Exhibit 99.2
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of January 18, 2001 (this "Agreement"), by and
between Sonus Networks, Inc., a Delaware corporation (the "Parent"), and
Xxxxxxxx Xxxxxx (the "Pledgor").
RECITALS
A. Employment Agreements. The Parent, telecom technologies, inc. (the
"Company") and the Pledgor have entered into an Employment Agreement dated as of
the date hereof (the "AA Employment Agreement") (capitalized terms used herein
and not otherwise defined having the same meanings ascribed to them in the AA
Employment Agreement). In addition, the Parent, the Company and Xxxxx Xxxxxx
have entered into an Employment Agreement, dated as of the date hereof (the "HA
Employment Agreement," and together with the AA Employment Agreement, the
"Employment Agreements").
B. The Pledge. Pursuant to Section 9 of the Employment Agreements, the
Pledgor has agreed to secure certain contingent payment obligations that the
Pledgor and Xxxxx Xxxxxx may have to the Parent (the "Damages") by pledging to
the Parent 1,365,684 shares (the "Pledged Shares") of common stock, $0.001 par
value per share, of the Parent (the "Common Stock"), with the number of Pledged
Shares to be reduced as set forth herein, which number of shares has been agreed
by the Pledgor and the Company to represent on the date hereof, notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
with a "Fair Market Value" equal to $35,000,000 as called for on Exhibit C to
the Employment Agreements. In no event shall the Damages payable under the
Employment Agreements, either individually or together, be greater than the
lesser of $35 million or the Adjusted Damages Amount (as defined in Section 5)
in the aggregate.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Effectiveness. This Agreement shall become effective immediately upon
the "Effective Time" (the "Effective Time") of the merger contemplated by the
Agreement and Plan of Merger and Reorganization, dated as of the date hereof,
among the Company, the Parent and, Storm Merger Sub, Inc., a wholly-owned
subsidiary of the Parent.
2. Pledge. (a) As collateral security for the full and timely payment of
the principal of the Damages, the Pledgor hereby delivers, deposits, pledges,
transfers and assigns to the Company, in form transferable for delivery, and
Creates in the Parent a security interest in all the Pledged Shares and all
certificates or other instruments or documents evidencing the same now owned by
the Pledgor, and, except as set forth in Section 3(a) hereof, all proceeds
thereof (collectively worth any securities or property to be delivered to the
Pledgor pursuant to Section 3(b) hereof, and any Substitute Collateral delivered
pursuant to Section 5 below, the "Pledged Securities").
(b) Prior to the Effective Time, the Pledgor shall deliver to the Parent
appropriate undated security transfer powers duly executed in blank for the
Pledged Securities set forth above and will deliver appropriate undated security
transfer powers duly executed in blank for the Pledged Securities to be pledged
hereunder from time to time hereafter.
(c) At the end of each Period (as defined in the AA Employment Agreement),
Pledged Securities shall be returned to the Pledgor to the extent the Fair
Market Value of the Pledged Securities on the last day of the Period exceeds the
Adjusted Damages Amount.
3. Administration of Security. The following provisions shall govern the
administration of the Pledged Securities:
(a) So long as no Event of Default has occurred and is continuing (as used
herein, an "Event of Default" shall mean the Pledgor or Xxxxx Xxxxxx becoming
obligated to make a cash payment to the Parent under Section 9(a) of the
respective Employment Agreements and filing to make such cash payment when the
same shall be due) the Pledgor shall be entitled to vote the Pledged Securities
and to receive and retain all cash and, except as set forth in Section 3(b)
below, other distributions thereon and to give consents, waivers and
ratifications in respect thereof.
(b) If, while this Agreement is in effect, the Pledgor shall become
entitled to receive or shall receive any certificate representing Common Stock
in respect of any stock split, reverse stock split, stock dividend or any
distribution in connection with any reclassification, increase or reduction of
capital, in each case, with respect to the Pledged Securities, the Pledgor
agrees to accept the same as the Parent's agent and to hold the same in trust on
behalf of and for the benefit of the Parent and to deliver the same forthwith to
the Parent in the exact form received, with the endorsement of the Pledgor when
necessary and/or appropriate undated security transfer powers duly executed in
blank, to be held by the Parent, subject to the terms of this Agreement, as
additional collateral security for the Damages.
(c) The Pledgor shall immediately upon request by the Parent and in
confirmation of the security interests hereby created, execute and deliver to
the Parent such further instruments, deeds, transfers, assurances and
agreements, in such form and substance as the Parent shall reasonably request,
including any financing statements and amendments thereto, or any other
documents, required under Delaware or Texas law and any other applicable law to
protect the security interests created hereunder.
(d) Subject to any sale by the Parent or other disposition by the Parent of
the Pledged Securities pursuant to this Agreement, upon the earliest to occur of
(A) the death or Disability of the Pledgor, (B) the termination of the Pledgor's
employment (x) by the Parent other than for Cause or (y) by the Pledgor for Good
Reason, (C) a Change in Control (as defined in the Contingency Escrow
Agreement), (D) January 1, 2003, and (E) payment in cash or other satisfaction
by the Pledgor of the maximum amount of Damages that could be due pursuant to
Section 9(a) of the Employment Agreements, all remaining Pledged Securities
shall be returned promptly to the Pledgor and this Agreement shall terminate,
provided, that the Parent shall not be required to return any Pledged Securities
to the Pledgor to the extent that such Pledged Securities
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are the subject of a claim by the Parent under Section 9 of either of the
Employment Agreements under this Pledge Agreement.
(e) The Parent shall immediately upon request by the Pledgor execute and
deliver to the Pledgor such instruments, deeds, transfers, assurances and
agreements, in form and substance as the Pledgor shall reasonably request,
including the withdrawal or termination of any financing statements and
amendments thereto, or any filing, withdrawal, termination or amendment of any
other documents, required under Delaware or Texas law and any other applicable
law to evidence the termination of the security interest created hereunder and
the transfer of possession to the Pledgor with respect to any securities that
are required to be returned to the Pledgor in accordance with Section 3(d)
hereof
4. Remedies in Case of an Event of Default. (a) If an Event of Default has
occurred and is continuing, the Parent may take ownership (without payment of
any consideration) of such number of Pledged Securities as are necessary (based
upon the Fair Market Value thereof) to satisfy the unpaid portion of Damages due
and payable under Section 9(a) of either of the Employment Agreements by giving
written notice to the Pledgor (the "Enforcement Notice"). Effective upon the
giving of the Enforcement Notice, and without further action on the part of the
parties to this Agreement, the Parent shall be deemed to have taken ownership of
such Pledged Securities, and to have disposed of such Pledged Securities for
proceeds having a value equal to the Fair Market Value (as defined below) of
such Pledged Securities as of such date. The Parent shall be deemed to have
applied such proceeds to the payment of any unpaid Damages. Any excess net
proceeds from the deemed sale of such Pledged Securities shall be for the
Pledgor's account and shall be paid over to the Pledgor in cash no later than
three days after the giving of the Enforcement Notice.
(b) The "Fair Market Value" of the Pledged Securities as of any date for
purposes of this Agreement means the product of (i) the number of shares of
Pledged Securities on such date multiplied by (ii) the average of the daily
closing prices for a share of Common Stock for the five (5) trading days up to
and including the day that is two (2) trading days prior to the applicable date
(the "Average Closing Price"). The closing price for each day will be the last
reported sale price regular way or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices regular way,
in either case as reported on NASDAQ, or, if the Common Stock is not listed or
admitted to trading on NASDAQ at such time, on the principal securities exchange
on which the Common Stock is listed or admitted to trading, as officially
reported by such exchange, or, if the Common Stock is not listed or admitted to
trading on any securities exchange, the average of the closing bid and asked
prices as furnished by any NASDAQ firm as agreed to from time to time by the
Parent and the Pledgor for that purpose.
(c) Section 4(a) sets forth the exclusive remedies of the Parent in respect
of the Pledged Securities (but not with respect to an Event of Default in the
event the Fair Market Value of the Pledged Securities is less than the Adjusted
Damages Amount). The Parent hereby waives (to the extent that such remedy arises
solely by virtue of the security interest granted hereunder) any and all other
remedies in respect of the collateral that are or may be available to it
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as a secured party under the Delaware Uniform Commercial Code. Neither failure
nor delay on the part of the Parent to exercise any right, remedy, power or
privilege provided for in this Section 4 shall operate as a waiver thereof.
5. Substitute Collateral. The Pledgor may substitute, in whole or in part,
for the Pledged Securities any cash collateral (including a letter of credit) of
equal or greater value than the then current contingent Damages, as adjusted
from time to time under Section 9(a) of the respective Employment Agreements
("Adjusted Damages Amount") (the "Substitute Collateral"). From and after any
such substitution, the Pledged Securities shall be released from this Agreement
and the provisions of this Agreement shall apply to the Substitute Collateral to
the same extent that such provisions would have applied to the Pledged
Securities. Notwithstanding the foregoing, in no event shall Pledgor be entitled
to substitute any Substitute Collateral to the extent that, after such
substitution, the value of all of the Pledged Securities (including and
Substitute Collateral), with any Common Stock being valued at the Fair Market
Value of such Common Stock on the date of substitution, is not equal to the
lesser of Thirty-Five Million Dollars ($35,000,000) or the Adjusted Damages
Amount as of the date of such substitution.
6. Pledgor's Obligations Not Affected. The obligations of the Pledgor under
this Agreement shall remain in full force and effect without regard to, and
shall not be impaired or affected by (a) any subordination, amendment or
modification of or addition or supplement to the Employment Agreements or any
assignment or transfer of any thereof; (b) any exercise or non-exercise by the
Parent of any right, remedy, power or privilege under or in respect of this
Agreement, the Employment Agreements or any waiver of any such right, remedy,
power or privilege; (c) any waiver, consent, extension, indulgence or other
action or inaction in respect of this Agreement, the Employment Agreements or
any assignment or transfer of any thereof; (d) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or the like,
of the Parent, whether or not the Pledgor shall have notice or knowledge of any
of the foregoing; (e) any substitution of collateral pursuant to Section 5
above; or (f) any other act or omission to act or delay of any kind by the
Pledgor, the Parent or any other person or any other circumstance whatsoever
which might, but for the provisions of this clause (f), constitute a legal and
equitable discharge of the Pledgor's obligations hereunder.
7. Termination. Upon the earliest to occur of the events set forth in
Section 3(d) hereof, this Agreement shall terminate and the Parent shall return
to the Pledgor the remaining Pledged Securities as provided in such Section.
8. Notices. All notices or other communications required or permitted to be
given hereunder shall be delivered as provided in the AA Employment Agreement.
9. Binding Effect, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and nothing herein is intended or shall be construed to
give any other person any right, remedy or claim under, to or in respect of this
Agreement. No transfer, sale, pledge, hypothecation or other
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disposition of Pledged Securities by the Pledgor shall be permitted hereunder,
and any such transfer shall be null and void.
10. Miscellaneous. The Parent and its assigns shall have no obligation in
respect of the Pledged Securities, except to hold and dispose of the same in
accordance with the terms of this Agreement. Neither this Agreement nor any
provision hereof may be amended, modified, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of the amendment, modification, waiver, discharge or termination is
sought. The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware applicable to contracts made and to be performed entirely within
such State. This Agreement may be executed simultaneously in several
counterparts each of which is an original, but all of which together shall
constitute one instrument.
Remainder of Page Intentionally Left Blank
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
SONUS NETWORKS, INC.
By: /s/ Xxxxxx Xxxxx
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Name:
Title:
/s/ Xxxxxxxx Xxxxxx
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XXXXXXXX XXXXXX
