. Upon any sale or other transfer or disposition of a Note
under Section 5.1 hereof, Parent and the Company shall immediately be provided
with the name and address and telephone and facsimile numbers of the purchaser
or transferee of such Note. Co-Agents shall at all times maintain a register of
the names, addresses and facsimile numbers of holders of the Notes and provide
such list to Obligors upon request, and at least five Business Days prior to
each scheduled payment of principal or interest hereunder.
11
18
ARTICLE THREE
Interest
SECTION 3.1 Interest Rate; When Payable.
Each Note will provide that interest on unpaid principal will accrue
at a rate equal to seven percent (7%) per annum (calculated on the basis of a
365-day year), compounded quarterly, through the Initial Maturity Date.
Immediately following the Initial Maturity Date, such rate shall increase to
twelve percent (12%) per annum (calculated on the basis of a 365-day year),
compounded quarterly, which rate shall increase by two percent (2%) per annum
immediately following each Extended Maturity Date after the first Extended
Maturity Date (the "First Extended Maturity Date"). Interest shall be payable in
arrears (i) on a calendar quarterly basis until the Initial Maturity Date, (ii)
on the Initial Maturity Date (if the Maturity Date is extended under Section
2.1), (iii) on each Extended Maturity Date prior to the Maturity Date and (iv)
to the extent unpaid at maturity, on the Maturity Date.
SECTION 3.2 Default Rate.
Each Note will further provide that upon the occurrence and during
the continuation of any Event of Default (as defined in Article 8 below), the
outstanding principal amount of all Notes shall thereafter bear interest
(including post-petition interest in any proceeding under the Bankruptcy Code or
other applicable bankruptcy laws) payable upon demand at a rate of twelve
percent (12%) per annum (computed on the basis of a 365-day year), compounded
quarterly, through the First Extended Maturity Date, and thereafter equal to the
then applicable interest rate. Payment or acceptance of the increased rates of
interest provided for in this Section 3.2 is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of any Significant
Stockholder.
SECTION 3.3 Waiver of Usury Laws.
Notwithstanding any provision of any Financing Document, Obligors
(individually and collectively) are not and will not be required to pay interest
at a rate or any fee
12
19
or charge in an amount prohibited by applicable law. If interest or any fee or
charge payable on any date would be in a prohibited amount, then such interest,
fee or charge will be automatically reduced to the maximum amount that is not
prohibited, and any interest, fee or charge for subsequent periods (to the
extent not prohibited by applicable law) will be increased accordingly until
Co-Agents and each Significant Stockholder receives payment of the full amount
of each such reduction. To the extent that any prohibited amount is actually
received by Co-Agents or any Significant Stockholder, then such amount will be
automatically deemed to constitute a repayment of principal indebtedness
hereunder.
Obligors covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury law whenever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of the Financing Documents; and Obligors (to the extent that they
may lawfully do so) hereby expressly waive all benefit or advantage of any such
usury law and covenants that they will not hinder, delay or impede the execution
of any power herein granted to Co-Agents based on such law, but will permit the
execution of every such power as though no such usury law had been enacted.
ARTICLE FOUR
Representations and Warranties of Significant Stockholders
SECTION 4.1 Investment Representations.
Each Significant Stockholder hereby represents and warrants to
Obligors that it is purchasing the Notes solely for its own account and not as
nominee or agent for any other person and not with a view to, or for offer or
sale in connection with, any distribution thereof (within the meaning of the
Securities Act) that would be in violation of the securities laws of the United
States of America or any state thereof; and that it is an "accredited investor"
as that term is defined in Rule 501 of Regulation D of the Securities Act. Each
Significant Stockholder agrees to complete and provide to Parent and Company an
Investor Questionnaire in such form as reasonably requested by Parent.
13
20
SECTION 4.2 Source of Consideration.
Each Significant Stockholder represents and warrants that no part of
the consideration to be exchanged for or used to purchase the Notes to be
purchased by it constitutes assets allocated to any qualified trust which
contains the assets of any employee pension benefit plan with respect to which
Obligors or any corporation considered an affiliate of Obligors within the
meaning of Section 407(d)(7) of ERISA is a party in interest or disqualified
person. As used in this Section 4.2, the terms "employee pension benefit plan"
and "party in interest" shall have the meanings assigned to such terms in
Section 3 of ERISA, the term "disqualified person" shall have the meaning
assigned to such term in Section 4975 of the Internal Revenue Code of 1986, the
term "qualified trust" shall mean any trust exempt under Section 501(a) of the
Internal Revenue Code of 1986 that holds the assets of any employee pension
benefit plan that is qualified under Section 401(a) of the Internal Revenue Code
of 1986, and the term "affiliate" shall have the meaning assigned to it in
Section 407(d)(7) of ERISA.
ARTICLE FIVE
Post-Closing Covenants of Significant Stockholders
SECTION 5.1. Limits on Resales of Notes.
No Significant Stockholder shall sell or otherwise transfer or
dispose of any Note or Notes on or before the Initial Maturity Date or the
occurrence of an Event of Default hereunder. If a Significant Stockholder
desires to sell or otherwise transfer or dispose of any Note or Notes following
the Initial Maturity Date or the occurrence of an Event of Default hereunder
other than pursuant to a registration statement under the Securities Act, such
Significant Stockholder shall deliver to Obligors an opinion of counsel in form
and substance (and from counsel) reasonably satisfactory to Obligors, that
exemptions from the Securities Act and any other applicable federal or state
securities laws are available; provided, however, that Obligors shall be given
not less than ten (10) Business Days' prior written notice of any intended sale,
transfer or disposition of a Note by a Significant Stockholder and a right of
first refusal for such period to purchase such Note by paying the full principal
amount and accrued but unpaid interest outstanding thereunder ("Right of First
Refusal"), which Right of First Refusal shall
14
21
terminate with respect to such Note (and only that Note) upon the initial sale,
transfer or other disposition of such Note in accordance with this Section 5.1
to a Person other than a Significant Stockholder or Affiliated Transferee.
Notwithstanding the foregoing provisions of this Section 5.1, a Significant
Stockholder that is an individual may transfer a Note at any time to a family
trust or limited partnership in which all of the general and limited partnership
interests are held by such Significant Stockholder and members of such
Significant Stockholder's immediate family (an "Affiliated Transferee") solely
for estate planning purposes, subject only to the provision by such Significant
Stockholder of an opinion of counsel in conformity with the preceding sentence.
If any Note is sold or otherwise transferred or disposed of by a Significant
Stockholder in accordance with this Section 5.1, then any purchaser, assignee or
transferee of such Note (or subsequent purchaser, assignee or transferee) shall
be deemed a "Significant Stockholder" under this Agreement and have the rights,
duties and obligations arising hereunder. Upon issuance of the Notes, and until
such time as the same is no longer required under applicable securities laws,
the Notes (and all Notes issued in exchange therefor or substitution thereof)
shall bear the following legend:
"THIS NOTE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH
THE PROVISIONS OF A NOTE AND SECURITY AGREEMENT DATED AS OF MAY 7,
1999 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF TEKELEC.
EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS NOTE
MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE `ACT'),
OR (B) IF TEKELEC HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND
15
22
REGULATIONS IN EFFECT THEREUNDER AND OTHER APPLICABLE SECURITIES
LAWS."
The first sentence of the foregoing legend shall be deleted from and
shall not be applicable to a Note following the initial sale, transfer or other
disposition of such Note in accordance with this Section 5.1 by a Significant
Stockholder to a Person other than a Significant Stockholder or Affiliated
Transferee.
Notwithstanding the foregoing, the Escrow Notes shall not be sold or
otherwise be subject to transfer or disposition so long as they are held by the
Escrow Agent. Upon any release or return of any Escrow Notes to Significant
Stockholders in accordance with the Indemnity Section or Escrow Agreement, such
Notes shall be subject to the foregoing provisions of this Section 5.1.
SECTION 5.2 Subordination of Notes and Claims.
The Obligations under the Notes shall be subordinate to Senior
Indebtedness of Parent as provided in Article 7 hereof. Each Significant
Stockholder further covenants and agrees that any claims it may have against
Parent arising out of this Agreement shall be subordinated to the Senior
Indebtedness to the same extent and on the same terms as the Notes are
subordinate to Senior Indebtedness.
ARTICLE SIX
Post-Closing Covenants of Parent and the Company
Until payment in full of all of the Obligations, unless a Co-Agent
or Requisite Stockholders shall otherwise give prior written consent, Parent and
the Company, as applicable, shall perform all covenants in this Article 6.
SECTION 6.1 Prohibition on Dividends and Distributions of Company
The Company shall not declare, order, pay, make or set apart (i) any
dividend or other distribution on account of any shares of any class of stock of
the Company now or hereafter outstanding, except a dividend payable solely in
shares of Capital Stock to the holders of that
16
23
class (which dividend of shares shall be subject to the pledge by Parent under
Article 10 hereof), or (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value of any shares of any class of
stock of the Company now or hereafter outstanding held by Parent.
SECTION 6.2 Prohibition of Equity Issuances of the Company
The Company shall not issue or sell any Capital Stock, except:
(i) to Parent (which Capital Stock shall be subject to the pledge by
Parent under Article 10 hereof); and
(ii) as required to satisfy any pre-Merger obligations of the
Company to issue or sell Capital Stock.
SECTION 6.3 Prohibition of Liens on Company Assets
The Company shall not create, incur, assume or permit to exist any
Lien on or with respect to any property or asset of any kind (including any
document or instrument in respect of goods or accounts receivable) of the
Company, whether now owned or hereafter acquired, or any income or profits
therefrom, or file or permit the filing of any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances; and
(ii) Other Liens junior to Liens of the Significant
Stockholders so long as the indebtedness secured thereby does not exceed
$1,000,000 in aggregate principal amount.
SECTION 6.4 Restriction on Certain Transactions; Asset Sales by the Company
Neither the Company nor any wholly-owned Subsidiary of the Company
shall enter into any transaction of merger or consolidation, or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution), create
any Subsidiary, or convey, sell, lease, sublease,
17
24
license, transfer or otherwise dispose of, in one transaction or a series of
transactions, any intellectual property or Material Assets, whether now owned or
hereafter acquired, except:
(i) any Subsidiary of the Company may be created (as provided
in subsection (iv) below), and merged or consolidated with or into the Company
or any wholly-owned Subsidiary of the Company, or be liquidated, wound up or
dissolved, or all or any substantial part of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to the Company or any wholly-owned
Subsidiary of the Company; provided that, in the case of such a merger or
consolidation, the Company or such wholly-owned Subsidiary shall be the
continuing or surviving corporation;
(ii) the Company and its Subsidiaries may sell or otherwise
transfer or dispose of (a) inventory in the ordinary course of business, (b)
obsolete assets and (c) intellectual property in the ordinary course of business
or for value acceptable to a Co-Agent or Requisite Stockholders, and may enter
into licenses of intellectual property in the ordinary course of business or for
value acceptable to a Co-Agent or Requisite Stockholders; and
(iii) the Company and its Subsidiaries may sell or otherwise
transfer or dispose of Material Assets in arms' length transactions with
non-affiliated third parties for fair value, provided that the Net Cash Proceeds
of any sales of Material Assets shall be applied as payment on the Notes; and
(iv) the Company and its Subsidiaries may create Subsidiaries
and transfer assets thereto, subject in each case to (a) the consent of a
Co-Agent or Requisite Stockholders or (b) each such Subsidiary becoming an
obligor under the Notes and being bound by the covenants applicable to the
Company hereunder, and granting a security interest and lien in all of its
assets and having its Capital Stock (to the extent held by the Company or its
Subsidiary) pledged to Co-Agents under the terms and conditions set forth in
Article 10 hereof.
18
25
SECTION 6.5 Limitation on Other Company Indebtedness
The Company shall not create, incur, assume or guarantee, or
otherwise become or remain liable with respect to, any Indebtedness, except:
(i) the Company may become and remain liable with respect to
the Notes;
(ii) the Company may become and remain liable with respect to
guarantees of Indebtedness of Parent that are subordinated to the Notes;
(iii) the Company may become and remain liable with respect to
Purchase Money Debt;
(iv) the Company may become and remain liable with respect to
Indebtedness described in parts (iv) and (v) of the definition thereof;
(v) the Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned
Subsidiary of the Company may become and remain liable with respect to
Indebtedness to the Company or any other wholly-owned Subsidiary of the Company;
provided that (a) all such intercompany Indebtedness shall be evidenced by
promissory notes in which Co-Agents shall have a perfected security interest
under Article 10 hereof, (b) all such intercompany Indebtedness owed by the
Company to any of its Subsidiaries shall be unsecured and subordinated in right
of payment to the payment in full of the Obligations pursuant to the terms of
the applicable promissory notes or an intercompany subordination agreement, and
(c) any payment by any Subsidiary of the Company under any guarantee of the
Obligations shall result in a pro tanto reduction of the amount of any
intercompany Indebtedness owed by such Subsidiary to the Company or to any of
its Subsidiaries for whose benefit such payment is made;
(vi) the Company may become and remain liable with respect to
unsecured trade debt incurred in the ordinary course of business of the Company;
and
19
26
(vii) the Company may remain liable with respect to
Indebtedness existing on the date of this Agreement.
SECTION 6.6 Affiliate Transactions with Company.
The Company shall not engage in transactions with affiliates
involving the lease, license, transfer, purchase or sale of assets, except:
(i) transactions of a type that have historically been in
the ordinary course of business for Parent and its affiliates;
(ii) transactions in which fair value is received by the
Company;
(iii) transactions otherwise permitted by a Section of this
Article 6; or
(iv) transactions consented to by a Co-Agent or Requisite
Stockholders.
SECTION 6.7. SEC Filings.
Parent shall provide to Co-Agents copies of its filings with the SEC
under the Securities Exchange Act of 1934, in each case within fifteen (15) days
of the date of filing.
SECTION 6.8 Identification of Senior Indebtedness and Designated Senior
Indebtedness.
From time to time, upon reasonable request by a Co-Agent,
Parent will provide a list of the then-outstanding Senior Indebtedness and
Designated Senior Indebtedness to Co-Agents; provided, however, that such a
request may be made only once prior to the Initial Maturity Date and no more
frequently than once each quarter thereafter (excluding any reasonable requests
made during the continuation of an Event of Default).
20
27
ARTICLE SEVEN
Subordination of Notes
SECTION 7.1. Agreement of Subordination.
Parent and the Company covenant and agree, and each Significant
Stockholder or other holder of a Note likewise covenants and agrees, that all
Notes shall be issued subject to the provisions of this Article 7; and each
Person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees to be bound by such
provisions. The payment of the principal of and interest on all Notes by Parent
(but not by the Company) shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the prior payment in
full in cash of all Senior Indebtedness of Parent, whether outstanding as of the
date of this Agreement or thereafter incurred; provided, however, and
notwithstanding any contrary provision of this Agreement, that unless a Co-Agent
or any Significant Stockholder has actual notice or knowledge of the occurrence
of an event or any reason why a payment to a Co-Agent or Significant
Stockholders is not permitted by this Article 7 at the time of receiving such
payment, such payment shall not be subject to any claim or liability for
disgorgement by Co-Agents or Significant Stockholders to or for the benefit of a
holder of Senior Indebtedness under this Article 7.
SECTION 7.2. Payments to Significant Stockholders.
No payment shall be made with respect to the principal of, or any
interest on the Notes by Parent, if:
(i) a default in the payment of principal, interest or other
obligations due on any Senior Indebtedness of Parent has occurred and is
continuing (or, in the case of Senior Indebtedness of Parent for which there is
a period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument or lease evidencing such
Senior Indebtedness of Parent), unless and until such default shall have been
cured or waived, shall have ceased to exist or shall become subject to a
forbearance agreement expressly permitting payment on the Notes; or
21
28
(ii) a default (other than a payment default) on Designated
Senior Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and a Co-Agent
receives a notice of the default (a "Payment Blockage Notice") from a
representative of Designated Senior Indebtedness or a holder of Designated
Senior Indebtedness or Parent.
If a Co-Agent receives any Payment Blockage Notice pursuant to
clause (ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 365 days shall have elapsed
since the initial effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to a Co-Agent (unless such default was
waived, cured or otherwise ceased to exist or was subject to a forbearance
agreement expressly permitting payment on the Notes and thereafter subsequently
reoccurred) shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
Parent may and shall resume payments on and distributions in respect
of the Notes upon the earlier of:
(a) in the case of a payment default, the date upon which the
default was cured or waived, ceases to exist or becomes subject to a forbearance
agreement expressly permitting payment on the Notes, or
(b) in the case of a default referred to in clause (ii) above,
the earlier of the date on which such default is cured or waived, ceases to
exist or becomes subject to a forbearance agreement expressly permitting payment
on the Notes or 180 days after the date on which the applicable Payment Blockage
Notice is received if the maturity of the applicable Designated Senior
Indebtedness has not been accelerated, unless this Article 7 otherwise prohibits
the payment or distribution at the time of such payment or distribution as a
result of a payment default with respect to the applicable Senior Indebtedness
as a consequence of the acceleration of the maturity thereof or otherwise.
Upon any payment by Parent, or distribution of assets of Parent of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up
22
29
or liquidation or reorganization of Parent, whether voluntary or involuntary or
in bankruptcy, moratorium of payments, insolvency, receivership or other
proceedings, all amounts due or to become due upon all Senior Indebtedness of
Parent shall first be paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness of Parent, or payment thereof in accordance
with its terms provided for in cash or other payment satisfactory to the holders
of such Senior Indebtedness of Parent before any payment is made on account of
the principal of or interest on the Notes by Parent (other than from the Pledged
Collateral or proceeds of foreclosure thereon); and upon any dissolution or
winding-up or liquidation or reorganization of Parent or bankruptcy, insolvency,
receivership or other proceeding, any payment by Parent, or distribution of
assets of Parent of any kind or character, whether in cash, property or
securities (other than the Pledged Collateral or the proceeds of foreclosure
thereon), to which the Significant Stockholders or Co-Agents would be entitled,
except for the provisions of this Article 7, shall (except as aforesaid), be
paid by Parent or by any receiver, trustee in bankruptcy, moratorium of
payments, liquidating trustee, agent or other Person making such payment or
distribution, or by the Significant Stockholders or by the Co-Agents under this
Agreement if received by them or it, directly to the holders of Senior
Indebtedness of Parent (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness of Parent held by such holders, or as otherwise
required by law or a court order) or their representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness of Parent may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness of
Parent in full, in cash or other payment satisfactory to the holders of such
Senior Indebtedness of Parent, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness of Parent, before any
payment or distribution is made by Parent, its successors or representatives to
the Significant Stockholders or to the Co-Agents.
For purposes of this Article 7, the words, "cash, property or
securities" shall not be deemed to include shares of stock of Parent as
reorganized or readjusted, or securities of Parent or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article 7 with respect
to the Notes to the payment of all Senior Indebtedness of Parent which may at
the time be outstanding; provided that (y) the Senior Indebtedness of Parent is
assumed by the new
23
30
corporation, if any, resulting from any reorganization or readjustment, and (z)
the rights of the holders of Senior Indebtedness of Parent (other than leases
which are not assumed by Parent or the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization or
readjustment.
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Co-Agents or any
Significant Stockholders in respect of the principal of or interest on the Notes
by Parent, until (i) all Senior Indebtedness of Parent has been paid in full in
cash or other payment satisfactory to the holders of Senior Indebtedness of
Parent, (ii) such acceleration is rescinded in accordance with the terms of this
Agreement or (iii) the 181st day following the date of such acceleration if no
Senior Indebtedness of Parent has been accelerated prior thereto. If payment of
the Notes is accelerated because of an Event of Default, Parent shall promptly
notify holders of Senior Indebtedness of Parent of the acceleration.
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of Parent of any kind or character, whether in
cash, property or securities (including, without limitation, by way of setoff or
otherwise, but excluding the Pledged Collateral and any proceeds of foreclosure
thereon), prohibited by the foregoing, shall be received by the Co-Agents or the
Significant Stockholders before all Senior Indebtedness of Parent is paid in
full in cash or other payment satisfactory to the holders of such Senior
Indebtedness of Parent, or provisions made for such payment thereof in
accordance with its terms in cash or other payment satisfactory to the holders
of such Senior Indebtedness of Parent, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness of Parent or their representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness of Parent may have been issued, as their
respective interests may appear, as calculated by Parent, for application to the
payment of all Senior Indebtedness of Parent remaining unpaid to the extent
necessary to pay all Senior Indebtedness of Parent in full in cash or other
payment satisfactory to the holders of such Senior Indebtedness of Parent after
giving effect to any concurrent payment or distribution, or provision therefor
to or for the holders of such Senior Indebtedness of Parent.
24
31
SECTION 7.3. Subrogation of Notes.
Subject to the payment in full in cash of all Senior Indebtedness of
Parent, the Significant Stockholders shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness of
Parent pursuant to the provisions of this Article 7 to the rights of the holders
of Senior Indebtedness of Parent to receive payments or distributions of cash,
property or securities of Parent applicable to the Senior Indebtedness of Parent
until the principal and interest on the Notes shall be paid in full; and, for
the purposes of such subrogation, no payments or distributions to the holders of
the Senior Indebtedness of Parent of any cash, property or securities to which
the Significant Stockholders or the Co-Agents would be entitled except for the
provision of this Article 7, and no payment over pursuant to the provisions of
this Article 7, to or for the benefit of the holders of Senior Indebtedness of
Parent by the Significant Stockholders or the Co-Agents, shall, as between
Parent, its creditors other than holders of Senior Indebtedness of Parent, and
the Significant Stockholders, be deemed to be a payment by Parent to or on
account of the Senior Indebtedness of Parent. It is understood that the
provisions of this Article 7 are and are intended solely for the purposes of
defining the relative rights of the Significant Stockholders, on the one hand,
and the holders of the Senior Indebtedness of the Parent on the other hand.
Nothing contained in this Article 7 or elsewhere in this Agreement
or in the Notes is intended to or shall impair, as among Parent, its creditors
other than the holders of Senior Indebtedness of Parent, and the Significant
Stockholders, the obligation of Parent (and the Company), which is absolute and
unconditional to pay to the Significant Stockholders the principal of and
interest on the Notes as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Significant Stockholders and creditors of Parent other than the
holders of the Senior Indebtedness of Parent, nor shall anything herein or
therein prevent the Co-Agents or any Significant Stockholder from exercising all
rights otherwise permitted by applicable law upon default under this Agreement
or the Notes, subject to the rights, if any, under this Article 7 of the holders
of Senior Indebtedness of Parent in respect of cash, property or securities of
Parent (other than the Pledged Collateral and the proceeds of any foreclosure
thereon) received upon the exercise of any such remedy.
25
32
Upon any payment or distribution of assets of Parent referred to in
this Article 7, the Significant Stockholders and the Co-Agents shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which such bankruptcy, dissolution, winding-up, liquidation or reorganization
proceedings are pending, or certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
delivered to a Co-Agent or to the Significant Stockholders, for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness of Parent and other Indebtedness of Parent,
with the amount thereof or payable thereon and all of the facts pertinent
thereto or to this Article 7.
SECTION 7.4. Authorization to Effect Subordination.
Each Significant Stockholder by its acceptance of a Note authorizes
and directs each Co-Agent on such Significant Stockholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 7 and appoints each Co-Agent to act as the Significant
Stockholder's attorney-in-fact for any and all such purposes. If the Co-Agent or
Significant Stockholders do not file a proper proof of claim or proof of debt in
the form required in any bankruptcy or insolvency proceeding at least fifteen
(15) days before the expiration of the time to file such claim, holders of any
Senior Indebtedness of Parent or their representatives are hereby authorized to
file an appropriate claim for and on behalf of any Significant Stockholders.
SECTION 7.5. No Impairment of Subordination.
No right of any present or future holder of any Senior Indebtedness
of Parent to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of Parent
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by Parent with the terms, provisions and covenants of this
Agreement, regardless of any knowledge thereof which any holder may have or
otherwise be charged with.
26
33
SECTION 7.6. Senior Indebtedness of Parent Entitled to Rely.
The holders of Senior Indebtedness of Parent (including, without
limitation, Designated Senior Indebtedness) shall have the right to rely upon
this Article 7, and no amendment or modification of the provisions contained
herein shall diminish the rights of such holders unless such holders at the time
of such amendment or modification shall have agreed in writing thereto.
ARTICLE EIGHT
Events of Default
Each Note shall provide that if any of the following conditions or
events ("Events of Default") shall occur:
SECTION 8.1. Failure to Make Payments When Due.
Failure to pay any installment of principal of any Note when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; or failure to pay any interest on any Note within ten (10) Business
Days after the date due; or
SECTION 8.2 Default in Other Agreements.
(i) Failure (a) of Parent to pay when due $1,000,000 or more of
principal of or interest on any specific Indebtedness (other than Indebtedness
referred to in Section 8.1) or (b) of Parent to pay when due any principal of or
interest on any Indebtedness having an outstanding principal amount of
$5,000,000 or more, in each case beyond the end of any grace period provided
therefor; or (ii) breach or default by Parent with respect to any other material
term of any evidence of any Indebtedness described in the foregoing clause (i)
if the effect of such breach or default is to cause an amount of $1,000,000 or
more to become or be declared due and payable prior to its stated maturity or
the stated maturity of any underlying obligation, as the case may be (upon the
giving or receiving of notice, lapse of time, both, or otherwise); provided,
however, there shall not be an Event of Default under this Section 8.2 if any
default or claimed default is cured either by payment of the amount of
Indebtedness that is then due or payable or by curing
27
34
the cause of the default within forty-five (45) days from the date an executive
officer of Parent actually becomes aware thereof (or ninety (90) days from the
date an executive officer of Parent actually becomes aware thereof if Parent is
attempting to remedy such default or disputes such default in good faith); or
SECTION 8.3. Other Defaults Under Agreements.
Parent or the Company shall default in the performance of or
compliance with any term contained in this Agreement, other than any such term
referred to in Section 8.1, and such default shall not have been remedied or
waived within thirty (30) days after an executive officer of Parent or the
Company (other than a Significant Stockholder), as applicable, actually becomes
aware of such default (or sixty (60) days thereafter if Parent or the Company is
attempting to remedy such default or disputes such default in good faith); or
SECTION 8.4. Involuntary Bankruptcy: Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Parent or the Company in an involuntary
case under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, which decree or order is
not stayed; or any other similar relief shall be granted under any applicable
federal or state law; or (ii) an involuntary case shall be commenced against
Parent or the Company under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or
order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Parent or the Company, or over all or a substantial part of
its property, shall have been entered; or there shall have occurred the
involuntary appointment of an interim receiver, trustee or other custodian of
Parent or the Company for all or a substantial part of its property; or
SECTION 8.5. Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Parent or the Company shall have an order for relief
entered with respect to it or commence a voluntary case under the Bankruptcy
Code or under any other applicable
28
35
bankruptcy, insolvency or similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; or Parent or
the Company shall make any assignment for the benefit of creditors; or (ii)
Parent or the Company shall be unable or shall fail, or shall admit in writing
its inability, to pay its debts as such debts become due; or the Board of
Directors of Parent or the Company (or any committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of the actions
referred to in clause (i) above or this clause (ii); or
SECTION 8.6. Dissolution.
Any order, judgment or decree shall be entered against Parent or the
Company decreeing the dissolution or split up of Parent or the Company and such
order shall remain undischarged or unstayed for a period in excess of 60 days;
or
SECTION 8.7. Judgments and Attachments.
Any money judgment(s), writ(s) or warrant(s) of attachment or
similar process(es) involving in the aggregate at any time an amount in excess
of (a) $15,000,000 for Parent and (b) $5,000,000 for the Company (not adequately
covered by insurance as to which a solvent and unaffiliated insurance company
has acknowledged coverage) shall be entered or filed against Parent or the
Company or any of their respective assets and shall remain undischarged,
unbonded or unstayed for a period of 60 days, excluding any judgment, writ or
warrant of attachment or similar process constituting, arising out of or
resulting from a breach of any representation, warranty or covenant by the
Company or Stockholders (as such terms are defined in the Merger Agreement)
under the Merger Agreement;
THEN (i) upon the occurrence of any Event of Default described in the foregoing
Section 8.4 or 8.5, each of the unpaid principal amount of and accrued interest
on the Notes and all other Obligations shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements of
any kind, all of which are hereby expressly waived by Parent and the Company and
(ii) upon the occurrence and during the continuation of any other
29
36
Event of Default, Co-Agents shall, upon the written request of Requisite
Stockholders, by written notice to Parent and the Company, declare all or any
portion of the amounts described in clause (i) immediately above to be, and the
same shall forthwith become, immediately due and payable.
Notwithstanding anything contained in the preceding paragraph, if at
any time within sixty (60) days after an acceleration of the Notes pursuant to
such paragraph Obligors shall pay all arrears of interest and all payments on
account of principal which shall have become due otherwise than as a result of
such acceleration (with interest on principal at the rates specified in this
Agreement) and all Events of Default (other than non-payment of the principal of
and accrued interest on the Notes, in each case which is due and payable solely
by virtue of acceleration) shall be remedied or waived, then Requisite
Stockholders, by written notice to Obligors, may at their option rescind and
annul such acceleration and its consequences; but such action shall not affect
any subsequent Event of Default or impair any right consequent thereon. The
provisions of this paragraph are intended merely to bind Significant
Stockholders to a decision which may be made at the election of Requisite
Stockholders and are not intended to benefit Obligors and do not grant Obligors
the right to require Significant Stockholders to rescind or annul any
acceleration hereunder, even if the conditions set forth herein are met.
ARTICLE NINE
Co-Agents of Significant Stockholders
SECTION 9.1. Appointment.
The Representatives (as defined in the Merger Agreement) are hereby
appointed Co-Agents hereunder and under the other Financing Documents by
Significant Stockholders and each Significant Stockholder hereby authorizes each
Co-Agent to act as its agent in accordance with the terms of this Agreement and
the other Financing Documents. Each Co-Agent accepts such appointment and agrees
to act upon the express conditions contained in this Agreement and the other
Financing Documents, as applicable. The provisions of this Article 9 are solely
for the benefit of Co-Agents and Significant Stockholders, and Obligors shall
have no rights as a third party beneficiary of any of the provisions thereof. In
performing their functions and duties under this Agreement, Co-Agents shall act
solely as agents of Significant Stockholders and do not
30
37
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Obligors or any other Person (other
than Significant Stockholders).
SECTION 9.2. Powers: General Immunity.
(a) Duties Specified. Each Significant Stockholder irrevocably
authorizes each Co-Agent to take such action on such Significant Stockholder's
behalf and to exercise such powers hereunder and under the other Financing
Documents as are specifically delegated to Co-Agents by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto.
Co-Agents shall have only those duties and responsibilities that are expressly
specified in this Agreement and the other Financing Documents and may perform
such duties by or through their agents or employees. Co-Agents shall not have,
by reason of this Agreement or any of the other Financing Documents, a fiduciary
relationship in respect of any Significant Stockholders; and nothing in this
Agreement or any of the other Financing Documents, expressed or implied, is
intended to or shall be so construed as to impose upon a Co-Agent any
obligations in respect of this Agreement or any of the other Financing Documents
except as expressly set forth herein or therein.
(b) No Responsibility for Certain Matters. Co-Agents shall not be
responsible to any Significant Stockholders for the execution, effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any other Financing Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any instruments or certificates or any other documents
furnished or made by Co-Agents to Significant Stockholders or by or on behalf of
Obligors to Co-Agents or any Significant Stockholder in connection herewith or
therewith, nor shall Co-Agents be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the existence or possible
existence of any Event of Default.
(c) Exculpatory Provisions. Co-Agents and their respective officers,
directors, employees or agents shall not be liable to Significant Stockholders
for any action taken or omitted hereunder or in connection herewith by Co-Agents
except to the extent caused by ▇▇-
▇▇
▇▇
Agents' gross negligence or willful misconduct. If a Co-Agent shall request
instructions from Significant Stockholders with respect to any act or action
(including the failure to take an action) in connection with this Agreement or
any of the other Financing Documents, such Co-Agent shall be entitled to refrain
from such act or taking such action unless and until such Co-Agent shall have
received instructions from Requisite Stockholders. Without prejudice to the
generality of the foregoing, (i) each Co-Agent shall be entitled to rely, and
shall be fully protected in relying, upon any communication, instrument or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and shall be entitled to rely and shall be
protected in relying on opinions and judgments of attorneys (who may be
attorneys for Parent or the Company), accountants, experts and other
professional advisors selected by it; and (ii) no Significant Stockholder shall
have any right of action whatsoever against a Co-Agent as a result of such
Co-Agent acting or (where so instructed) refraining from acting under this
Agreement or any of the other Financing Documents in accordance with the
instructions of Requisite Stockholders. Each Co-Agent shall be entitled to
refrain from exercising any power, discretion or authority vested in it under
this Agreement or any of the other Financing Documents unless and until it has
obtained the instructions of Requisite Stockholders. Each Co-Agent is authorized
to act in accordance with and upon the instructions of Requisite Stockholders.
(d) Co-Agent Entitled to Act as Significant Stockholder. The agency
hereby created shall in no way impair or affect any of the rights and powers of,
or impose any duties or obligations upon, a Co-Agent in its individual capacity
as a Significant Stockholder hereunder. With respect to its participation in the
Notes, a Co-Agent that is a Significant Stockholder shall have the same rights
and powers hereunder as any other Significant Stockholder and may exercise the
same as though it were not performing the duties and functions delegated to it
hereunder, and the term "Significant Stockholder" or "Significant Stockholders"
or any similar term shall, unless the context clearly otherwise indicates,
include such Co-Agent in its individual capacity.
32
39
SECTION 9.3 Right to Indemnity.
Each Significant Stockholder, in proportion to its Pro Rata Share,
severally agrees to indemnify each Co-Agent, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against each Co-Agent in performing its duties hereunder
or under the other Financing Documents or otherwise in its capacity as Co-Agent
in any way relating to or arising out of this Agreement or the other Financing
Documents; provided that no Significant Stockholder shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from a Co-Agent's
gross negligence or willful misconduct. If any indemnity furnished to a Co-Agent
for any purpose shall, in the opinion of such Co-Agent, be insufficient or
become impaired, such Co-Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional indemnity
is furnished.
SECTION 9.4. Payee of Note Treated as Owner.
Co-Agents may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with Co-Agents. Any
request, authority or consent of or any payment to any person or entity who, at
the time of making such request or giving such authority or consent, or
receiving such payment, is the holder of any Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of that Note or of any
Note or Notes issued in exchange therefor.
SECTION 9.5. Successor Co-Agents.
A Co-Agent may resign at any time by giving thirty (30) days' prior
written notice thereof to Significant Stockholders, Parent and the Company, and
a Co-Agent may be removed at any time with or without cause by an instrument or
concurrent instruments in writing delivered to Parent, the Company and Co-Agents
and signed by Requisite Stockholders. Upon any such notice of resignation or any
such removal, Requisite Stockholders shall have the right, upon five Business
Days' notice to Obligors, to appoint a successor Co-Agent. Upon the
33
40
acceptance of any appointment as Co-Agent hereunder by a successor Co-Agent,
that successor Co-Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring or removed Co-Agent
and the retiring or removed Co-Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Co-Agent's
resignation or removal hereunder as Co-Agent, the provisions of this Article 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was a Co-Agent under this Agreement.
ARTICLE TEN
Security for Notes
SECTION 10.1 Security.
The payment and performance of Parent's and the Company's
Obligations under the Notes will at all times be secured as follows:
(a) Grant of Security Interest. As security for the due
performance and payment of the Obligations, (i) the Company hereby grants to
Co-Agents, on behalf of the Significant Stockholders, a security interest in and
lien on the "Company Collateral" as defined in Section 10.1(b), and (ii) Parent
hereby pledges and grants a lien to Co-Agents, on behalf of the Significant
Stockholders, in the "Pledged Collateral" as defined in Section 10.1(b).
(b) Collateral Defined. The term "Company Collateral" means,
collectively, whether or not covered by Article 9 of the Uniform Commercial
Code, any and all of the assets, properties, goods, inventory, equipment,
furniture, fixtures, leases, supplies, records, money, deposit accounts, Capital
Stock of Subsidiaries of the Company, documents, instruments, chattel paper,
accounts, contract rights, investment property, financial assets, intellectual
property rights (including, but not limited to, copyrights, copyright
applications, moral rights, patents, patent applications, trademarks, service
marks, trade names and trade secrets) and other general intangibles, of the
Company, whether owned by the Company on the date of this Agreement or hereafter
acquired, and all products and proceeds thereof. Notwithstanding the foregoing
provisions of this Section 10.1(b), such grant of security interest
34
41
shall not extend to, and the term "Company Collateral" shall not include, any
equipment lease, real property lease or chattel paper which is now or hereafter
held by the Company as licensee, lessee or otherwise, to the extent that (a)
such equipment lease, real property lease or chattel paper is not assignable or
capable of being encumbered as a matter of law or under the terms of the
license, lease or other agreement applicable thereto (but solely to the extent
that any such restriction shall be enforceable under applicable law), without
the consent of the licensor or lessor thereof or other applicable party thereto
and (b) such consent has not been obtained; provided, however, that the
foregoing grant of security interest shall extend to, and the term "Company
Collateral" shall include, (i) any and all proceeds of such equipment lease,
real property lease or chattel paper to the extent that the assignment or
encumbering of such proceeds is not so restricted and (ii) upon the consent of
any such licensor, lessor or other applicable party with respect to any such
otherwise excluded equipment lease, real property lease or chattel paper being
obtained (which consent shall be required only at a Co-Agent's request following
an Event of Default hereunder), thereafter such equipment lease, real property
lease or chattel paper as well as any and all proceeds thereof that might
theretofore have been excluded from such grant of a security interest and the
term "Company Collateral".
The term "Pledged Collateral" means the Capital Stock of the Company
held by Parent, now or hereafter, and all dividends and distributions thereon.
In the event that any stock dividend, reclassification, readjustment, stock
split or other change is declared or made with respect to the Pledged
Collateral, or if warrants or any other rights, options or securities are issued
to Parent in respect of the Pledged Collateral, then all new, substituted and/or
additional shares or other securities issued by reason of such change or by the
exercise of such warrants, rights, options or securities will be automatically
pledged to Co-Agents and become part of the Pledged Collateral. Notwithstanding
this Agreement, so long as Parent owns the Pledged Collateral and no Event of
Default has occurred and is continuing, Parent will be entitled to vote any
shares comprising the Pledged Collateral, subject to any proxies granted by
Parent.
The Company Collateral and Pledged Collateral shall be referred to
herein as the "Collateral".
35
42
(c) Delivery of Certain Collateral. Any Collateral (other than
checks) as to which possession is required under applicable law to perfect
Co-Agents' security interest therein, shall be delivered to Co-Agents or, at
Parent's request, an independent escrow holder acceptable to Parent and
Co-Agents. Any such Collateral shall be duly endorsed and accompanied by duly
executed instruments of transfer or assignment in blank, as applicable.
(d) Financing Statements. So long as Obligors have any
Obligations to Significant Stockholders under the Notes, Obligors will promptly
execute and deliver to Co-Agents such notices, financing statements, or other
documents and papers (including, but not limited to, such documents as may be
filed with the U.S. Register of Copyrights and the U.S. Patent and Trademark
Office in order to perfect Co-Agents' security interest in the Company's
patents, patent applications, registered trademarks, registered copyrights and
applications therefor) as Co-Agents may reasonably require in order to perfect
and maintain the security interest in and lien on the Collateral granted to
Co-Agents hereby. Notwithstanding the foregoing provisions of this Section
10.1(d), and except upon the occurrence and during the continuation of an Event
of Default, the Company shall not be required to take any action that would
restrict or limit its access to its deposit accounts. Upon the full and final
discharge of all of the Obligations, each Co-Agent and each Significant
Stockholder will execute and deliver such documents as may be reasonably
necessary and requested and provided by Obligors to release the Collateral from
the security interest and lien granted to Co-Agents in this Agreement, and
return (or cause to be returned) to Obligors any Collateral in the possession of
Co-Agents or their agents including, without limitation, the Pledged Collateral.
(e) Co-Agents' Obligations and Duties. The Significant
Stockholders hereby appoint each Co-Agent to act as the agent, attorney-in-fact
and representative of the Significant Stockholders to execute and deliver any
and all documents, and to exercise any and all rights and remedies of the
Significant Stockholders under this Article 10, by and on behalf of the
Significant Stockholders. Anything herein to the contrary notwithstanding,
Obligors shall remain liable under each contract or agreement comprised in the
Collateral to be observed or performed by them thereunder. A Co-Agent shall not
have any obligation or liability under any such contract or agreement by reason
of or arising out of this Agreement or the receipt by a Co-Agent of any payment
relating to any of the Collateral, nor shall a Co-Agent be obligated in any
36
43
manner to perform any of the obligations of Obligors under or pursuant to any
such contract or agreement, to make inquiry as to the nature or sufficiency of
any payment received by a Co-Agent in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to Co-Agents or to which Co-Agents may be entitled at any time or
times. Co-Agents' sole duty with respect to the custody, safe keeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code of the State of California or otherwise, shall be
to deal with such Collateral in the same manner as Co-Agents deal with similar
property for their own accounts.
SECTION 10.2. Rights and Remedies Upon Event of Default.
(a) Remedies. If an Event of Default shall have occurred and be
continuing, Co-Agents may, without notice to or demand upon Obligors, declare
this Agreement to be in default, and Co-Agents shall thereafter have in any
jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies available under contract and applicable law, the rights and
remedies of a secured party under the Uniform Commercial Code, including,
without limitation, the right to take possession of the Collateral, and for that
purpose Co-Agents may, so far as Obligors can give authority therefor, enter
upon any premises on which the Collateral may be situated and remove the same
therefrom. Co-Agents may in their discretion require Obligors to assemble all or
any part of the Collateral at such location or locations within the state(s) of
Obligors' principal offices(s) or at such other locations as Co-Agents may
designate. Unless the Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Co-Agents
shall give to Obligors at least ten (10) Business Days' prior written notice of
the time and place of any public sale of Collateral or of the time after which
any private sale or any other intended disposition is to be made. Obligors
hereby acknowledges that ten (10) Business Days' prior written notice of such
sale or sales shall be reasonable notice.
37
44
(b) No Election of Remedies. The election by Co-Agent of any
right or remedy will not prevent it from exercising any other right or remedy
against Obligors. All rights and remedies are cumulative.
(c) Sales of Collateral. Any item of Collateral may be sold for
cash or other value at public or private sale or other disposition and the
proceeds thereof collected by or for the Significant Stockholders. Obligors
agree to promptly execute and deliver, or promptly cause to be executed and
delivered, such instruments, documents, assignments, waivers, certificates and
affidavits and supply or cause to be supplied such further information and take
such further action as Co-Agents may require in connection with any such sale or
disposition. Co-Agents will have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in Obligors, which right or equity is hereby waived or
released.
(d) Application of Proceeds. The proceeds of all sales and
collections in respect of the Collateral, the application of which is not
otherwise specifically herein provided for, will be applied as follows: (i)
first, to the payment of the costs and expenses of such sale or sales and
collections and the attorneys' fees and out-of-pocket expenses incurred by
Co-Agents relating to costs of collection; (ii) second, any surplus then
remaining will be applied first to the pro rata payment of all unpaid interest
accrued under each Note, and then to the pro rata payment of unpaid principal
under each Note; and (iii) third, any surplus then remaining will be paid to
Obligors, as applicable.
SECTION 10.3. Termination.
When all Obligations have been paid and performed in full and
discharged, all security interests and other Liens granted to Co-Agents under
this Agreement will terminate.
38
45
ARTICLE ELEVEN
Miscellaneous
SECTION 11.1. Ratable Sharing.
Significant Stockholders hereby agree among themselves that if any
of them shall, whether by voluntary payment, by realization upon security,
through the exercise of any right of set-off or recoupment, by counterclaim or
cross-action or by the enforcement of any right under the Financing Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, fees and other amounts then due and
owing to that Significant Stockholder hereunder or under the other Financing
Documents (collectively, the "Aggregate Amounts Due" to such Significant
Stockholder) which is greater than the proportion received by any other
Significant Stockholder in respect of the Aggregate Amounts Due to such other
Significant Stockholder, then the Significant Stockholder receiving such
proportionately greater payment shall (i) notify Co-Agents and each other
Significant Stockholder of the receipt of such payment and (ii) apply a portion
of such payment to purchase participations (which it shall be deemed to have
purchased from each seller of a participation simultaneously upon the receipt by
such seller of its portion of such payment) in the Aggregate Amounts Due to the
other Significant Stockholders so that all such recoveries of Aggregate Amounts
Due shall be shared by all Significant Stockholders in proportion to the
Aggregate Amounts Due to them; provided that if all or part of such
proportionately greater payment received by such purchasing Significant
Stockholder is thereafter recovered from such Significant Stockholder upon the
bankruptcy or reorganization of Parent or the Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to such purchasing Significant Stockholder
ratably to the extent of such recovery, but without interest. Obligors expressly
consent to the foregoing arrangement and agree that any holder of a
participation so purchased may exercise any and all rights of set-off,
recoupment or counterclaim with respect to any and all monies owing by Parent or
the Company to that holder with respect thereto as fully as if that holder were
owed the amount of the participation held by that holder.
39
46
SECTION 11.2. Set Off.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, Obligors are hereby
authorized by each Significant Shareholder at any time or from time to time,
without notice to Significant Shareholders or to any other Person, any such
notice being hereby expressly waived, to set off, recoup or to appropriate and
to apply any and all indebtedness at any time held or owing by Obligors to or
for the credit or the account of Significant Stockholders against and on account
of the obligations and liabilities of Significant Stockholders to Obligors
arising out of indemnity claims of Parent to the extent that such claims have
been resolved in Parent's favor in accordance with the Indemnity Section and the
Escrow Agreement. Any such setoff, recoupment, appropriation or application
shall be subject to the terms, conditions and limitations of the Indemnity
Section and Escrow Agreement. Except as provided in this Section 11.2 and in the
Indemnity Section and Escrow Agreement, Obligors shall have no other right of
setoff or recoupment with respect to the Obligations.
SECTION 11.3. Governing Law.
The internal laws of the State of California (irrespective of its
choice of law principles) will govern the validity of the Financing Documents,
the construction of their terms, and the interpretation and enforcement of the
rights and duties of the parties thereto.
SECTION 11.4. Assignment; Successors and Assigns.
Except as set forth in Section 5.1, no party hereto may assign or
delegate any of its rights or obligations under the Financing Documents without
the prior written consent of the Obligors and Requisite Stockholders. Any
purported assignment not permitted by this Section shall be void. The Financing
Documents will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
SECTION 11.5. Severability.
If any provision of this Agreement, or the application thereof, is
for any reason held to any extent to be invalid or unenforceable, the remainder
of this Agreement and
40
47
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such unenforceable provision of this Agreement
with a valid and enforceable provision that will achieve, to the extent
possible, the economic, business and other purposes of the void or unenforceable
provision.
SECTION 11.6. Counterparts.
This Agreement may be executed in counterparts, each of which will
be an original as regards any party whose name appears thereon and all of which
together will constitute one and the same instrument. This Agreement will become
binding when one or more counterparts hereof, individually or taken together,
bear the signatures of all parties reflected hereon as signatories.
SECTION 11.7. Other Remedies.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby or by law on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
SECTION 11.8. Amendment and Waivers.
Any term or provision of this Agreement may be amended only by a
writing signed by Obligors and Requisite Stockholders. The observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by a writing signed by
the party to be bound thereby. The waiver by a party of any breach hereof or
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. The failure of any party
to enforce any of the provisions hereof or any other Financing Document will not
be construed to be a waiver of the right of such party thereafter to enforce
such provisions.
41
48
SECTION 11.9. Expenses.
Each party will bear its respective expenses and fees of its own
accountants, attorneys, investment bankers and other professionals incurred with
respect to the execution of this Agreement, the other Financing Documents and
the transactions contemplated hereby, except that Obligors shall bear, or
reimburse Co-Agents for, reasonable fees and expenses incurred by Co-Agents in
preparing and filing the documents described in Section 10.1(d) hereof.
SECTION 11.10. Attorneys' Fees.
Should suit be brought to enforce or interpret any part of this
Agreement or the other Financing Documents, the prevailing party will be
entitled to recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees to be fixed by the court (including without
limitation, costs, expenses and fees on any appeal). The prevailing party will
be entitled to recover its costs of suit, regardless of whether such suit
proceeds to final judgment.
SECTION 11.11. Notices.
Any notice or other communication required or permitted to be given
under this Agreement will be in writing, will be delivered personally, by mail
or express delivery, postage prepaid, or telecopy (confirmed in writing) and
will be deemed given upon actual delivery or, if mailed by registered or
certified mail, on the third business day following deposit in the mails,
addressed as follows:
(i) If to Parent and/or the Company:
Tekelec
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
42
49
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to the Co-Agents and/or Significant
Stockholders:
▇▇▇▇▇▇ ▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
IEX Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as the party in question may have furnished to
the other parties by written notice given in accordance with this Section 11.11.
43
50
SECTION 11.12. Construction of Agreement.
The language hereof will not be construed for or against any party. A
reference to an article, Section or exhibit will mean an article or Section in,
or an exhibit to, this Agreement, unless otherwise explicitly set forth. The
titles and headings in this Agreement are for reference purposes only and will
not in any manner limit the construction of this Agreement. For the purposes of
such construction, this Agreement will be considered as a whole.
SECTION 11.13. Further Assurances.
Each party agrees to cooperate fully with the other party and to
execute such further instruments, documents and agreements and to give such
further written assurances as may be reasonably requested by the other parties
to evidence and reflect the transactions provided for herein and to carry into
effect the intent of this Agreement.
SECTION 11.14. Other Waivers.
Until the Obligations are satisfied in full, (a) Parent and the Company
each waive, to the fullest extent permitted by law, any defense or benefit that
may be derived from or afforded by law that limits the liability of or
exonerates guarantors or sureties, including, without limitation, California
Civil Code sections 2809, 2810, 2819, 2845, 2847, 2849 and 2850, and (b) neither
Parent nor the Company shall pursue rights of subrogation or contribution
against the other with respect to the Obligations.
SECTION 11.15. Entire Agreement
This Agreement, the Notes, the exhibits hereto and thereto and
agreements (or portions thereof) referenced herein or therein constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter of the Financing Documents and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect to the subject
matter of the Financing Documents. The express terms of the Financing Documents
control and supersede any course of performance or usage of trade inconsistent
with any of the terms of the Financing Documents.
44
51
SECTION 11.16. Submission to Jurisdiction; Waiver of Jury Trial
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY CALIFORNIA STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
LOS ANGELES IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE FINANCING DOCUMENTS AND/OR SEEKING INJUNCTIVE OR EQUITABLE
RELIEF, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE
PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT SUCH
PARTY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY
OBJECTION THAT SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT WITH RESPECT TO
ANY FINANCING DOCUMENT AND ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
45
52
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date first above written.
TEKELEC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: CFO and Vice President,
Finance
IEX CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: CEO
TEKNEKRON PARTNERS II
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: General Partner
IEX PARTNERS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: General Partner
TEKNEKRON CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: CEO
46
53
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ MAY
----------------------------------
▇▇▇▇▇ May
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
47
54
EXHIBIT A (Note and Security Agreement)
EXHIBIT B (Agreement and Plan of Reorganization)
THIS NOTE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF A NOTE AND
SECURITY AGREEMENT DATED AS OF MAY 7, 1999 (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF TEKELEC. EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS
NOTE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE `ACT'), OR (B) IF TEKELEC HAS
BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT
FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN
EFFECT THEREUNDER AND OTHER APPLICABLE SECURITIES LAWS.
FORM OF SECURED PROMISSORY NOTE
$________________ as of May 7, 1999
FOR VALUE RECEIVED, the undersigned Tekelec, a California corporation,
and IEX Corporation, a Nevada corporation, (collectively the "Obligors"), hereby
jointly and severally promise to pay to the order of [INSERT NAME OF SIGNIFICANT
STOCKHOLDER] ("Holder"):
(a) prior to or on the Maturity Date the principal amount of [INSERT
AMOUNT] DOLLARS ($_______________), evidencing the indebtedness owing by the
Obligors to Holder pursuant to the Note and Security Agreement dated as of May
7, 1999 (as amended and in effect from time to time, and as subject by its terms
to the Agreement and Plan of Reorganization, dated April 20, 1999 and other
documents referenced in such Note and Security Agreement, the "Note Agreement"),
by and among the Obligors and the Significant Stockholders; and
(b) interest from the date hereof on the principal amount from time
to time outstanding to and including the maturity hereof at the rates and terms
and in all cases in accordance with the terms of the Note Agreement.
This Note evidences indebtedness under and has been issued by the
Obligors in accordance with the terms of the Note Agreement. Holder is entitled
to the benefits of
55
the Note Agreement and may enforce the agreements of the Obligors contained
therein, and any holder hereof may exercise the respective remedies provided for
thereby or otherwise available in respect thereof, all in accordance with the
respective terms thereof. All capitalized terms used in this Note and not
otherwise defined herein shall have the same meanings herein as in the Note
Agreement.
The Obligors have the right, and the obligation under certain
circumstances, to prepay the whole or part of the principal of this Note on the
terms and conditions specified in the Note Agreement.
If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Note Agreement.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other rights of
Holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar or waiver of the same or any other right on any future occasion.
Obligors hereby waive presentment, demand, notice, notice of
acceleration, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
assents to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of collateral and to the
addition or release of any other party or person liable.
THIS NOTE AND THE OBLIGATIONS OF OBLIGORS HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
CALIFORNIA (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OR LAW).
OBLIGORS AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN
ANY CALIFORNIA STATE OR FEDERAL COURT SITTING IN THE COUNTY OF LOS ANGELES AND
CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON OBLIGORS BY MAIL AT THE ADDRESS
SPECIFIED IN SECTION 11.11 OF THE NOTE AGREEMENT. OBLIGORS HEREBY WAIVE TRIAL BY
JURY AND ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.
56
IN WITNESS WHEREOF, each of the undersigned, jointly and severally, has
caused this Note to be signed by its duly authorized officer as of the day and
year first above written.
TEKELEC
By:_______________________________
Title:
IEX CORPORATION
By:_______________________________
Title: