Exhibit 10.3
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STOCKHOLDERS' AGREEMENT
OF
SANTERA SYSTEMS INC.
DATED AS OF APRIL 30, 2003
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TABLE OF CONTENTS
Article I Definitions............................................................................................ 2
1.1 Definitions.................................................................................... 2
1.2 Usage Generally, Interpretation................................................................ 8
1.3 Effective Date................................................................................. 8
Article II Transfers............................................................................................. 8
2.1 Prohibited Transfers........................................................................... 8
2.2 Instrument of Accession........................................................................ 9
2.3 Right of First Refusal on Dispositions......................................................... 9
2.4 Bring-Along Right.............................................................................. 11
2.5 Sales to Competitors........................................................................... 13
2.6 Compliance with Securities Laws and Certain Tax Laws........................................... 13
Article III Call and Put Options................................................................................. 13
3.1 Tekelec Call Option............................................................................ 13
3.2 Put Option..................................................................................... 17
3.3 Legacy Options................................................................................. 23
Article IV Tekelec Option to Acquire Additional Shares of Series B Preferred Stock............................... 24
4.1 Number of Shares............................................................................... 24
4.2 Availability of Shares......................................................................... 24
4.3 Term of Option................................................................................. 24
4.4 Exercise of Option............................................................................. 24
4.5 Adjustments for Certain Events; Advance Notice................................................. 25
4.6 Transferability of Option...................................................................... 25
Article V Governance of Santera.................................................................................. 25
5.1 Board Representation........................................................................... 25
5.2 Supermajority Voting for Certain Corporate Actions............................................. 27
5.3 Attendance at Meetings......................................................................... 27
5.4 Committees..................................................................................... 27
5.5 Director Expenses.............................................................................. 27
Article VI Other Agreements Between the Stockholders............................................................. 28
6.1 Confidentiality................................................................................ 28
6.2 Non-Solicitation............................................................................... 28
6.3 Funding of Certain Redemption Rights........................................................... 29
6.4 Registration Rights with Respect to Tekelec Stock.............................................. 29
6.5 Information Rights............................................................................. 31
6.6 Visitation and Inspection...................................................................... 31
6.7 Set-Off........................................................................................ 32
Article VII Certificates......................................................................................... 32
Article VIII Termination......................................................................................... 33
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Article IX Miscellaneous......................................................................................... 34
9.1 Notices........................................................................................ 34
9.2 Remedies....................................................................................... 35
9.3 Expenses....................................................................................... 35
9.4 Binding Effect; Assignment..................................................................... 35
9.5 Amendment and Waiver........................................................................... 35
9.6 Counterparts................................................................................... 36
9.7 Headings....................................................................................... 36
9.8 Severability................................................................................... 36
9.9 Governing Law.................................................................................. 37
9.10 Further Assurances............................................................................. 37
9.11 Third Party Beneficiary........................................................................ 37
9.12 Dispute Resolution............................................................................. 37
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STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (the "Agreement") is entered into this
30th day of April, 2003 by and among Tekelec, a California corporation
("Tekelec"), Santera Systems Inc., a Delaware corporation ("Santera"), certain
of the stockholders of Santera on the date hereof and such additional parties
that may become parties hereto as Legacy Santera Stockholders (the "Legacy
Santera Stockholders") and Austin Ventures VI, L.P., a Delaware limited
partnership ("Austin Ventures"), as the Representative, as defined below.
RECITALS
A. Concurrently herewith, Tekelec, Merger Sub, Santera and
certain of the Legacy Santera Stockholders are entering into that certain
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which the
operations of Tekelec's packet telephony business unit (the "PTBU") will be
combined with the business operations of Santera, together with additional cash
infusions.
B. On or prior to the Closing Date, as that term is defined in
the Merger Agreement, certain Legacy Santera Stockholders will contribute an
aggregate of Twelve Million Dollars ($12,000,000) in cash to Santera in exchange
for a combination of convertible notes and Series D Preferred Stock of Santera.
C. On or prior to the Closing Date, as that term is defined in
the Merger Agreement, Tekelec will, and will cause its subsidiaries to,
contribute the PTBU (including specified liabilities) and Twenty-Eight Million
Dollars ($28,000,000) in cash to Merger Sub in exchange for an aggregate of one
hundred (100) shares of common stock of Merger Sub.
D. Upon consummation of the merger contemplated by the Merger
Agreement, Tekelec and its subsidiaries will receive twenty-eight thousand
(28,000) shares of Series B Preferred Stock, $0.001 per share (the "Series B
Preferred Stock"), of Santera, thirty-eight thousand (38,000) shares of Series A
Preferred Stock, $0.001 per share (the "Series A Preferred Stock" and, together
with the Series B Preferred Stock, the "Preferred Stock"), of Santera and one
(1) share of Common Stock, $0.001 per share (the "Common Stock"), of Santera in
exchange for one hundred one (101) shares of common stock of Merger Sub, all
subject to and on the terms and conditions set forth in the Merger Agreement.
E. Upon consummation of the merger contemplated by the Merger
Agreement, certain stockholders of Santera existing immediately prior to the
merger will receive an aggregate of sixty-two thousand (62,000) shares of Series
A Preferred Stock of Santera in exchange for shares of Series A-2 Preferred
Stock, Series B-2 Preferred Stock, Series C-2 Preferred Stock and Series D
Preferred Stock of Santera, all subject to and on the terms and conditions set
forth in the Merger Agreement.
F. As of the Closing Date, Tekelec will own thirty-eight percent
(38%) of the issued and outstanding Series A Preferred Stock and all of the
issued and outstanding Common Stock and Series B Preferred Stock of Santera, and
the Legacy Santera Stockholders will collectively own sixty-two percent (62%) of
the issued and outstanding Series A Preferred Stock of Santera.
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G. The parties hereto desire to promote their mutual interests by
imposing certain restrictions and obligations on each other and on the shares of
Stock and, further, to provide for matters pertaining to the management and
governance of Santera following the Effective Date.
NOW, THEREFORE, in consideration of the conditions and provisions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall, for purposes of this
Agreement, have the following meanings (terms defined in the singular or the
plural include the plural or the singular, as the case may be):
"Act" shall mean the Securities Act of 1933, as amended.
"Adjustment Factor" shall mean the aggregate percentage of
Common Stock not owned by Tekelec, by its wholly owned subsidiaries or by
Tekelec Designees and not considered Disputed Shares, assuming the conversion of
all then issued and outstanding shares of Preferred Stock (including any of such
shares that the holder thereof may not yet have the right to convert into shares
of Common Stock), as of the end of the Call Measurement Period or the Put
Measurement Period, as applicable.
"Affiliate" shall mean a person or entity that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the person or entity referred to. In this definition,
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person or entity,
whether through ownership of securities, by contract, or otherwise.
"Agreement" shall mean this Stockholders' Agreement, as the
same may be amended from time to time in accordance with the terms hereof.
"Amended and Restated Certificate of Incorporation" shall mean
the Amended and Restated Certificate of Incorporation of Santera in the form of
Exhibit M attached to the Merger Agreement, as the same may be amended from time
to time.
"Arbiter" shall have the meaning provided in Section 2.3(g).
"Austin Ventures" shall have the meaning provided in the
introduction hereto.
"Board" shall mean the board of directors of Santera.
"Bring-Along Notice" shall have the meaning provided in
Section 2.4(a).
"Bylaws" shall mean the bylaws of Santera as in effect as of
the date of this Agreement, as the same may be amended from time to time in
accordance with the terms thereof and the Amended and Restated Certificate of
Incorporation.
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"Call Closing Date" shall have the meaning provided in Section
3.1(e).
"Call Measurement Period" shall have the meaning provided in
Section 3.1(a).
"Call Notice" shall have the meaning provided in Section
3.1(a).
"Call Price" shall have the meaning provided in Section
3.1(a).
"Call Price Notice" shall have the meaning provided in Section
3.1(c)
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of Santera as in effect as of the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange
Commission.
"Common Stock" shall mean common stock, par value $0.001 per
share, of Santera that is authorized on the Effective Date following the Merger.
"Confidential Information" shall mean (a) data, reports,
interpretations, forecasts, records, statements, whether oral or written, and
documents of any kind to the extent that they contain information concerning
Santera, any party hereto or any of their respective Affiliates which is not
available to the general public and (b) information, reports, analyses,
compilations, studies, interpretations, forecasts, records or other material
prepared by a party hereto containing any of the information described in (a)
above; provided, however, that Confidential Information shall not include
information which has become generally available to the public other than as a
result of a disclosure by the receiving party.
"Consultative Period" shall have the meaning provided in
Section 3.1(d).
"Dispute" shall have the meaning provided in Section 9.12.
"Disputed Shares" shall mean the number of shares of Series A
Preferred Stock specified by Tekelec in a written notice to Santera as being the
subject of a dispute notice pursuant to the terms of the Escrow Agreement (it
being understood that unless Tekelec delivers a notice to Santera specifying a
lower amount, which it may do if it intends to exercise its set-off rights
contained herein or in the other Ancillary Agreements, a number of shares of
Series A Preferred Stock equal to the amounts disputed under the Escrow
Agreement divided by 1,000 shall be considered Disputed Shares).
"Effective Date" shall have the meaning provided in Section
1.3.
"Escrow Agreement" means the Escrow Agreement dated as of the
date hereof among Tekelec, Santera, the Representative, the preferred
stockholders of Santera and the Escrow Agent, which agreement is in
substantially the form attached to the Merger Agreement as Exhibit F.
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"Exercise Period" shall have the meaning provided in Section
2.3(d).
"GAAP" shall mean United States generally accepted accounting
principles.
"Initial Business Plan" shall mean the Santera business plan
in the form previously approved by the Board.
"Instrument of Accession" shall mean that certain instrument
of accession to this Agreement, in substantially the form attached hereto as
Exhibit A.
"Joint Arbitrator" shall have the meaning provided in Section
3.1(d).
"Legacy Santera Stockholders" shall have the meaning set forth
in the introduction hereto.
"Legacy Option" shall mean any Option issued by Santera prior
to the Effective Date that remains outstanding after the Effective Date.
"Majority Holder" shall mean any Stockholder which directly
and/or indirectly through its wholly owned subsidiaries would own a majority of
the issued and outstanding shares of Common Stock assuming the conversion of all
issued and outstanding shares of Preferred Stock (including any of such shares
that the holder thereof may not yet have the right to convert into shares of
Common Stock). For the avoidance of doubt, Tekelec shall become a Majority
Holder on the Effective Date.
"Majority Offer" shall have the meaning provided in Section
2.4.
"Majority Sale" shall have the meaning provided in Section
2.4.
"Merger" shall have the meaning provided in the recitals.
"Merger Agreement" shall mean that Agreement and Plan of
Merger dated as of the date hereof among Tekelec, Merger Sub, Santera, certain
of the Legacy Santera Stockholders and the Representative.
"Merger Sub" shall mean Luke Acquisition Corp., a Delaware
corporation.
"Net Income" shall mean Revenue less all operating and other
expenses incurred in connection therewith (including depreciation and
amortization, selling, general and administrative expenses which includes
allocations of corporate services provided by Tekelec to or for the benefit of
Santera, and interest and tax expense) excluding losses associated with a
write-off resulting from an impairment of intangible assets under FAS 142 or FAS
144 (only to the extent applicable to impairments of intangible assets), and
excluding any impact of granting or exercising stock options as a result of this
transaction due to a change in GAAP in which the expensing of stock options is
required, all as computed in accordance with GAAP and Tekelec's accounting
practices, as consistently applied by Santera. All allocated expenses will be
subject to a Transition Services Agreement, as that term is defined in the
Merger Agreement, dated as of the Effective Date. The
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pricing of allocated services will be subject to periodic review as defined in
the Transition Services Agreement.
"Net Income Consultative Period" shall have the meaning
provided in Section 3.2(f).
"Net Income Dispute Notice" shall have the meaning provided in
Section 3.2(d).
"Net Income Joint Arbitrator" shall have the meaning provided
in Section 3.2(f).
"Notice of Dispute" shall mean a written notice signed by the
Representative to Tekelec delivered pursuant to Section 3.1(d) or 3.2(e),
specifying in reasonable detail all points of disagreement with Tekelec'
calculation of the Call Price, the Put Price, or Net Income, or such other
claims or matters, as the case may be.
"Offer" shall have the meaning provided in Section 2.3(a).
"Offered Shares" shall have the meaning provided in Section
2.3(a).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, call, right, "phantom" stock right or other
contract or arrangement that gives the right to (a) purchase or otherwise
receive or be issued any shares of capital stock of such Person or any security
of any kind convertible into or exchangeable or exercisable for any shares of
capital stock of such Person or (b) receive or exercise any benefits or rights
similar to any rights enjoyed by or accruing to the holder of shares of capital
stock of such Person, including any rights to participate in the equity or
income of such Person or to participate in or direct the election of any
directors or officers (or comparable Persons) of such Person or the manner in
which any shares of capital stock of such Person are voted.
"Person" shall mean an individual, sole proprietorship,
corporation, partnership, limited partnership, limited liability company, joint
venture, trust, statutory trust, unincorporated organization, mutual company,
joint stock company, estate, union, employee organization, bank, trust company,
land trust or other organization, whether or not a legal entity.
"Preferred Stock" shall mean the Series A Preferred Stock and
the Series B Preferred Stock, collectively.
"Pro Rata" shall mean a fraction, the numerator of which is
the number of shares of Common Stock which the applicable Qualifying Stockholder
then owns and would own upon conversion of all of such Stockholder's Preferred
Stock and the denominator of which is the total number of shares of Common Stock
then owned and that would be owned upon conversion of all shares of Preferred
Stock owned by all of the Qualifying Stockholders.
"Put Closing Date" shall have the meaning provided in Section
3.2(f).
"Put Measurement Period" shall have the meaning provided in
Section 3.2(a).
"Put Notice" shall have the meaning provided in Section
3.2(a).
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"Put Price" shall have the meaning provided in Section 3.2(a).
"Put Price Notice" shall have the meaning provided in Section
3.2(d).
"Qualifying Stockholder" shall mean Tekelec and any other
Stockholder which, after giving effect to Section 2.3(h), owns at least 1,000
shares of Preferred Stock (as adjusted for any stock dividends, combinations,
reverse stock splits, stock splits, recapitalizations, reorganizations,
reclassifications or other similar event with respect to such shares).
"Recapitalization" shall mean the approval by the requisite
stockholders of Santera of, and the filing with the Delaware Secretary of State
and effectiveness of, the Certificate of Amendment, as that term is defined in
the Merger Agreement.
"Redpoint Ventures" shall mean Redpoint Ventures II, L.P., a
Delaware limited partnership.
"Registration Statement" shall have the meaning provided in
Section 3.1(b).
"Remaining Shares" shall have the meaning provided in Section
2.3(c).
"Representative" shall mean Austin Ventures VI, L.P., who has
been appointed the representative of the Legacy Santera Stockholders hereunder
and under all of the applicable Ancillary Agreements, as that term is defined in
the Merger Agreement, pursuant to the terms of the Escrow Agreement, or any
successor appointed pursuant to the terms of the Escrow Agreement.
"Representative's Arbitrator" shall have the meaning provided
in Section 3.1(d).
"Representative's Net Income Arbitrator" shall have the
meaning provided in Section 3.2(f).
"Revenue" shall mean (a) revenues earned by Santera as a
result of the sale of products or the provision of services, after taking into
consideration returned products and allowances for price reductions, credits, or
discounts, computed in accordance with GAAP and Tekelec's accounting practices,
as consistently applied by Santera plus (b) to the extent not otherwise included
in (a) above, revenues earned by Tekelec or its Affiliates from the sale of
Santera's packet telephony products, after taking into consideration returned
products and allowances for price reductions, credits, or discounts, computed in
accordance with GAAP, as consistently applied by Tekelec; provided, that in no
event shall Revenue include any revenue earned by Tekelec or its Affiliates as a
result of the sale by Tekelec or its Affiliates of packet telephony products
other than Santera's packet telephony products, including but not limited to
Tekelec's signaling gateway products, or revenue from any agreements not
assigned or transferred to Santera, or the provision of services with respect
thereto. For purposes of this definition, Affiliate shall not include Santera.
"Revenue Notice" shall have the meaning provided in Section
3.1(d).
"Right of First Refusal Notice" shall have the meaning
provided in Section 2.3(a).
"Santera" shall mean Santera Systems Inc., a Delaware
corporation.
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"Securities" shall mean equity securities, instruments
convertible into or exchangeable for equity securities, or any Options to
acquire any of the foregoing.
"Series A Preferred Stock" shall mean the Series A Convertible
Preferred Stock, par value $0.001 per share, of Santera that is authorized on
the Effective Date following the Merger.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $0.001 per share, of Santera that is authorized on
the Effective Date following the Merger.
"Stock" shall mean the Common Stock and the Preferred Stock,
collectively.
"Stockholder" or "Stockholders" shall mean Tekelec, the Legacy
Santera Stockholders and any Person who becomes a Stockholder by Instrument of
Accession. For the avoidance of doubt, the Representative, in its capacity as
record owner of certain shares of Stock as contemplated by the Escrow Agreement,
shall be considered a Stockholder hereunder for all purposes with respect to
those shares of Stock registered in its name and held for the benefit of certain
stockholders of Santera pursuant to the terms and subject to the conditions
contained in the Escrow Agreement.
"Tekelec" shall mean Tekelec, a California corporation.
"Tekelec Designee" shall mean all direct and indirect
transferees of shares of Preferred Stock or Common Stock owned by Tekelec or by
a wholly owned subsidiary of Tekelec, other than a transferee that is a wholly
owned subsidiary of Tekelec.
"Tekelec Option" has the meaning set forth in Article IV.
"Tekelec's Arbitrator" shall have the meaning provided in
Section 3.1(d).
"Tekelec's Net Income Arbitrator" shall have the meaning
provided in Section 3.2(f).
"Tekelec Stock" shall have the meaning provided in Section
3.1(b).
"Termination Date" shall mean the earliest to occur of (x) the
date that all shares of capital stock of Santera not owned by Tekelec, its
wholly owned subsidiaries or any Tekelec Designees, other than the Disputed
Shares, are redeemed pursuant to Article Fourth, Section B.(ii) of the Amended
and Restated Certificate of Incorporation, (y) March 1, 2008 if no Call Notice
or Put Notice under this Agreement or no notice of redemption under Article
Fourth, Section B.(ii)(I) or (II) of the Amended and Restated Certificate of
Incorporation has been delivered prior to March 1, 2008, or (z) the date that
Tekelec acquires all Stock of Santera not owned by Tekelec, its wholly owned
subsidiaries or any Tekelec Designees, other than the Disputed Shares, pursuant
to the exercise of the call option by Tekelec under Section 3.1 hereof or the
put option by the Representative under Section 3.2 hereof.
"Transfer" shall mean, whether directly or indirectly by
merger, operation of law, bequest or otherwise, any sale, assignment,
conveyance, transfer, donation or any other means to dispose of, or pledge,
hypothecate or otherwise encumber in any manner whatsoever, or permit or suffer
any encumbrance.
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1.2 Usage Generally, Interpretation. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. All references herein to articles, sections, subsections or paragraphs
shall be deemed to be references to articles, sections, subsections or
paragraphs of this Agreement unless the context otherwise requires. Unless
otherwise expressly provided herein, any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute, as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. Unless otherwise expressly provided herein,
all references to "as converted" or "as if converted" shall mean assuming
conversion of all then issued and outstanding shares of Preferred Stock
(including any of such shares that the holder thereof may not yet have the right
to convert into shares of Common Stock).
1.3 Effective Date. This Agreement shall become effective
simultaneously with the Closing, as that term is defined in the Merger
Agreement, of the transactions contemplated by the Merger Agreement.
ARTICLE II
TRANSFERS
2.1 Prohibited Transfers Each Stockholder agrees not to Transfer
any Stock owned by it, except (i) for Transfers of Stock to Santera, (ii)
Tekelec and/or its Affiliates shall have the right to transfer Stock to any
direct or indirect wholly owned subsidiary of Tekelec (provided the same
executes an Instrument of Accession as provided by Section 2.2) and/or pledge,
hypothecate, grant a security interest in and otherwise encumber Stock in
connection with the incurrence by Tekelec or its Affiliates of indebtedness for
borrowed money and nothing herein shall prohibit any Transfer of the Stock owned
by Tekelec or its Affiliates in connection with any sale of all or substantially
all of the stock or assets of Tekelec or any acquisition of Tekelec and/or its
Affiliates by merger or otherwise, (iii) to the extent agreed to by the holders
of not less than sixty-five percent (65%) of the Stock, calculated on a fully
converted basis, (iv) any Stockholder may Transfer some or all of the Stock
owned by such Stockholder to another Stockholder (provided that such Stockholder
is a party to this Agreement and the Escrow Agreement), including any Transfers
to Santera contemplated by the Escrow Agreement (provided that the
Representative, in its capacity as record owner, may not Transfer any of the
shares of Stock registered in its name and held for the benefit of certain
stockholders of Santera pursuant to the terms and subject to the conditions
contained in the Escrow Agreement except as otherwise permitted under Article IV
of the Escrow Agreement), (v) any time after the Termination Date, so long as
approved in advance by the Board of Directors (such approval not to be
unreasonably withheld), any Transfer of Stock owned by a Stockholder to
stockholders, partners or members of such Stockholder upon the liquidation of
such Stockholder or a distribution to the stockholders, partners or members of
such Stockholder, (vi) upon the death of any Stockholder, such Stock may be
transferred to one, but only one, beneficiary or, if there is more than one
beneficiary, then such Stock shall be transferred to, and remain in, such
Stockholder's estate, by operation of law or (vii) as otherwise expressly
provided in this Agreement. Notwithstanding the foregoing or anything else
contained herein to the contrary, without the prior written consent of Tekelec,
no Stockholder may Transfer any shares of Stock (including, without limitation,
any such Transfers otherwise permitted by this Section 2.2 or as contemplated by
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Sections 2.3 or 2.4) in the event that such proposed Transfer would cause the
transactions contemplated by the Merger Agreement to fail to qualify as a
tax-free transaction under Section 351 of the Code. Any purported Transfer in
violation of this Agreement shall be invalid and void, and shall not be
registered in Santera's or any other Person's books or otherwise recognized for
any purpose (including for the purpose of determining voting rights or
entitlement to dividends or other distributions).
2.2 Instrument of Accession. Every stockholder of Santera who is
not an original signatory to this Agreement and every Person who becomes a
stockholder of Santera after the Effective Date shall, as a condition to
becoming a Stockholder, become a party to this Agreement by signing an
Instrument of Accession hereto, and, unless such new Stockholder is a
wholly-owned subsidiary of Tekelec, the Escrow Agreement by signing an
Instrument of Accession thereto. No Person shall become an owner of record of
any shares of Stock of Santera through Transfer from another Stockholder until
Santera has received an Instrument of Accession signed by such Person, and no
transfer of shares of Stock shall be effective for any purpose unless and until
recorded on Santera's record of stockholders upon surrender of the certificates
representing such Stock, duly endorsed for Transfer. Thereafter, a transferee
shall be entitled to the rights and privileges of a Stockholder set forth in
this Agreement and shall be bound and obligated by the provisions of this
Agreement.
2.3 Right of First Refusal on Dispositions. Except as otherwise
permitted in Section 2.1 or as contemplated by Article III, a Stockholder may
Transfer all or any portion of the Stock owned by it at any time to any other
Person only in strict accordance with the following restrictions and after
complying in all respects with the following procedures:
(a) Offer of Sale; Written Notice. If a Stockholder
desires to Transfer all or any portion of the Stock owned by it from time to
time (the "Offered Shares"), it shall first obtain a bona fide written offer (an
"Offer") from an unaffiliated third party purchaser to purchase the Offered
Shares, which Offer the Stockholder is willing to accept, and promptly send a
written notice (a "Right of First Refusal Notice") and a copy of the Offer to
Santera and to the non-selling Qualifying Stockholders. The Offer shall set
forth the number of Offered Shares, the identity of the third party purchaser,
the purchase price and all other material terms and conditions thereof.
(b) Santera's Option to Purchase All of the Offered
Shares. Santera shall have the right, but not the obligation, to purchase all of
the Offered Shares, at the price and on the terms and conditions of the Offer.
The right provided for in this Section 2.3(b) shall be exercisable by Santera by
giving written notice to the selling Stockholder and the non-selling Qualifying
Stockholders within thirty (30) calendar days after receipt of the Right of
First Refusal Notice. In the event Santera exercises its right to purchase all
of the Offered Shares, the closing of such purchase shall take place at the
offices of Santera five (5) days after the expiration of the thirty (30) day
period (or the first business day thereafter).
(c) Santera's Conditional Option to Purchase None or Less
Than All of the Offered Shares. In the event Santera does not desire to exercise
its option within such thirty (30) day period with respect to all of the Offered
Shares, Santera shall have the right, but not the obligation, to purchase less
than all of the Offered Shares, at the price and on the terms and conditions of
the Offer, subject, however, to the conditions contained in this Section 2.3(c).
In the event Santera does not desire to purchase any of the Offered Shares or
desires to purchase less than
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all of the Offered Shares, Santera shall provide written notice to the selling
Stockholder and the non-selling Qualifying Stockholders within thirty (30)
calendar days after receipt of the Right of First Refusal Notice which notice
shall describe the number of Offered Shares, if any, to be purchased by Santera
and the number of Offered Shares for which Santera has not exercised its option
(the "Remaining Shares"), which shares shall be available for purchase by the
Qualifying Stockholders in the manner set forth in Section 2.3(d). Santera shall
not have the right to purchase less than all of the Offered Shares unless
Santera, together with the non-selling Qualifying Stockholders elect, as among
themselves, to purchase all (and not less than all) of the Offered Shares.
(d) Stockholders' Option to Purchase; Reoffer to Santera.
Each non-selling Qualifying Stockholder shall have the right, but not the
obligation, to purchase all, but not less than all, of his, her or its Pro Rata
share of the Remaining Shares, at the price and on the terms and conditions of
the Offer, subject however to the conditions contained in this Section 2.3(d).
The right to purchase such Pro Rata share of such Remaining Shares shall be
exercisable by such non-selling Qualifying Stockholders by giving written notice
to the selling Stockholder, Santera and the other non-selling Qualifying
Stockholders within thirty (30) calendar days after receipt of the notice from
Santera pursuant to Section 2.3(b) or 2.3(c), as the case may be (the "Exercise
Period"). The non-selling Qualifying Stockholders which elect to purchase their
Pro Rata share of the Remaining Shares shall also have a right of overallotment
such that if any such non-selling Qualifying Stockholder fails to accept the
Offer as to its Pro Rata share of the Remaining Shares, such non-selling
Qualifying Stockholders who have exercised such right shall have the right to
purchase up to the balance of the Remaining Shares which remain available for
purchase. Such right of overallotment may be exercised by any such non-selling
Qualifying Stockholder by providing to the selling Stockholder, Santera and the
other non-selling Qualifying Stockholders which have elected to purchase
Remaining Shares written notice, on or before the sixtieth (60th) day following
the date of the Right of First Refusal Notice, of such Stockholder's election to
accept the Offer as to more than its Pro Rata share of the Remaining Shares,
specifying the number of additional Remaining Shares it so wishes to purchase.
If such non-selling Qualifying Stockholders have oversubscribed for such
overallotment, then such overallotment shall be allocated among such non-selling
Qualifying Stockholders on a pro rata basis among themselves, with pro rata
determined by the number of shares of Common Stock that are then owned or would
be owned by such Stockholders upon conversion of all of the shares of Preferred
Stock then owned by such Stockholders. If such non-selling Qualifying
Stockholders have subscribed for the exact number of shares available for
overallotment, then each such non-selling Qualifying Stockholder shall be
entitled to purchase the number of such overalloted shares as such non-selling
Qualifying Stockholder has elected to purchase. If such non-selling Qualifying
Stockholders have undersubscribed for such overallotment, then Santera shall
have the right to elect to purchase any Remaining Shares which have not been
elected to be purchased, by providing to the selling Stockholder and the
non-selling Qualifying Stockholders which have elected to purchase Remaining
Shares written notice, on or before the sixty-first (61st) day following the
date of the Right of First Refusal Notice, of Santera's election to accept the
Offer as to such Remaining Shares. In the event Santera and the non-selling
Qualifying Stockholders have provided notices exercising their right to purchase
all (and not less than all) of the Offered Shares, the closing of such purchase
and sale shall take place at the offices of Santera five (5) days after the
expiration of the sixty (60) day period described above (or the first business
day thereafter). The non-selling Qualifying Stockholders shall not have the
right to purchase less than all of the Offered Shares unless, such non-selling
Qualifying Stockholders, together with Santera elect, as among themselves, to
purchase all (and not less than all) of the Offered Shares.
10
(e) Binding Nature of Notices. The Offer and any notices
delivered under this Section 2.3, taken together, shall constitute the
legally-binding obligation of Santera or the Stockholder delivering such notice
to consummate the purchase of the Remaining Shares on the terms and conditions
of the Offer and the terms set forth herein. Santera and the applicable
Stockholders may agree on other documentation in respect of the purchase and
sale, but the failure to agree on such documentation shall not relieve Santera
or any of the Stockholders of any of their obligations hereunder.
(f) Sale to Third Party. If Santera and the non-selling
Qualifying Stockholders decline to purchase all of the Offered Shares or fail to
give the written notices referred to in this Section 2.3 within the relevant
Exercise Periods, the selling Stockholder shall have the right, to sell all, but
not less than all, of the Offered Shares to the third party purchaser which
originally made the Offer on terms and conditions no more favorable to the third
party purchaser than those set forth therein. Any sale of Offered Shares
pursuant to this Section 2.3 shall close within thirty (30) calendar days from
the expiration of the last of the relevant Exercise Periods described above,
provided that if the sale of the Offered Shares is not completed in that period,
the provisions of Section 2.1 shall again apply and no Transfer may be made in
reliance upon this Section 2.3 without complying again with all its provisions.
(g) Non-Cash Consideration. If any portion of the price
in an Offer is not cash, the cash equivalent value of the non-cash consideration
will be reasonably determined by the Board of Directors, in good faith. At any
time within thirty (30) calendar days after the Board of Directors makes a good
faith determination as to the cash equivalent value of such non-cash
consideration, the Representative may dispute the good faith determination of
the Board of Directors as to the cash equivalent value of such non-cash
consideration by delivering a written notice of dispute signed by Representative
to Santera. Upon receipt of any such written notice of dispute, the Board of
Directors and the Representative shall promptly consult with each other with
respect to the specified points of disagreement in an effort to resolve the
dispute. If any such dispute cannot be resolved within thirty (30) calendar days
after the Board of Directors receives such notice of dispute, the Board of
Directors and the Representative shall refer the dispute to Deloitte & Touche,
LLP or, if Deloitte & Touche, LLP is no longer in existence, to any other
reputable accounting firm reasonably acceptable to Tekelec and the
Representative (in each case, the "Arbiter"), to finally resolve, as soon as
practicable, and in any event within forty-five (45) calendar days after such
reference, all points of disagreement with respect to the cash equivalent value
of such non-cash consideration. The Arbiter shall apply the terms of this
Agreement, and shall otherwise conduct the arbitration under such procedures as
the parties may agree or, failing such agreement, under the then prevailing
Commercial Rules of the American Arbitration Association. The Representative and
Santera shall each bear its own expenses in connection with the arbitration. All
determinations by the Arbiter shall be final, conclusive and binding with
respect to the cash equivalent value of such non-cash consideration.
(h) Aggregation. All shares of Stock held or acquired by
a Stockholder and its Affiliates shall be aggregated for the purpose of
determining the availability of any rights under this Agreement.
2.4 Bring-Along Right. If a Majority Holder receives a bona fide
offer from an unaffiliated third party purchaser to purchase more than fifty
percent (50%) of the issued and outstanding Common Stock, calculated assuming
the conversion of all of the then issued and
11
outstanding shares of Preferred Stock (including any of such shares that the
holder thereof may not yet have the right to convert into shares of Common
Stock), which offer the Majority Holder is willing to accept (a "Majority
Offer"), such Majority Holder shall have the right to cause the other
Stockholders to sell the Stock owned by such other Stockholders to the third
party purchaser on the terms and conditions of the Majority Offer (a "Majority
Sale"), subject to the following provisions:
(a) The Majority Holder may exercise its right to cause a
Majority Sale by delivering written notice to the other Stockholders (a
"Bring-Along Notice") simultaneously with the delivery of a Right of First
Refusal Notice pursuant to Section 2.3. The "Offered Shares" for the purposes of
such Right of First Refusal Notice shall be all of the Stock held by the
Majority Holder as of the date of the Bring-Along Notice and the price for such
Offered Shares shall be the per share price specified in the Majority Offer. In
the event that Santera or the non-selling Qualifying Stockholders timely
exercise their right of first refusal as provided in Section 2.3 to purchase all
(and not less than all) of the Offered Stock, Santera and/or such non-selling
Qualifying Stockholders shall purchase, or cause to be purchased, the Offered
Shares from the Majority Holder and, upon consummation of such purchase, the
Majority Holder shall have no further rights under this Section 2.4.
(b) In the event that (A) Santera and the applicable
non-selling Qualifying Stockholders decline to purchase the Offered Shares
pursuant to Section 2.3 or (B) the Exercise Periods contemplated in Section 2.3
have expired without Santera and the applicable non-selling Qualifying
Stockholders having given the written notices referred to therein electing to
purchase all of such Offered Shares, then in each of cases (A) and (B) the
Bring-Along Notice, the Majority Offer and this Agreement, taken together, shall
constitute the legally-binding obligation of each non-selling Stockholder to
consummate the Majority Sale on the terms and conditions of the Majority Offer.
The parties hereto and the third party purchaser may agree on other
documentation in respect of the Majority Sale, but the failure to agree on such
documentation shall not relieve the parties hereto of any of their obligations
hereunder. In the case of such Majority Sale:
(i) Each Stockholder shall sell, or cause to be sold, all
of the Stock owned by such Stockholder in such Majority Sale, and its
obligation to consummate the Majority Sale shall be subject to the
purchase of all of such Stock.
(ii) The purchase consideration received by the
Stockholders in connection with the Majority Sale shall be identical
for each class or series of Stock on a per share basis (calculated
assuming the conversion of all shares of Preferred Stock to Common
Stock), and all other terms and conditions of the Majority Sale shall
apply ratably to the Stockholders in all material respects. The
purchase consideration payable in connection with the Majority Sale
shall be payable in the form of the consideration payable or paid with
respect to each share of Series A Preferred Stock owned by Tekelec, by
its wholly owned subsidiaries and by Tekelec Designees; provided that
if such consideration is not or was not paid or payable in cash, the
unaffiliated third party purchaser shall nonetheless pay for the shares
of Series A Preferred Stock held by Stockholders other than Tekelec,
its wholly-owned subsidiaries and Tekelec Designees in cash to the
extent that Tekelec and such unaffiliated third party purchaser agree
to have such unaffiliated third party purchaser pay for such shares of
Series A Preferred Stock in cash. If all or any portion of the
consideration payable or paid in connection with the Majority Sale with
respect to each share of Series A Preferred Stock is
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paid or payable in securities or property other than cash, the value of
such consideration shall be valued as provided in Section 3.1(d)
hereof.
(iii) The Majority Sale shall be consummated within sixty
(60) business days from the date on which (A) Santera and the
non-selling Qualifying Stockholders decline to purchase the Offered
Shares pursuant to Section 2.3 or (B) the relevant Exercise Periods
contemplated in Section 2.3 have expired without Santera and the
applicable non-selling Qualifying Stockholders having given the written
notices referred to therein electing to purchase all of such Offered
Shares, provided that if the Majority Sale is not consummated within
that period, other than as the result of the breach by any party hereto
of its obligations hereunder or under any documentation agreed in
respect of the Majority Sale, the provisions of Section 2.1 shall again
apply and no Transfer may be made in reliance upon this Section 2.4
without complying again with the provisions thereof.
2.5 Sales to Competitors. Notwithstanding anything else in this
Agreement to the contrary, none of the Stockholders other than Tekelec may
Transfer, directly or indirectly (and whether or not following the other
procedures or provisions set forth in this Article II or otherwise), any
Securities of Santera to any competitors of Tekelec in any lines of business in
which Tekelec is engaged, or any of such competitors' respective legal
successors (whether by merger, consolidation or other form of business
combination or reorganization) or Affiliates without the prior written consent
of Tekelec.
2.6 Compliance with Securities Laws and Certain Tax Laws. Prior to
any Transfer of shares of Stock which are not registered under an effective
registration statement under the Act (other than a Transfer pursuant to Rule 144
or any comparable rule under the Act), the holder thereof will give written
notice to Santera of such Stockholder's intention to effect such Transfer and to
comply in all other respects with this Article II. Santera may request that each
such notice shall be accompanied by a written opinion from counsel to such
Stockholder addressed to Santera in form and substance reasonably satisfactory
to Santera that the proposed Transfer (i) may be effected without registration
under the Securities Act and/or (ii) if such proposed Transfer is at any time
within twelve (12) months following the Closing under the Merger Agreement,
would not cause the transactions contemplated by the Merger Agreement to fail to
qualify as a tax-free transaction under Section 351 of the Code. Upon acceptance
of such notice, opinion and such other documents as may be reasonably requested
by Santera, such Stockholder shall thereupon be entitled to Transfer such
security in accordance with the terms of the notice delivered to Santera,
subject to the conditions contained in this Article II.
ARTICLE III
CALL AND PUT OPTIONS
3.1 Tekelec Call Option.
(a) At any time during the period commencing July 1, 2005
and ending December 31, 2007, Tekelec shall have the right, but not the
obligation, exercisable upon written notice to the Representative (a "Call
Notice"), to purchase from the other Stockholders at the same time all of the
Stock owned by such other Stockholders, excluding, in any event, any Stock owned
by Tekelec, its wholly owned subsidiaries or Tekelec Designees and any Disputed
Shares, for an aggregate purchase price (the "Call Price") calculated as the
product of (x) the Adjustment Factor
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multiplied by (y) the assumed fair market value of Santera, which assumed fair
market value shall equal 2.0 multiplied by the amount of Santera's Revenue
during the one (1) year period beginning the first day of the sixth (6th)
calendar month prior to the date of the Call Notice is given to the
Representative and ending twelve (12) months thereafter (the "Call Measurement
Period"), provided, that in no event shall the assumed fair market value of
Santera exceed $350.0 million. The Call Price shall be identical for all shares
of the same class or series being purchased (in the case of any series of
Preferred Stock, such amount shall be calculated on an as if converted basis).
The Parties hereto acknowledge and agree that Tekelec shall have the right, in
its sole and absolute discretion, to exercise the call right contemplated hereby
and/or to provide the Series B Holder Redemption Notice (as defined in the
Amended and Restated Certificate of Incorporation) in order to cause Santera to
redeem any shares of Series A Preferred Stock as provided by Section
C.1(ii)(a)(I) of Article Fourth of the Amended and Restated Certificate of
Incorporation, in either case, at any time during the exercise period therefor,
and that neither Tekelec nor Santera shall have any liability as a result of,
and none of the Parties hereto shall have any claim whatsoever as a result of,
the time chosen by Tekelec to exercise such right or to cause Santera to so
redeem such shares. Notwithstanding anything contained herein to the contrary,
if at any time after the delivery of a redemption notice pursuant to Article
Fourth, Section C.1(ii) of the Amended and Restated Certificate of Incorporation
and prior to the redemption date in respect thereof, Tekelec delivers notice to
Santera specifying that Tekelec desires to treat any such redemption notice as a
Call Notice hereunder, then such redemption notice shall be treated as of the
date of its delivery as a Call Notice for all purposes under Article Fourth,
Section C.1(ii) of the Amended and Restated Certificate of Incorporation and all
purposes hereunder. Upon delivery of the Call Notice, this Agreement and the
Call Notice, taken together, shall constitute the legally-binding obligations of
the parties hereto to consummate the purchase and sale of the Stock on the terms
and conditions set forth herein. The parties hereto may agree on other
documentation in respect of the purchase and sale, but the failure to agree on
such documentation shall not relieve the parties hereto of any of their
obligations hereunder.
(b) The Call Price payable by Tekelec to the other
Stockholders shall be payable, at Tekelec's option in the exercise of its sole
and absolute discretion, in cash, shares of common stock, without par value, of
Tekelec (the "Tekelec Stock") either registered upon issuance or registered for
resale pursuant to the Act pursuant to a registration statement effective on the
Call Closing Date (as defined below) (the "Registration Statement"), or any
combination thereof; provided, however, that Tekelec may deliver Tekelec Stock
which is not registered upon issuance or registered for resale pursuant to the
Act to any of the other Stockholders who has not confirmed or provided the
information regarding such holder set forth or requested by any transmittal
letter that accompanies the Call Notice (to the extent such information is
required by Tekelec for inclusion in the Registration Statement under applicable
securities laws) at least two (2) days prior to the Call Closing Date. Tekelec
shall be able to elect to deliver Tekelec Stock (and not all cash) only if (i)
no stop order suspending the effectiveness of the Registration Statement shall
then be in effect, and no proceedings for that purpose shall then be threatened
by the Commission or shall have been initiated by the Commission and not
concluded or withdrawn; (ii) all state securities or blue sky permits or
approvals required to resell such Tekelec Stock shall have been received and
(iii) the shares of Tekelec Stock shall have been duly approved for listing on
the Nasdaq National Market or another national securities exchange, subject to
official notice of issuance. To the extent that Tekelec elects to pay all or any
portion of the Call Price in the form of Tekelec Stock, such Tekelec Stock shall
be valued for such purpose as the average closing price per share of Tekelec
Stock, as
14
published by The Wall Street Journal, for the ten (10) trading days ending on
and including the second to the last trading day prior to the Call Closing Date.
(c) At least sixty (60) days prior to the end of the Call
Measurement Period, Tekelec shall provide a written notice (the "Revenue
Notice") to the Representative providing it with the calculations of Revenue on
a monthly basis for the first nine (9) months of the Call Measurement Period (as
calculated and determined by Tekelec). Santera shall permit Tekelec and its
accountants to review promptly upon request all records necessary for the
preparation by Tekelec of the Revenue for such periods and to take copies of the
same. Upon delivery of the Revenue Notice, Santera shall, upon request of the
Representative, promptly, but in any event within five (5) days after receipt by
Santera of any such request from the Representative, provide the Representative
and its accountants reasonable access to those records of Santera which are
reasonably necessary in order for such Representative to verify the accuracy of
the Revenue for such periods, which records shall include the records provided
to Tekelec that were necessary for the computation by Tekelec of the Revenue for
such periods, and to take copies of any such records. After delivery of the
Revenue Notice, Tekelec and the Representative shall, upon request of either
Tekelec or the Representative, each appoint a designated senior business
executive or its equivalent (who for Tekelec shall be Tekelec's Chief Executive
Officer) whose task it will be to meet for the purpose of endeavoring to resolve
any actual or anticipated disputes, claims or other matters with respect to the
exercise of such call right. The designated representatives shall meet as often
as Tekelec and the Representative reasonably deem necessary in order to gather
and furnish to the other all information with respect to the dispute, claim or
other matter which Tekelec and the Representative believe to be appropriate and
germane in connection with its resolution. Such representatives shall discuss
the dispute, claim or other matter with respect to the exercise of such call
right and will negotiate in good faith in an effort to resolve the dispute,
claim or other matter. The specific format for such discussions shall be left to
the discretion of the designated representatives and may include the preparation
of agreed upon statements of fact or written statements of position furnished to
the other party. Within ten (10) days after the end of the Call Measurement
Period, Tekelec shall provide a written notice (the "Call Price Notice") to the
Representative notifying it of the aggregate amount of the Call Price (as
calculated and determined by Tekelec), and providing it with a statement
calculating the Call Price and showing the calculations of Revenue on a monthly
basis during the Call Measurement Period. Santera shall permit Tekelec and its
accountants to review promptly upon request all records necessary for the
computation by Tekelec of the Call Price and to take copies of the same. Upon
delivery of the Call Price Notice, Santera shall, upon request of the
Representative, promptly, but in any event within five (5) days after receipt by
Santera of any such request from the Representative, provide the Representative
and its accountants reasonable access to those records of Santera which are
reasonably necessary in order for such holders to verify the accuracy of the
Call Price, which records shall include the records provided to Tekelec that
were necessary for the computation by Tekelec of the Call Price, and to take
copies of any such records.
(d) If the Representative disputes the Call Price (as a
result of its disagreement as to the calculation of the amount of the Revenue
during the Call Measurement Period or otherwise) as calculated by Tekelec or
desires to raise any other claim or matter related to or in connection with the
exercise of such call right, including, without limitation, any claim or matter
related to the amount of the Revenue or other variables that are necessary for
the calculation of the Call Price or the fulfillment or non-fullfillment of the
legal, fiduciary or other obligations or duties of any person or entity with
respect to the exercise of such call right, not more than thirty (30) calendar
days after the date the Representative receives the Call Price Notice, the
Representative shall deliver to Tekelec
15
a Notice of Dispute signed by such Representative. If no such Notice of Dispute
signed by the Representative has been delivered during such thirty (30) day
period or if the Representative has delivered to Tekelec a signed written notice
accepting the Call Price set forth in the Call Price Notice, then Tekelec's
determination of the Call Price shall be final and conclusive for all purposes.
Upon receipt of the Notice of Dispute, the designated representatives of Tekelec
and the Representative shall promptly consult with each other with respect to
the specified points of disagreement in an effort to resolve the dispute, claim
or other matter. If the designated representatives of Tekelec and the
Representative are unable to resolve the dispute, claim or other matter within
ten (10) calendar days after Tekelec receives the Notice of Dispute (the
"Consultative Period"), then Tekelec and the Representative each shall select an
independent arbitrator, expert in the subject matter of such dispute (the
arbitrators so selected shall be referred to herein as "Tekelec's Arbitrator"
and the "Representative's Arbitrator," respectively). In the event that the
Representative fails to select an independent arbitrator within five (5) days
from the date of the expiration of the Consultative Period, then the matter
shall be resolved by Tekelec's Arbitrator. In the event that Tekelec fails to
select an independent arbitrator within five (5) days from the date of the
expiration of the Consultative Period, then the matter shall be resolved by the
Representative's Arbitrator. Tekelec's Arbitrator and the Representative's
Arbitrator shall select a third independent arbitrator, expert in the subject
matter of the dispute (the "Joint Arbitrator"), and the three arbitrators so
selected shall finally resolve, as soon as practicable, all points of
disagreement with respect to the Call Price or such other claim or matter, as
the case may be and in any event within thirty (30 ) calendar days after all the
arbitrators are selected and finalized. Within seven (7) days after the date of
the expiration of the Consultative Period, Tekelec's Arbitrator and the
Representative's Arbitrator shall each prepare a list of three independent
arbitrators. If Tekelec's Arbitrator fails to prepare a list of three
independent arbitrators within such seven (7) day period, then the
Representative's Arbitrator shall select the Joint Arbitrator within ten (10)
days after the date of the expiration of the Consultative Period. If the
Representative's Arbitrator fails to prepare a list of three independent
arbitrators within such seven (7) day period, then Tekelec's Arbitrator shall
select the Joint Arbitrator within ten (10) days after the date of the
expiration of the Consultative Period. If Tekelec's Arbitrator and the
Representative's Arbitrator each prepare a list of three arbitrators, the Joint
Arbitrator shall be selected jointly by Tekelec's Arbitrator and the
Representative's Arbitrator from the lists of proposed arbitrators within
seventeen (17) days after the date of the expiration of the Consultative Period.
If Tekelec's Arbitrator and the Representative's Arbitrator are unable to
jointly select the Joint Arbitrator within seventeen (17) days after the date of
the expiration of the Consultative Period, then Tekelec's Arbitrator and the
Representative's Arbitrator shall each have the opportunity to designate as
objectionable and eliminate one arbitrator from the other arbitrator's list
within twenty (20) days after the date of the expiration of the Consultative
Period, and the Joint Arbitrator shall then be selected by lot from the
arbitrators remaining on the lists submitted by Tekelec's Arbitrator and the
Representative's Arbitrator. The final determination of all points of
disagreement with respect to the Call Price, Net Income, or such other claim or
matter, as the case may be, must be agreed upon and signed by the sole
arbitrator or by at least two of the three arbitrators, as the case may be;
provided that if two of the three arbitrators are unable to agree on all points
of disagreement with respect to the Call Price, Net Income or such other claim
or matter, as the case may be, within thirty (30) days after all the arbitrators
are selected and finalized, the final determination of all points of
disagreement with respect thereto shall be resolved by the Joint Arbitrator and
the Joint Arbitrator shall have signed a statement rendering such determination
by such date. For purposes of such arbitration each of Tekelec and the
Representative shall submit a proposed calculation of the Call Price. The
arbitrator(s) shall apply the terms of this Agreement (including Article III
hereof), and shall
16
otherwise conduct the arbitration under such procedures as Tekelec and the
Representative may agree or, failing such agreement, under the then prevailing
Commercial Rules of the American Arbitration Association. The fees and expenses
incurred in connection with the arbitration of the Call Price or such other
claim or matter (including the fees and expenses of the arbitrator(s) and other
party's outside counsel and accounting fees) shall be paid by the party who is
not the prevailing party with respect to the items in dispute with respect to
the Call Price or such other claim or matter; it being understood that the party
whose proposed calculation with respect to the Call Price is nearest in terms of
dollars to the amount of the Call Price determined by the arbitrator(s) shall be
considered the prevailing party hereunder for purposes of this sentence. All
determinations by the arbitrator(s) shall be final, conclusive and binding with
respect to the Call Price or such other claim or matter and the allocation of
arbitration fees and expenses, in the absence of fraud or manifest error. This
Section 3.1(d) shall be the sole and exclusive remedy for the Representative and
the Stockholders for any and all claims and disputes with respect to the Call
Price and any other matter related to such call right, including, without
limitation, any claim or matter related to the amount of the Revenue or other
variables that are necessary for the calculation of the Call Price or the
fulfillment or non-fullfillment of the legal, fiduciary or other obligations or
duties of any person or entity with respect to the exercise of such call right.
(e) The purchase and sale of the Stock pursuant to this
Section 3.1 shall close (the "Call Closing Date") twenty-five (25) days
following the expiration of the Call Measurement Period or, if the
Representative disputes the Call Price or any other matter related to such call
right, then no later than the tenth (10th) calendar day following the final
determination of the Call Price and/or such other matter in accordance with the
terms of this Section 3.1. At least five (5) calendar days prior to such Call
Closing Date, Tekelec shall provide a notice to the Representative specifying
how much, if any, of the Call Price Tekelec intends to pay in shares of Tekelec
Stock. At any time on or prior to the Call Closing Date for such transaction,
Tekelec may change its intention to pay in shares of Tekelec Stock and may elect
instead to pay some or any portion of the amount due in cash.
(f) Tekelec shall after a Call Closing Date purchase all
of the shares previously considered Disputed Shares within fifteen (15) days
after the date that such shares are no longer Disputed Shares (as specified in a
written notice delivered by Tekelec to Santera; it being understood that shares
previously considered Disputed Shares that have been or are required to be
transferred to Santera in accordance with the terms of the Escrow Agreement
shall not be considered Disputed Shares to be redeemed), for the same per share
Call Price (as adjusted for any stock dividends, combinations, reverse stock
splits, stock splits, recapitalizations, reorganizations, reclassifications or
other similar event with respect to such shares) paid on such prior Call Closing
Date.
3.2 Put Option.
(a) Subject to the satisfaction of the condition set
forth in Section 3.2(b) hereof, during the period commencing January 1, 2006 and
ending February 28, 2008, the Representative (on behalf of the Stockholders
other than Tekelec, its wholly owned subsidiaries and Tekelec Designees) shall
have the right, but not the obligation, exercisable upon delivery of written
notice to Tekelec signed by the Representative (a "Put Notice"), to require
Tekelec to purchase at the same time from all stockholders of Santera at that
time all and not less than all of the Stock (other than any Disputed Shares)
owned by such other stockholders, excluding, in any event, any Stock owned by
Tekelec, its wholly owned subsidiaries or Tekelec Designees or any Disputed
Shares, for an aggregate purchase price (the "Put Price") calculated as the
product of (x) 0.80 multiplied by (y) the
17
Adjustment Factor multiplied by (z) the assumed fair market value of Santera,
which assumed fair market value shall equal 2.0 multiplied by the amount of
Santera's Revenue during the one (1) year period beginning on the first day of
the sixth (6th) calendar month prior to the date the Put Notice is given to the
Representative and ending twelve (12) months thereafter (the "Put Measurement
Period"), provided, that in no event shall the assumed fair market value of
Santera exceed $350.0 million. The Put Notice shall set forth the calculations
and reasonable supporting data used to determine the Put Price. The Put Price
shall be identical for all shares of the same class or series being purchased
(in the case of any series of Preferred Stock, such amount shall be calculated
on an as if converted basis).
(b) The Representative shall not be entitled to exercise
the put right described in Section 3.2(a) above unless Santera has had positive
Net Income in each of the two most recently ended calendar quarters prior to the
date of the Put Notice and each stockholder of Santera, other than Tekelec, its
wholly-owned subsidiaries or any Tekelec Designees, shall have executed this
Agreement and the Escrow Agreement and shall have appointed the Representative
as its representative hereunder and thereunder. Notwithstanding anything
contained herein to the contrary, if at any time after the delivery of a
redemption notice pursuant to Article Fourth, Section C.1(ii) of the Amended and
Restated Certificate of Incorporation and prior to the redemption date in
respect thereof, Tekelec delivers notice to Santera specifying that Tekelec
desires to treat any such redemption notice as a Put Notice hereunder, then such
redemption notice shall be treated as of the date of its delivery as a Put
Notice for all purposes under Article Fourth, Section C.1(ii) of the Amended and
Restated Certificate of Incorporation and all purposes hereunder. Upon delivery
of the Put Notice, this Agreement and the Put Notice, taken together, shall
constitute the legally-binding obligations of the parties hereto to consummate
the purchase and sale of the Stock on the terms and conditions set forth herein.
The parties hereto may agree on other documentation in respect of the purchase
and sale, but the failure to agree on such documentation shall not relieve the
parties hereto of any of their obligations hereunder.
(c) The Put Price payable by Tekelec to the other
Stockholders shall be payable, at Tekelec's option in the exercise of its sole
and absolute discretion, in cash, shares of Tekelec Stock registered upon
issuance or registered for resale pursuant to the Act pursuant to a Registration
Statement effective on the Put Closing Date, or any combination thereof;
provided, however, that Tekelec may deliver Tekelec Stock which is not
registered upon issuance or registered for resale pursuant to the Act to any of
the other Stockholders who has not confirmed or provided the information
regarding such holder set forth or requested by any transmittal letter sent by
Tekelec after receipt of the Put Notice (to the extent such information is
required by Tekelec for inclusion in the Registration Statement under applicable
securities laws) at least two (2) days prior to the Put Closing Date. Tekelec
shall be able to elect to deliver Tekelec Stock (and not all cash) only if (i)
no stop order suspending the effectiveness of the Registration Statement shall
then be in effect, and no proceedings for that purpose shall then be threatened
by the Commission or shall have been initiated by the Commission and not
concluded or withdrawn; (ii) all state securities or blue sky permits or
approvals required to resell such Tekelec Stock shall have been received and
(iii) the shares of Tekelec Stock shall have been duly approved for listing on
the Nasdaq National Market or another national securities exchange, subject to
official notice of issuance. To the extent that Tekelec elects to pay all or any
portion of the Put Price in the form of Tekelec Stock, such Tekelec Stock shall
be valued for such purpose as the average closing price per share of Tekelec
Stock, as published by The Wall Street Journal, the ten (10) trading days ending
on and including the second to the last trading day prior to the Put Closing
Date for such transaction.
18
(d) If, following Tekelec's receipt of a Put Notice,
Tekelec disputes the existence of positive Net Income for the two most recently
completed calendar quarters prior to the date of such Put Notice, then Tekelec
shall promptly provide the Representative with written notice to that effect (a
"Net Income Dispute Notice"). Following the delivery of a Put Notice, Santera
shall permit Tekelec and its accountants to review promptly upon request all
records necessary for Tekelec to determine the existence or nonexistence of
positive Net Income for such periods and to take copies of the same. Santera
shall, upon request of the Representative, promptly provide the Representative
and its accountants reasonable access to those records of Santera which are
reasonably necessary in order for the Representative to verify the existence or
non-existence of positive Net Income for the relevant calendar quarters, which
records shall include any such records provided to Tekelec that are necessary
for Tekelec to confirm the existence or non-existence of positive Net Income for
such periods, and to take copies of any such records.
(e) Upon delivery of any Net Income Dispute Notice,
Tekelec and the Representative shall each appoint a designated senior business
executive or its equivalent (who for Tekelec shall be Tekelec's Chief Executive
Officer) whose task it will be to meet for the purpose of endeavoring to resolve
any disputes with respect to the existence or non-existence of positive Net
Income for such periods. The designated representatives shall meet as often as
Tekelec and the Representative reasonably deem necessary in order to gather and
furnish to the other all information with respect to the dispute which Tekelec
and the Representative believe to be appropriate and germane in connection with
its resolution. Such representatives shall discuss the dispute and will
negotiate in good faith in an effort to resolve the dispute. The specific format
for such discussions shall be left to the discretion of the designated
representatives and may include the preparation of agreed upon statements of
fact or written statements of position furnished to the other party.
(f) If the designated representatives of Tekelec and the
Representative are unable to resolve the dispute as to Net Income within ten
(30) calendar days after the Representative receives the Net Income Notice of
Dispute (the "Net Income Consultative Period"), Tekelec and the Representative
each shall select an independent arbitrator, expert in the subject matter of
such dispute (the arbitrators so selected shall be referred to herein as
"Tekelec's Net Income Arbitrator" and the "Representative's Net Income
Arbitrator", respectively). In the event that the Representative fails to select
an independent arbitrator within five (5) days from the date of the expiration
of the Net Income Consultative Period, then the matter shall be resolved by
Tekelec's Net Income Arbitrator. In the event that Tekelec fails to select an
independent arbitrator within five (5) days from the date of the expiration of
the Net Income Consultative Period, then the matter shall be resolved by the
Representative's Net Income Arbitrator. Tekelec's Net Income Arbitrator and the
Representative's Net Income Arbitrator shall select a third independent
arbitrator, expert in the subject matter of the dispute (the "Net Income Joint
Arbitrator"), and the three arbitrators so selected shall finally resolve, as
soon as practicable, all points of disagreement with respect to the existence or
non-existence of Net Income for the relevant periods and in any event within
thirty (30) calendar days after all the arbitrators are selected and finalized.
Within seven (7) days after the date of the expiration of the Net Income
Consultative Period, Tekelec's Net Income Arbitrator and the Representative's
Net Income Arbitrator shall each prepare a list of three independent
arbitrators. If Tekelec's Net Income Arbitrator fails to prepare a list of three
independent arbitrators within such seven (7) day period, then Representative's
Net Income Arbitrator shall select the
19
Net Income Joint Arbitrator within ten (10) days after the date of the
expiration of the Net Income Consultative Period. If the Representative's Net
Income Arbitrator fails to prepare a list of three independent arbitrators
within such seven (7) day period, then Tekelec's Net Income Arbitrator shall
select the Net Income Joint Arbitrator within ten (10) after the date of the
expiration of the Net Income Consultative Period. If Tekelec's Net Income
Arbitrator and the Representative's Net Income Arbitrator each prepare a list of
three arbitrators, the Net Income Joint Arbitrator shall be selected jointly by
Tekelec's Net Income Arbitrator and the Representative's Net Income Arbitrator
from the lists of proposed arbitrators within seventeen (17) days after the date
of the expiration of the Consultative Period. If Tekelec's Net Income Arbitrator
and the Representative's Net Income Arbitrator are unable to jointly select the
Net Income Joint Arbitrator within seventeen (17) days after the date of the
expiration of the Net Income Consultative Period, then Tekelec's Net Income
Arbitrator and the Representative's Net Income Arbitrator shall each have the
opportunity to designate as objectionable and eliminate one arbitrator from the
other arbitrator's list within twenty (20) days after the date of the expiration
of the Net Income Consultative Period, and the Net Income Joint Arbitrator shall
then be selected by lot from the arbitrators remaining on the lists submitted by
Tekelec's Net Income Arbitrator and the Representative's Net Income Arbitrator.
(g) The final determination of all points of disagreement
with respect to the existence or non-existence of Net Income for the relevant
periods must be agreed upon and signed by the sole arbitrator or by at least two
of the three arbitrators, as the case may be; provided that if two of the three
arbitrators are unable to agree upon all points of disagreement with respect to
the Net Income within thirty (30) days after all the arbitrators are selected
and finalized, as the case may be, the final determination of all points of
disagreement with respect thereto shall be resolved by the Net Income Joint
Arbitrator and the Net Income Joint Arbitrator shall have signed a statement
rendering such determination by such date. For purposes of such arbitration each
of Tekelec and the Representative shall submit a proposed calculation of the Net
Income for such periods. The arbitrator(s) shall apply the terms of this
Agreement, and shall otherwise conduct the arbitration under such procedures as
Tekelec and the Representative may agree or, failing such agreement, under the
then prevailing Commercial Rules of the American Arbitration Association. The
fees and expenses incurred in connection with the arbitration of the existence
or non-existence of Net Income for such relevant periods (including the fees and
expenses of the arbitrator(s) and the other party's outside counsel and
accounting fees) shall be paid by the party who is not the prevailing party with
respect to such matter. All determinations by the arbitrator(s) shall be final,
conclusive and binding with respect to the existence or non-existence of Net
Income for such relevant periods, in the absence of fraud or manifest error.
This Section 3.2(g) shall be the sole and exclusive dispute resolution mechanism
for Tekelec, the Representative and the Stockholders for any and all claims and
disputes with respect to the existence or non-existence of Net Income.
(h) At least sixty (60) days prior to the end of the Put
Measurement Period, Tekelec shall provide a Revenue Notice to the Representative
providing it with the calculations of Revenue on a monthly basis for the first
nine (9) months of the Put Measurement Period (as calculated and determined by
Tekelec) and the calculations of Net Income in each of the two most recently
ended calendar quarters prior to the date of the Put Notice (as calculated and
determined by Tekelec). Santera shall permit Tekelec and its accountants to
review promptly upon request all records necessary for the computation by
Tekelec of the Revenue for such periods and to take copies of the same. Upon
delivery of the Revenue Notice, Santera shall, upon request of the
Representative, promptly, but in any event within five (5) days after receipt by
Santera of any such request from the Representative, provide the Representative
and its accountants reasonable access to those records of Santera which are
reasonably necessary in order for such Representative to verify the accuracy of
the Revenue for such periods, which records shall include the records provided
to Tekelec that were necessary for the computation by Tekelec of the Revenue for
such periods, and to
20
take copies of any such records. After delivery of the Revenue Notice, Tekelec
and the Representative shall, upon request of either Tekelec or the
Representative, each appoint a designated senior business executive or its
equivalent (who for Tekelec shall be Tekelec's Chief Executive Officer) whose
task it will be to meet for the purpose of endeavoring to resolve any actual or
anticipated disputes, claims or other matters with respect to the exercise of
such put right. The designated representatives shall meet as often as Tekelec
and the Representative reasonably deem necessary in order to gather and furnish
to the other all information with respect to the dispute, claim or other matter
which Tekelec and the Representative believe to be appropriate and germane in
connection with its resolution. Such representatives shall discuss the dispute,
claim or other matter with respect to the exercise of such put right and will
negotiate in good faith in an effort to resolve the dispute, claim or other
matter. The specific format for such discussions shall be left to the discretion
of the designated representatives and may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
party. Within ten (10) days after the end of the Put Measurement Period, Tekelec
shall provide a written notice (the "Put Price Notice") to the Representative
notifying it of the aggregate amount of the Put Price (as calculated and
determined by Tekelec), and providing it with a statement calculating the Put
Price and showing calculations of Revenue on a monthly basis during the Put
Measurement Period. Santera shall permit Tekelec and its accountants to review
promptly upon request all records necessary for the computation by Tekelec of
the Put Price and to take copies of the same. Upon delivery of the Put Price
Notice, Santera shall, upon request of the Representative, promptly, but in any
event within five (5) days after receipt by Santera of any such request from the
Representative, provide the Representative and its accountants reasonable access
to those records of Santera which are reasonably necessary in order for such
holders to verify the accuracy of the Put Price, which records shall include the
records provided to Tekelec that were necessary for the computation by Tekelec
of the Put Price, and to take copies of any such records.
(i) If the Representative disputes the Put Price (as a
result of its disagreement as to the calculation of the amount of the Revenue
during the Put Measurement Period or otherwise) or desires to raise any other
claim or matter related to or in connection with the exercise of such put right,
including, without limitation, any claim or matter related to the amount of the
Revenue or other variables that are necessary for the calculation of the Put
Price or the fulfillment or non-fullfillment of the legal, fiduciary or other
obligations or duties of any person or entity with respect to the exercise of
such put right, not more than thirty (30) calendar days after the date the
Representative receives the Put Price Notice, the Representative shall deliver
to Tekelec a Notice of Dispute signed by such Representative. If no such Notice
of Dispute signed by the Representative has been delivered during such thirty
(30) day period or if the Representative has delivered to Tekelec a signed
written notice accepting the Put Price set forth in the Put Price Notice, then
Tekelec's determination of the Put Price shall be final and conclusive for all
purposes. Upon receipt of the Notice of Dispute, the designated representatives
of Tekelec and the Representative shall promptly consult with each other with
respect to the specified points of disagreement in an effort to resolve the
dispute, claim or other matter. If the designated representatives of Tekelec and
the Representative are unable to resolve the dispute, claim or other matter
before the date of the expiration of the Consultative Period, then Tekelec shall
select Tekelec's Arbitrator, and the Representative shall select the
Representative's Arbitrator; provided, however, if, at such time, there has been
an arbitration with respect to Net Income matters, then the dispute, claim or
other matter shall be referred to the arbitrator or arbitrators which resolved
the Net Income matters, and for all purposes of this paragraph, the term Joint
Arbitrator shall be deemed to refer to the Net Income Joint Arbitrator, the term
Tekelec's Arbitrator shall be deemed to refer to Tekelec's Net Income
21
Arbitrator and the term Representative's Arbitrator shall be deemed to refer to
the Representative's Net Income Arbitrator. If, at such time, there has been no
arbitration with respect to Net Income matters, then the following process shall
apply for purposes of selecting the arbitrators. In the event that the
Representative fails to select an independent arbitrator within five (5) days
from the date of the expiration of the Consultative Period, then the matter
shall be resolved by Tekelec's Arbitrator. In the event that Tekelec fails to
select an independent arbitrator within five (5) days from the date of the
expiration of the Consultative Period, then the matter shall be resolved by the
Representative's Arbitrator. Tekelec's Arbitrator and the Representative's
Arbitrator shall select the Joint Arbitrator, and the three arbitrators so
selected shall finally resolve, as soon as practicable, all points of
disagreement with respect to the Put Price or such other claim or matter, as the
case may be and in any event within thirty (30 ) calendar days after all the
arbitrators are selected and finalized. Within seven (7) days after the date of
the expiration of the Consultative Period, Tekelec's Arbitrator and the
Representative's Arbitrator shall each prepare a list of three independent
arbitrators. If Tekelec's Arbitrator fails to prepare a list of three
independent arbitrators within such seven (7) day period, then the
Representative's Arbitrator shall select the Joint Arbitrator within ten (10)
days after the date of the expiration of the Consultative Period. If the
Representative's Arbitrator fails to prepare a list of three independent
arbitrators within such seven (7) day period, then Tekelec's Arbitrator shall
select the Joint Arbitrator within ten (10) days after the date of the
expiration of the Consultative Period. If Tekelec's Arbitrator and the
Representative's Arbitrator each prepare a list of three arbitrators, the Joint
Arbitrator shall be selected jointly by Tekelec's Arbitrator and the
Representative's Arbitrator from the lists of proposed arbitrators within
seventeen (17) days after the date of the expiration of the Consultative Period.
If Tekelec's Arbitrator and the Representative's Arbitrator are unable to
jointly select the Joint Arbitrator within seventeen (17) days after the date of
the expiration of the Consultative Period, then Tekelec's Arbitrator and the
Representative's Arbitrator shall each have the opportunity to designate as
objectionable and eliminate one arbitrator from the other arbitrator's list
within twenty (20) days after the date of the expiration of the Consultative
Period, and the Joint Arbitrator shall then be selected by lot from the
arbitrators remaining on the lists submitted by Tekelec's Arbitrator and the
Representative's Arbitrator. The final determination of all points of
disagreement with respect to the Put Price or such other claim or matter, as the
case may be, must be agreed upon and signed by the sole arbitrator or by at
least two of the three arbitrators, as the case may be; provided that if two of
the three arbitrators are unable to agree on all points of disagreement with
respect to the Put Price or such other claim or matter, as the case may be,
within thirty (30) days after all the arbitrators are selected and finalized,
the final determination of all points of disagreement with respect thereto shall
be resolved by the Joint Arbitrator and the Joint Arbitrator shall have signed a
statement rendering such determination by such date. For purposes of such
arbitration each of Tekelec and the Representative shall submit a proposed
calculation of the Put Price. The arbitrator(s) shall apply the terms of this
Agreement (including Article III hereof), and shall otherwise conduct the
arbitration under such procedures as Tekelec and the Representative may agree
or, failing such agreement, under the then prevailing Commercial Rules of the
American Arbitration Association. The fees and expenses incurred in connection
with the arbitration of the Put Price or such other claim or matter, as the case
may be, (including the fees and expenses of the arbitrator(s) and the other
party's outside counsel and accounting fees) shall be paid by the party who is
not the prevailing party with respect to the items in dispute with respect to
the Put Price or such other claim or matter, as the case may be; it being
understood that the party whose proposed calculation with respect to the Put
Price is nearest in terms of dollars to the amount of the Put Price determined
by the arbitrator(s) shall be considered the prevailing party hereunder for
purposes of this sentence. All determinations by the arbitrator(s) shall be
final, conclusive and binding with respect to the Put
22
Price or such other claim or matter, as the case may be, and the allocation of
arbitration fees and expenses, in the absence of fraud or manifest error. This
Section 3.2(i) shall be the sole and exclusive remedy for the Representative and
the Stockholders for any and all claims and disputes with respect to the Put
Price and any other matter related to such put right, including, without
limitation, any claim or matter related to the amount of the Revenue or other
variables that are necessary for the calculation of the Put Price or the
fulfillment or non-fullfillment of the legal, fiduciary or other obligations or
duties of any person or entity with respect to the exercise of such put right.
(j) The purchase and sale of the Stock pursuant to this
Section 3.2 shall close (the "Put Closing Date") twenty-five (25) days following
the expiration of the Put Measurement Period or, if the Representative dispute
the Put Price or any other matter related to such call right, then no later than
the tenth (10th) calendar day following the final determination of the Put Price
and/or such other matter in accordance with the terms of this Section 3.2. At
least five (5) calendar days prior to the Put Closing Date, Tekelec shall
provide a notice to the Representative specifying how much, if any, of the Put
Price Tekelec intends to pay in shares of Tekelec Stock. At any time on or prior
to the Put Closing Date for such transaction, Tekelec may change its intention
to pay in shares of Tekelec Stock and may elect instead to pay some or any
portion of the amount due in cash.
(k) Tekelec shall after a Put Closing Date purchase all
of the shares previously considered Disputed Shares within fifteen (15) days of
the date such shares are no longer Disputed Shares (as specified in a written
notice delivered by Tekelec to Santera; it being understood that shares
previously considered Disputed Shares that have been or are required to be
transferred to Santera in accordance with the terms of the Escrow Agreement
shall not be considered Disputed Shares to be redeemed), for the same per share
Put Price (as adjusted for any stock dividends, combinations, reverse stock
splits, stock splits, recapitalizations, reorganizations, reclassifications or
other similar event with respect to such shares) paid on such prior Put Closing
Date.
(l) Each of the Stockholders hereby acknowledges, agrees
with, consents to and agrees to be bound by all of the provisions of Section
C.1.(ii) of Article Fourth of the Amended and Restated Certificate of
Incorporation, including, without limitation, the provisions of Section
C.1.(ii)(c)(V), (VI) and (VII) thereof.
3.3 Legacy Options. In calculating the Call Price or the Put
Price, as the case may be, that will be payable with respect to each share of
Series A Preferred Stock, Tekelec may, at its option, reduce the per share Call
Price or the per share Put Price, as the case may be, by assuming and taking
into account the issuance of all securities issuable upon the exercise of Legacy
Options which are then exercisable. If Tekelec so elects to reduce the per share
Call Price or the per share Put Price, then (a) upon the exercise of any such
Legacy Options, the consideration received by Santera upon such exercise shall
be deemed to be an increase in the aggregate Call Price or Put Price, as the
case may be, (b) upon the expiration of any such Legacy Option without exercise,
the per share Call Price or per share Put Price, as the case may be (in each
case, as adjusted for any stock dividends, combinations, reverse stock splits,
stock splits, recapitalizations, reorganizations, reclassifications or other
similar event with respect to such shares), shall be recalculated without
assuming and taking into account the issuance of any securities issuable upon
the exercise of such expired Legacy Option (but otherwise using all of the same
facts as previously used). Any increase resulting from the preceding sentence
will be paid to the parties entitled thereto within thirty (30)
23
days of the event giving rise to the increase, with the payment to be
accompanied by a statement setting forth the calculations and reasonable
supporting data used to determine the increase.
ARTICLE IV
TEKELEC OPTION TO ACQUIRE ADDITIONAL SHARES OF SERIES B PREFERRED STOCK.
Tekelec shall have the option (the "Tekelec Option") to acquire
additional shares of Series B Preferred Stock from Santera on the terms provided
in this Article IV.
4.1 Number of Shares. The Tekelec Option shall be exercisable from
time to time as set forth in this Article IV and shall entitle Tekelec to
acquire up to twelve thousand 12,000 additional shares of Series B Preferred
Stock, each at a per share purchase price of $1,000.
4.2 Availability of Shares. Santera shall, at all times until the
Tekelec Option shall have been exercised or shall have expired or been
terminated in full, keep a sufficient number of shares of Series B Preferred
Stock available for issuance to Tekelec to enable it to exercise the Tekelec
Option in full, which shares of Series B Preferred Stock shall be free of any
liens, encumbrances, restrictions, options or other rights in favor of any other
Person.
4.3 Term of Option. The Tekelec Option shall become exercisable on
the date hereof and shall remain exercisable in accordance with the following
sentence, unless it has been exercised in full prior to the applicable
expiration date set forth in such sentence, in which event it shall expire on
the date it has been so exercised in full. The Tekelec Option shall expire in
full on (a) the last day of the Call Measurement Period or the Put Measurement
Period hereunder or the last day of the Series A Holder Redemption Measurement
Period or the Series B Holder Redemption Measurement Period under the Amended
and Restated Certificate of Incorporation, as the case may be, or (b) if no Call
Notice or Put Notice hereunder and no Series A Holder Redemption Notice or
Series B Holder Redemption Notice under the Amended and Restated Certificate of
Incorporation has been delivered prior to March 1, 2008, on March 1, 2008.
4.4 Exercise of Option. In order to exercise the Tekelec Option,
Tekelec shall give written notice of such exercise to Santera and to the
Representative, and the date of giving of such notice shall be deemed to be the
date of exercise. Each such exercise of the Tekelec Option shall be for a number
of shares of Series B Preferred Stock indicated in such notice. Tekelec may
exercise the Tekelec Option as frequently as it may desire during the term of
the Tekelec Option. Following receipt of such notice of exercise, the parties
hereto shall cooperate in taking all steps which may be required to effect the
prompt issuance and transfer of the applicable shares of Series B Preferred
Stock to Tekelec. The issuance or transfer of the applicable shares shall take
place at such place as may be mutually acceptable to the parties thereto at
10:00 a.m. Dallas, Texas time on the later of (x) the first business day
following receipt of all consents, approvals or actions required in connection
with such issuance, but not later than the tenth (10) business day following the
delivery of the notice of exercise, or (y) such other time and/or place as
Tekelec may specify. At such closing, (i) Santera shall deliver to Tekelec the
certificates representing the shares to be so issued, duly registered in the
name of Tekelec or a wholly owned subsidiary of Tekelec designated by Tekelec,
together with such certificates, legal opinions and other instruments relating
to the transaction as Tekelec shall reasonably request; and (ii) Tekelec or such
designee shall pay the aggregate purchase price therefore in cash, by wire
transfer of immediately available funds to such account as Santera shall direct
by written notice delivered on or before the day of such closing.
24
4.5 Adjustments for Certain Events; Advance Notice. In the event
of (1) any merger, consolidation, liquidation or similar corporate event
relating to Santera, (2) any reclassification, reorganization or other similar
event affecting the rights of the holders of the shares of Series B Preferred
Stock, (3) any stock dividend or other distribution in respect of any shares of
Series B Preferred Stock (other than regular cash dividends), then Tekelec shall
be entitled to receive, on exercise of the Tekelec Option, such shares of Series
B Preferred Stock or other securities and such other property as it would have
been entitled to receive if it had exercised the Tekelec Option immediately
prior to the applicable record date for the event in question. If any such event
described in this paragraph shall be anticipated, Santera shall give advance
written notice of such event at least thirty (30) days prior to the record date
or intended date of announcement of such event (whichever is earlier).
4.6 Transferability of Option. Tekelec may at any time transfer
the Tekelec Option, in whole or in part, to any of its wholly owned subsidiaries
or any other Person in connection with the sale of all of its Stock and the
assignment of all of its rights to such Person; provided that such transferee
shall have executed and delivered to Santera an Instrument of Accession.
ARTICLE V
GOVERNANCE OF SANTERA
The provisions of Article V shall remain in full force and effect until
the Termination Date, at which point such provisions shall terminate and be of
no further force or effect whatsoever.
5.1 Board Representation. From and after the date hereof until the
Termination Date, each Stockholder on behalf of itself and its Affiliates agrees
to hold all of the shares of Stock registered in its name (and any Securities of
Santera issued with respect to, upon conversion of, or in exchange or
substitution of the Stock, and any other voting securities of Santera
subsequently acquired by such Stockholder) subject to, and to vote its Stock at
each meeting of stockholders (and in each written consent of Santera's
stockholders) in accordance with the provisions of this Agreement so as to
effect the following:
(a) Each Stockholder shall vote at each meeting of
stockholders (and in each written consent of Santera's stockholders) each share
of Stock owned by such Stockholder (or as to which such Stockholder has voting
power) to ensure that the size of the Board shall be set and remain at five (5)
or seven (7) directors.
(b) For so long as Stockholders holding shares of Series
A Preferred Stock (excluding Tekelec, its wholly owned subsidiaries and any
Tekelec Designees) in the aggregate own at least 31,000 shares of Series A
Preferred Stock (as adjusted for any stock dividends, combinations, reverse
stock splits, stock splits, recapitalizations, reorganizations,
reclassifications or other similar event with respect to such shares), in any
election of directors of Santera to elect the directors that such holders of
Series A Preferred Stock are entitled to elect pursuant to the Amended and
Restated Certificate of Incorporation, each Stockholder holding Series A
Preferred Stock who has the right to vote its shares of Series A Preferred Stock
for the election of directors shall vote all shares of Series A Preferred Stock
then owned by such Stockholder (or as to which such Stockholder has voting
power) as may be necessary to elect two (2) directors if the Board of Directors
consists of five (5) directors, one of whom shall be nominated by Austin
Ventures or its Affiliate and one of whom shall be nominated by Redpoint
Ventures or its Affiliate and three (3) directors if the Board of Directors
consists of seven (7) directors, one (1) of whom shall be nominated by Austin
Ventures or
25
its Affiliate, one (1) of whom shall be nominated by Redpoint Ventures or its
Affiliate and one (1) of whom shall be nominated by the Stockholders holding a
majority of the shares of Series A Preferred Stock (excluding Tekelec, its
wholly owned subsidiaries and any Tekelec Designees).
(c) For so long as Stockholders holding shares of Series
A Preferred Stock (excluding Tekelec, its wholly owned subsidiaries and any
Tekelec Designees) in the aggregate own at least 15,000 but less than 31,000
shares of Series A Preferred Stock (as adjusted for any stock dividends,
combinations, reverse stock splits, stock splits, recapitalizations,
reorganizations, reclassifications or other similar event with respect to such
shares), in any election of directors of Santera to elect the directors that
such holders of Series A Preferred Stock are entitled to elect pursuant to the
Amended and Restated Certificate of Incorporation, each Stockholder holding
Series A Preferred Stock who has the right to vote its shares of Series A
Preferred Stock for the election of directors shall vote all shares of Series A
Preferred Stock then owned by such Stockholder (or as to which such Stockholder
has voting power) as may be necessary to elect one (1) director if the Board of
Directors consists of five (5) directors, and one (1) director if the Board of
Directors consists of seven (7) directors, in each case which director shall be
nominated by the Stockholders holding a majority of the shares of Series A
Preferred Stock (excluding Tekelec, its wholly owned subsidiaries and any
Tekelec Designees).
(d) For so long as Stockholders holding shares of Series
A Preferred Stock (excluding Tekelec, its wholly owned subsidiaries and any
Tekelec Designees) in the aggregate own less than 15,000 shares of Series A
Preferred Stock (as adjusted for any stock dividends, combinations, reverse
stock splits, stock splits, recapitalizations, reorganizations,
reclassifications or other similar event with respect to such shares), in any
election of directors of Santera to elect the directors that such holders of
Series A Preferred Stock are entitled to elect pursuant to the Amended and
Restated Certificate of Incorporation, each Stockholder holding Series A
Preferred Stock who has the right to vote its shares of Series A Preferred Stock
for the election of directors (including Tekelec, its wholly owned subsidiaries
and any Tekelec Designees) shall vote all shares of Series A Preferred Stock
then owned by such Stockholder (or as to which such Stockholder has voting
power) as may be necessary to elect one (1) director if the Board of Directors
consists of five (5) directors, and one (1) director if the Board of Directors
consists of seven (7) directors, in each case which director shall be nominated
by Tekelec or its Affiliate.
(e) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors pursuant to this
Section 5.1, vacancies and newly created directorships of such class or classes
or series shall be filled in accordance with the Amended and Restated
Certificate of Incorporation, the Bylaws and applicable law.
(f) For so long as the holders of any class or classes of
stock or series thereof are entitled to elect such director pursuant to Section
5.1(a), 5.1(b) or 5.1(c), any director who was elected by a specified class or
classes of stock or series thereof may be removed during such director's term of
office only in accordance with the Amended and Restated Certificate of
Incorporation, the Bylaws and applicable law.
(g) Should the provisions of this Section 5.1 be
construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and are irrevocable for the term of this Article V.
26
5.2 Supermajority Voting for Certain Corporate Actions.
(a) The affirmative vote of at least a majority of the
directors of Santera present at a meeting duly called at which a quorum is
present or a unanimous written consent signed by the directors of Santera in
lieu of such meeting shall be required to take any action by the Board not
specifically addressed in Article Fifth Section C(ii) of the Amended and
Restated Certificate of Incorporation or in Section 5.2(b) below.
(b) The affirmative vote of at least eighty percent (80%)
of the directors of Santera or a unanimous written consent signed by the
directors of Santera in lieu of such meeting shall be required for any of the
following corporate actions, to the extent the same are to be taken from and
after the Effective Time and prior to the Termination Date:
(i) Payment of any dividend or distribution with respect
to any shares of capital stock of Santera, other than in connection
with a redemption contemplated by Article Fourth, Section C.1(ii) of
the Amended and Restated Certificate of Incorporation;
(ii) Change the range of the number of authorized
directors of the Board of Directors from the number set forth in
Article Fifth, Section B of the Amended and Restated Certificate of
Incorporation and set forth in the Bylaws;
(iii) Sale of all or substantially all of Santera's assets,
or merge into or consolidate with any other entity, or effect any
transaction or series of related transactions in which at least a
majority of Santera's voting power is disposed of (other than in
connection with a Majority Sale or in connection with a redemption
contemplated by Article Fourth, Section C.1(ii) of the Amended and
Restated Certificate of Incorporation); and
(iv) Except as otherwise contemplated or provided for in
this Agreement or contemplated by the Amended and Restated Certificate
of Incorporation, any transaction between Santera and a Stockholder or
an Affiliate of a Stockholder or an employee of a Stockholder, unless
such transaction is made on an arm's-length basis in the ordinary
course of business.
5.3 Attendance at Meetings. At each annual meeting of the
stockholders of Santera and each special meeting of stockholders of Santera
involving the election of directors of Santera, each Stockholder shall attend,
and vote its shares of Stock, in person or by proxy, or each Stockholder shall
execute written consents in lieu of such meetings, in accordance with this
Agreement.
5.4 Committees. At all times prior to the Termination Date, at
least one (1) member of each committee of the Board of Directors shall be a
director designated by the Representative. At all times prior to the Termination
Date, no committee of the Board of Directors shall be authorized to take any
action specified in Section 5.2(b) hereof.
5.5 Director Expenses. Santera shall pay all reasonable expenses
of the directors in connection with his or her election to and service on the
Board, including the cost of their attending or otherwise participating in
meetings or decisions of the Board.
27
ARTICLE VI
OTHER AGREEMENTS BETWEEN THE STOCKHOLDERS
6.1 Confidentiality.
(a) Acknowledgements Each party hereto acknowledges that,
in connection with its rights and obligations under this Agreement, such party
will provide to and receive from the other parties hereto certain Confidential
Information. Each such party hereby agrees that such Confidential Information
will be treated confidentially as provided herein, used only in connection with
the business of Santera and the involvement of the parties hereto therein and
that the parties hereto shall cooperate to prevent disclosure of competitively
sensitive information.
(b) Restrictions on Disclosure Except as expressly
permitted by the terms of this Agreement or as required by applicable law or
regulation, no party hereto may, or permit any of its representatives to,
disclose, in whole or in part, any Confidential Information to any Person or
otherwise use such Confidential Information in any way detrimental to the party
owning such Confidential Information; provided, however, that Confidential
Information may be disclosed to representatives of the receiving party who need
to know the information, it being understood that they will be advised of the
confidential nature of such information and that by receiving such information
they are agreeing to be bound by the provisions of this Section 6.1.
Notwithstanding the foregoing or anything else contained herein to the contrary,
no Stockholder shall be permitted to disclose any Confidential Information in
connection with the Transfer or attempted Transfer of his, her or its interest
in Santera without the prior written consent of Santera even if the failure to
disclose such Confidential Information would preclude such Stockholder from
selling such interest in Santera as a result of applicable legal requirements or
otherwise.
(c) Protective Order In the event that a party hereto is
requested to disclose any Confidential Information, which disclosure is not
otherwise permitted hereunder, such party shall use all reasonable efforts to
provide the other parties hereto with prompt notice of such request or
requirement so that such other party may seek, at its expense, an appropriate
protective order. The receiving party will not oppose any action by, and will
reasonably cooperate with, the disclosing party to obtain any appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information.
(d) Press Releases The parties hereto will not make any
public disclosure of the terms hereof or issue any press release with respect to
the transactions contemplated by this Agreement or otherwise issue any written
public statements with respect to such transactions without the prior written
consent of Tekelec and the Representative, not to be unreasonably withheld,
delayed or conditioned, except as may be required by applicable requirements of
law or by obligations pursuant to any listing agreement with any national
securities exchange or quotation system, in which case the party making such
disclosure will first provide to Tekelec and the Representative the text of the
proposed disclosure, the reasons such disclosure is required and the time and
manner in which the disclosure in intended to be made and Tekelec and the
Representative shall be permitted to comment on such proposed disclosure. The
parties agree that the initial press release and any Commission filing to be
made in respect of the transactions contemplated by this Agreement shall be in
the form heretofore agreed to by Tekelec and the Representative.
6.2 Non-Solicitation.
28
(a) Solicitation of Santera Employees During the term of
this Agreement, no Stockholder or any of their respective Affiliates, officers,
directors, partners or employees shall, without first obtaining the prior
written consent of Santera, which consent may be withheld for any reason,
solicit for employment or hire any employee of Santera, except (x) an employee
of Santera who has received formal notice of termination from Santera or (y) an
employee of Santera who has voluntarily resigned from Santera so long as such
solicitation or employment did not commence prior to the six (6) month
anniversary of such resignation. Notwithstanding the foregoing, nothing in this
Agreement shall prohibit a Stockholder which is primarily engaged in making
investments in other companies, either alone or in any other capacity, or on
behalf of another person or entity, from (i) advertising open positions,
participating in job fairs and comparable activities or in other forms of
soliciting candidates for employment which are general in nature, (ii) hiring a
current or former employee of Santera who has responded to a general
solicitation of employment not specifically directed at that employee or (iii)
hiring or soliciting for employment any employee of Santera who has received a
notice of termination or whose employment with Santera has otherwise been
terminated.
(b) Initial Employees Each Stockholder acknowledges that
the initial employees of Santera shall consist of employees from both Tekelec
and Santera.
6.3 Funding of Certain Redemption Rights. To the extent Santera
becomes obligated to redeem shares of Series A Preferred Stock pursuant to
Article Fourth, Sections D(1)(ii)(a)(I) or (II) of the Amended and Restated
Certificate of Incorporation but such redemption is not permitted under Delaware
law, Tekelec agrees to contribute to Santera assets in an amount sufficient to
permit Santera to redeem such shares for cash, Tekelec Stock or any combination
thereof in full under Delaware law.
6.4 Registration Rights with Respect to Tekelec Stock.
(a) To the extent Tekelec files a Registration Statement
in connection with the issuance of shares of Tekelec Stock in satisfaction for
all or any portion of the Call Price pursuant to Section 3.1, the Put Price
pursuant to Section 3.2 or all or any portion of the redemption price pursuant
to Article Fourth, Section C(1)(ii)(a)(I) or (II) of the Amended and Restated
Certificate of Incorporation, Tekelec agrees to maintain the effectiveness of
such Registration Statement for a period of at least twelve (12) months
following the effectiveness thereof or, for those Stockholders who are
Affiliates of Santera, for a period of at least twenty-four (24) months
following the effectiveness thereof, provided that if Tekelec determines in good
faith that (i) sales of securities pursuant to the Registration Statement would
have a material adverse effect on Tekelec or its stockholders in relation to any
financing, acquisition or other corporate transaction or (ii) sales of
securities pursuant to the Registration Statement would require disclosure of
information Tekelec reasonably believes should remain confidential at such time
for a valid business purpose, in each case as evidenced by a certificate signed
by Tekelec's Chief Executive Officer, Tekelec shall be entitled to suspend all
sales under the Registration Statement and prospectuses related thereto for a
reasonable period of time, but not for more than an aggregate of ninety (90)
calendar days in any 360 day period (provided that any such suspension shall
toll the period during which Tekelec must maintain the effectiveness of such
Registration Statement).
(b) Each of the Stockholders who receive Tekelec Stock
registered upon issuance or registered for resale pursuant to the Act in
connection with the issuance of shares of
29
Tekelec Stock in satisfaction for all or any portion of the Call Price pursuant
to Section 3.1, the Put Price pursuant to Section 3.2 or all or any portion of
the redemption price pursuant to Article Fourth, Section C(1)(ii)(a)(I) or (II)
of the Amended and Restated Certificate of Incorporation hereby agree to
indemnify and hold Tekelec, its directors, officers and agents harmless for any
loss, claim, damage, liability or action that arises out of or is based upon any
untrue statement, or alleged untrue statement, or omission, or alleged omission,
of material fact made in the Registration Statement or any preliminary
prospectus or prospectus contained therein or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished or
confirmed to Tekelec by such Stockholder, or by any agent thereof, specifically
for use in the preparation of such Registration Statement; provided, however,
that the foregoing indemnity obligations shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Stockholder (which consent
shall not be unreasonably withheld) and, provided further, that in no event
shall the foregoing indemnity obligations exceed the net proceeds from such
offering received by such Stockholder.
(c) Tekelec hereby agrees to indemnify and hold each of
the Stockholders and each person, if any, who controls such Stockholder within
the meaning of the Act who receive Tekelec Stock registered upon issuance or
registered for resale pursuant to the Act in connection with the issuance of
shares of Tekelec Stock in satisfaction for all or any portion of the Call Price
pursuant to Section 3.1, the Put Price pursuant to Section 3.2 or all or any
portion of the redemption price pursuant to Article Fourth, Section
C(1)(ii)(a)(I) or (II) of the Amended and Restated Certificate of Incorporation
and each of their respective directors, officers and agents harmless for any
loss, claim, damage, liability (joint or several) or action (including
reasonable attorneys fees) to which any of the foregoing persons may become
subject under the Act or other applicable securities laws, insofar as such loss,
claim, damage, liability or action arises out of or is based upon any of the
following statements, omissions or violations: (i) any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto (collectively, the "Filings"),
(ii) the omission or alleged omission to state in the Filings a material fact
required to be stated therein, or necessary to make the statements therein not
misleading or alleged untrue statement, or omission, or alleged omission, of
material fact made in the Filings, or (iii) any violation or alleged violation
by Tekelec of the Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Act, the Exchange Act or any state securities
law with respect to the offering of the securities pursuant to the Filings other
than, in any such case, for such untrue statement, or alleged untrue statement,
or omission, or alleged omission, of material fact or violation or alleged
violation made in reliance upon and in conformity with information furnished or
confirmed to Tekelec by such Stockholder, or by any agent thereof, specifically
for use in the preparation of the Filings.
(d) Promptly after receipt by an indemnified party under
this Section 6.4 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6.4, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, but only if such indemnifying party shall
have unconditionally acknowledged to each indemnified party in writing the
obligation of the indemnifying party to indemnify the persons entitled to be
indemnified hereunder with respect to such claims, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the
30
parties; provided, however, that an indemnified party (together with all other
indemnified parties that may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall, to the extent such failure is
prejudicial to the indemnifying party's ability to defend against any such
action, relieve such indemnifying party of any liability to the indemnified
party under this Section 6.4 to the extent thereto, but the failure to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 6.4.
(e) If the indemnification provided for in Section 6.4(b)
and Section 6.4(c) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or action referred to therein, then the indemnifying party in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage, liability or action in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such loss, liability, claim, liability
or action as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the indemnifying
party or by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. In no event shall any Stockholder be required to contribute an amount
in excess of the net proceeds from the offering received by such Stockholder.
6.5 Information Rights. The Company shall deliver to each
Qualifying Stockholder:
(a) as soon as practicable, but in any event within one
hundred twenty (120) calendar days after the end of each fiscal year of Santera,
consolidated balance sheets of Santera and its subsidiaries, if any, as of the
end of such fiscal year, and consolidated statements of income and consolidated
statements of cash flows of Santera and its subsidiaries, if any, for such year,
prepared in accordance with GAAP, all in reasonable detail and audited by
independent public accountants of national standing selected by Santera; and
(b) as soon as practicable, but in any event within
forty-five (45) calendar days after the end of each fiscal quarter of Santera,
unaudited consolidated balance sheets of Santera and its subsidiaries, if any,
as of the end of such fiscal quarter, and unaudited consolidated statements of
income and unaudited consolidated statements of cash flows of Santera and its
subsidiaries, if any, for such quarter, prepared in accordance with GAAP, all in
reasonable detail.
The Company shall bear all expenses and fees incurred in connection with the
preparation, audit and/or delivery of the financial statements to be delivered
to the Qualifying Stockholders pursuant to this Section 6.5.
6.6 Visitation and Inspection. Santera shall permit each
Qualifying Stockholder, at such Qualifying Stockholder's expense, to visit and
inspect Santera's properties and to discuss Santera's
31
affairs, finances and accounts with its executive officers, all at such
reasonable times as may be requested by the Qualifying Stockholder; provided,
however, that Santera shall not be obligated pursuant to this Section 6.6 to
provide access to any information that it reasonably considers in good faith to
be a trade secret or otherwise highly confidential information. The provisions
of this Section 6.6 shall not be in limitation of any rights which any
Stockholder may have with respect to the books and records of Santera and its
subsidiaries, or to inspect their properties or discuss their affairs, finances
and accounts, under the laws of the State of Delaware.
6.7 Set-Off. Tekelec shall be entitled to setoff, and/or at any
time following the Closing, cause Santera to setoff, (i) any amount that Tekelec
claims Santera owes it under Article XI of the Merger Agreement, including any
amounts owed pursuant to that letter agreement dated April 30, 2003, against (x)
any amounts owed by Tekelec to Santera (other than amounts owed by Tekelec to
Santera as indemnification payments pursuant to Article XI of the Merger
Agreement or upon exercise of the Tekelec Option) or to any of the Legacy
Santera Stockholders under this Agreement, the Escrow Agreement or the Merger
Agreement or (y) after the Closing, any amounts owed by Santera to the Legacy
Santera Stockholders upon redemption of shares of Series A Preferred Stock under
the Amended and Restated Certificate of Incorporation and/or (ii) any amount
Tekelec claims any Legacy Santera Stockholder owes it or Santera under the
Merger Agreement against (x) any amounts owed by Tekelec to Santera (other than
amounts owed by Tekelec to Santera as indemnification payments pursuant to
Article XI of the Merger Agreement or upon exercise of the Tekelec Option) or to
any such Legacy Santera Stockholder under this Agreement, the Escrow Agreement
or the Merger Agreement or (y) after the Closing, any amounts owed by Santera to
any such Legacy Santera Stockholder upon redemption of shares of Series A
Preferred Stock under the Amended and Restated Certificate of Incorporation;
provided, in any such case, that Tekelec informs the Representative in writing
of such proposed setoff in advance of such setoff and describes the grounds upon
which Tekelec claims the right to make such setoff (or cause Santera to make
such setoff) and provides the Representative a reasonable opportunity to contest
such setoff. If the Representative disputes such setoff, it shall notify Tekelec
thereof within thirty (30) days after receipt of the notice of setoff, whereupon
Tekelec and the Representative shall meet and attempt in good faith to resolve
their differences with respect to such claimed right of setoff. If the dispute
has not been resolved within thirty (30) days after such Parties first meet to
attempt such resolution, any Party may initiate litigation in accordance with
this Agreement. This Section 6.7 does not create any independent obligation of a
Party to Tekelec, nor shall this Section 6.7 circumvent the limitations set
forth in Sections 11.5, 11.6, 11.8 and 11.9 of the Merger Agreement.
ARTICLE VII
CERTIFICATES
As long as this Agreement shall remain in full force and effect, there
shall be inscribed upon each certificate of Common Stock and Preferred Stock
held by a Stockholder the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED, OR IN ANY WAY
DISPOSED OF OR ENCUMBERED EXCEPT PURSUANT TO THE TERMS AND
CONDITIONS OF A CERTAIN STOCKHOLDERS' AGREEMENT DATED AS OF
___________________ ________, 2003, AND ANY AMENDMENTS
THERETO, A COPY OF WHICH
32
IS ON FILE AT THE OFFICE OF SANTERA. THE HOLDER AND THE OWNER
HEREOF IS SUBJECT TO THE OBLIGATIONS THEREIN SET FORTH AND
CONTAINED AND ANY SUCH DISPOSITION OR ENCUMBRANCE IN
CONTRAVENTION OF SAID STOCKHOLDERS' AGREEMENT SHALL BE NULL
AND VOID.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE,
AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED,
TRANSFERRED, GRANTED AN OPTION WITH RESPECT TO OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR DELIVERY TO
SANTERA OF AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
ACCEPTABLE TO SANTERA THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE ACT.
ARTICLE VIII
TERMINATION
This Agreement shall terminate upon the occurrence of any of the
following events:
(a) prior to the Termination Date, the written agreement of the
holders of not less than (i) a majority of the Series B Preferred Stock,
calculated on an as converted basis and (ii) a majority of the Series A
Preferred Stock (excluding Tekelec, its wholly owned subsidiaries and any
Tekelec Designees), calculated on an as converted basis;
(b) after the Termination Date, the written agreement of the
holders of not less than 71% of the Stock, calculated on a fully converted
basis;
(c) the date on which only one Person (or its wholly owned
subsidiaries) own shares of Stock of Santera;
(d) the date on which Tekelec acquires all Stock as a result of
the consummation of a transaction pursuant to the exercise of the call right or
the put right contained in Article III hereof or the date on which Santera
redeems all Stock pursuant to Article Fourth, Section C(1)(ii)(a)(I) or (II) of
the Amended and Restated Certificate of Incorporation; or
(e) the dissolution of Santera.
The voting provisions of Article V will terminate (if the same have not sooner
terminated in accordance with their respective terms) upon the termination of
this Agreement pursuant to the terms of this Article VIII. Unless earlier
terminated pursuant to this Article VIII, the provisions of Article II shall
terminate upon the effective time of a firm commitment underwritten public
offering
33
of Stock registered under the Act. The provisions of Sections 6.1, 6.2, 9.2,
9.3, 9.8 and 9.9 shall survive the termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices, consents, approvals, requests and other
communications hereunder shall be in writing and shall be deemed given when
delivered personally, one (1) day after being delivered to an overnight courier
or when telecopied (with a confirmatory copy sent by overnight courier) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Santera, to:
Santera Systems Inc.
0000 Xxxx Xxxxx Xxxxxxx, #000
Xxxxx, Xxxxx 00000
Attention: President
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxx Xxxx & Xxxx P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: A. Xxxxxxx Xxxxxxxxxxxx
Facsimile No.: (000) 000-0000
If to Tekelec, to:
Tekelec
00000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: President
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx X. Xxxxxx
Tekelec
00000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
and
00
Xxxxx Xxxx XXX
Xxx Xxxxxxxxxxxx Xxxxxx
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: J. Xxxx Xxxxxx and Xxxxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Legacy Santera Stockholders, to the Representative:
Austin Ventures VI, L.P.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000-000-0000
with a copy to:
Wilson, Sonsini, Xxxxxxxx & Xxxxxx Professional Corporation
8911 Capital of Texas Highway North
Westech 360, Suite 3350
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
9.2 Remedies. The Stockholders will be entitled to enforce their
rights under this Agreement specifically (without posting a bond or other
security), to recover damages by reason of any material breach of any provision
of this Agreement and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
Stockholder may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violation of the provisions of this Agreement.
In the event of any dispute involving the terms of this Agreement, the
prevailing party shall be entitled to collect reasonable fees and expenses
incurred by the prevailing party in connection with such dispute from the other
parties to such dispute.
9.3 Expenses Except as otherwise provided in this Agreement or the
Merger Agreement, each party hereto will pay its own costs and expenses incurred
in connection with the negotiation, execution and performance of this Agreement
and the transactions contemplated hereby.
9.4 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the respective successors and permitted assigns
of the parties hereto.
9.5 Amendment and Waiver. No modification, amendment or waiver of
any provision of this Agreement will be effective against Santera or the
Stockholders unless such modification,
35
amendment or waiver is approved in writing by the holders of at least 71% of the
total number of outstanding shares of Stock, calculated on an as converted
basis; provided, however, that no amendment, modification or waiver of any
provision of this Agreement that affects one particular group of Stockholders
party to this Agreement (e.g., without limitation, the holders of the Series A
Preferred Stock only, Series B Preferred Stock only or Common Stock only) in a
manner different from any other group of Stockholders shall be effective against
such group of Stockholders without the approval in writing of the holders of 71%
of the total number of outstanding shares of Stock, calculated on an as
converted basis, held by such group of Stockholders, and no modification,
amendment or waiver of any provision of this Agreement that affects only one
party shall be effective against such party without the approval in writing of
such party; provided, further that, prior to the later of (a) the Termination
Date and (b) the date on which no Disputed Shares remain outstanding, no
amendment, modification or waiver of Article III or Section 6.3 hereof shall be
effective without the approval in writing of the holders of at least (i) a
majority of the Series B Preferred Stock, calculated on an as converted basis,
and (ii) a majority of the Series A Preferred Stock (excluding Tekelec, its
wholly owned subsidiaries and any Tekelec Designees), calculated on an as
converted basis, and, prior to the later of (a) the Termination Date and (b) the
date on which no Disputed Shares remain outstanding no amendment, modification
or waiver of any provision of this Agreement that adversely affects the rights
of the Legacy Santera Stockholders under Article III or Section 6.3 hereof shall
be effective without the approval in writing of the holders of at least (i) a
majority of the Series B Preferred Stock, calculated on an as converted basis
and (ii) a majority of the Series A Preferred Stock (excluding Tekelec, its
wholly owned subsidiaries and any Tekelec Designees), calculated on an as
converted basis; provided, further that, prior to the later of (a) the
Termination Date and (b) the date on which no Disputed Shares remain
outstanding, no amendment, modification or waiver of Article V hereof shall be
effective without the approval in writing of the holders of at least (i) a
majority of the Series B Preferred Stock, calculated on an as converted basis,
and (ii) a majority of the Series A Preferred Stock (excluding Tekelec, its
wholly owned subsidiaries and any Tekelec Designees), calculated on an as
converted basis, so long as the holders of Series A Preferred Stock (excluding
Tekelec, its wholly owned subsidiaries and any Tekelec Designees) in the
aggregate own at least 15,000 shares of Series A Preferred Stock (as adjusted
for any stock dividends, combinations, reverse stock splits, stock splits,
recapitalizations, reorganizations, reclassifications or other similar event
with respect to such shares); provided, further that, until the later of(a) the
Termination Date and (b) the date on which no Disputed Shares remain
outstanding, no amendment, modification or waiver of Article VIII hereof or this
Section 9.5 shall be effective without the approval in writing of the holders of
at least (i) a majority of the Series B Preferred Stock, calculated on an as
converted basis, and (ii) a majority of the Series A Preferred Stock (excluding
Tekelec, its wholly owned subsidiaries and any Tekelec Designees), calculated on
an as converted basis. The failure of any party to enforce any of the provisions
of this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
9.6 Counterparts This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same instrument.
9.7 Headings The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
9.8 Severability If any provision of this Agreement shall be
determined to be illegal or unenforceable, the remaining provisions of this
Agreement shall remain in full force and effect, and
36
this Agreement shall be construed as if the illegal or unenforceable provision
were not a part hereof, so long as the remaining provisions of this Agreement
shall be sufficient to carry out the overall intent of the parties as expressed
herein.
9.9 Governing Law This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its conflicts of law doctrine. All claims brought hereunder are required to
be brought and maintained in the any Federal or state court in the district in
which Dallas, Texas is located. Any and all counterclaims in any action must be
brought in the same court in which the related proceeding was initiated in
accordance with the foregoing provisions. The parties hereto agree that such
courts shall have exclusive jurisdiction and venue over all disputes between the
parties hereto that are permitted to be brought in a court of law pursuant to
Section 9.12.
9.10 Further Assurances Each party hereto shall perform all other
acts and execute and deliver all other documents as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
9.11 Third Party Beneficiary Nothing set forth in this Agreement
shall be construed to confer any benefit to any third party who is not a party
to this Agreement.
9.12 Dispute Resolution.
(a) Informal Proceedings Except as otherwise specifically
provided herein or in the Amended and Restated Certificate of Incorporation, in
the event that any dispute, controversy or claim of any kind or nature arising
under or in connection with this Agreement, the Amended and Restated Certificate
of Incorporation, the Bylaws or actions taken or to be taken hereunder or
thereunder (including disputes as to the creation, validity, interpretation,
breach or termination of any such agreement)(a "Dispute"), then upon the written
request of Tekelec or the Representative, Tekelec and the Representative shall
each appoint a designated senior business executive or its equivalent (who for
Tekelec shall be Tekelec's Chief Executive Officer) whose task it will be to
meet for the purpose of endeavoring to resolve any actual or anticipated
Disputes. The designated representatives shall meet as often as Tekelec and the
Representative reasonably deem necessary in order to gather and furnish to the
other all information with respect to the Dispute which Tekelec and the
Representative believe to be appropriate and germane in connection with its
resolution. Such representatives shall discuss the Dispute and will negotiate in
good faith in an effort to resolve the Dispute without the necessity of any
formal proceeding relating thereto. The specific format for such discussions
shall be left to the discretion of the designated representatives and may
include the preparation of agreed upon statements of fact or written statements
of position furnished to the other party. No formal proceedings for the
resolution of the Dispute under Section 9.12(b) may be commenced until the
earlier to occur of (i) a good faith determination by the designated
representatives that amicable resolution through continued negotiation of the
Dispute does not appear likely or (ii) the twenty-fifth (25th) day after the
initial request to negotiate the Dispute, except that the foregoing shall not
preclude any such party from seeking injunctive relief in any court having
jurisdiction.
(b) Formal Proceedings If a Dispute has not been resolved
through the procedures set forth pursuant to Section 9.12(a), any party may
pursue all available claims,
37
counterclaims, or causes of actions whether at law or in equity, in an action or
proceeding before a court of competent jurisdiction.
9.13 Additional Parties. The parties hereto acknowledge and agree
that any stockholders of Santera that execute this Agreement after the date
hereof and prior to the Closing shall be considered a Legacy Santera Stockholder
for all purposes hereunder.
[The remainder of this page has been left blank intentionally.]
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
SANTERA SYSTEMS INC.
By: /s/ Xxxxx Xxxxx
_____________________________________
Name: Xxxxx Xxxxx
___________________________________
Title: President and CEO
__________________________________
TEKELEC
By: /s/ Xxxxxxxxx X. Xxx
_____________________________________
Name: Xxxxxxxxx X. Xxx
___________________________________
Title: President and CEO
__________________________________
By: /s/ Xxxx X. Xxxxxx
_____________________________________
Name: Xxxx X. Xxxxxx
___________________________________
Title: CFO
__________________________________
AUSTIN VENTURES VI, L.P., as Representative
By: AV Partners VI, L.P., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
__________________________________
Xxxxxx X. Xxxxxxx, General Partner
AUSTIN VENTURES VI, L.P.
By: AV Partners VI, L.P., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
__________________________________
Xxxxxx X. Xxxxxxx, General Partner
AUSTIN VENTURES VI AFFILIATES FUND, L.P.
By: AV Partners VI, L.P., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
__________________________________
Xxxxxx X. Xxxxxxx, General Partner
AUSTIN VENTURES VIII, L.P.
By: AV Partners VIII, L.P., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
__________________________________
Xxxxxx X. Xxxxxxx, General Partner
STOCKHOLDERS' AGREEMENT
Signature Page
REDPOINT VENTURES II, L.P., by its General
Partner, Redpoint Ventures II, LLC
By: /s/ R. Xxxxxx Xxxx
__________________________________
R. Xxxxxx Xxxx, Managing Director
REDPOINT ASSOCIATES II, LLC, as nominee
By: /s/ R. Xxxxxx Xxxx
__________________________________
R. Xxxxxx Xxxx, Managing Director
REDPOINT TECHNOLOGY PARTNERS Q-I,
L.P.,by its General Partner, Redpoint Ventures I,
LLC
By: /s/ R. Xxxxxx Xxxx
_____________________________________
Name: R. Xxxxxx Xxxx
___________________________________
Title: Managing Director
__________________________________
REDPOINT TECHNOLOGY PARTNERS A-I,
L.P., by its General Partner, Redpoint Ventures I,
LLC
By: /s/ R. Xxxxxx Xxxx
_____________________________________
Name: R. Xxxxxx Xxxx
___________________________________
Title: Managing Director
__________________________________
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates L.L.C.
its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By: /s/ Xxxx Xxxxxxx
_____________________________________
Name: Xxxx Xxxxxxx
___________________________________
Title: __________________________________
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
its General Partner
By: Meritech Management Associates L.L.C.
a managing member
By: /s/ Xxxx Xxxxxxx
_____________________________________
Name: Xxxx Xxxxxxx
___________________________________
Title: __________________________________
STOCKHOLDER' AGREEMENT
Signature Page
SEQUOIA CAPITAL FRANCHISE FUND, L.P.
By: SCFF Management, LLC
A Delaware Limited Liability Company
General Partner
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
-----------------------------------
Title:
----------------------------------
SEQUOIA CAPITAL FRANCHISE PARTNERS, L.P.
By: SCFF Management, LLC
A Delaware Limited Liability Company
General Partner
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
-----------------------------------
Title:
----------------------------------
SEQUOIA CAPITAL VIII, L.P.
By: SC VIII Management, LLC
A California Limited Liability Company
General Partner
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
-----------------------------------
Title:
----------------------------------
SEQUOIA INTERNATIONAL TECHNOLOGY
PARTNERS VIII, L.P.
By: SC VIII Management, LLC
A California Limited Liability Company
General Partner
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
-----------------------------------
Title:
----------------------------------
STOCKHOLDERS' AGREEMENT
Signature Page
SEQUOIA INTERNATIONAL TECHNOLOGY
PARTNERS VIII (Q), L.P.
By: SC VIII Management, LLC
A California Limited Liability Company
General Partner
By: /s/ Xxxx Xxxxxxx
_____________________________________
Name: Xxxx Xxxxxxx
___________________________________
Title: __________________________________
SEQUOIA 1997
By: /s/ Xxxx Xxxxxxx
_____________________________________
Name: Xxxx Xxxxxxx
___________________________________
Title: __________________________________
CMS PARTNERS LLC
By: /s/ Xxxx Xxxxxxx
_____________________________________
Name: Xxxx Xxxxxxx
___________________________________
Title: __________________________________
INSTITUTIONAL VENTURE PARTNERS VIII,
L.P., by its General Partner, Institutional
Venture Management VIII, LLC
By: /s/ R. Xxxxxx Xxxx
__________________________________
R. Xxxxxx Xxxx, Managing Director
IVM INVESTMENT FUND VIII, LLC, by its
Manager, Institutional Venture Management VIII,
LLC
By: /s/ R. Xxxxxx Xxxx
__________________________________
R. Xxxxxx Xxxx, Managing Director
BROADBAND FUND, L.P., by its General Partner,
BBF Management, LLC, by its Manager,
Institutional Venture Management VIII, LLC
By: /s/ R. Xxxxxx Xxxx
__________________________________
R. Xxxxxx Xxxx, Managing Director
STOCKHOLDERS' AGREEMENT
Signature Page
EXHIBIT A
Instrument of Accession
Reference is made to that certain Stockholders' Agreement dated as of
April 30, 2003, a copy of which is attached hereto (the "Stockholders'
Agreement"), by and among Santera Systems Inc., a Delaware corporation
("Santera"), Tekelec, a California corporation ("Tekelec"), the other
stockholders of Santera that are signatory thereto (the "Legacy Santera
Stockholders" and, together with Tekelec, the "Stockholders") and Austin
Ventures VI, L.P., as representative of certain of the Legacy Santera
Stockholders thereunder. Any terms not defined herein shall be defined as in the
Stockholders' Agreement.
The undersigned, _______________, in order to become the owner or
holder of shares (the "Acquired Shares") of _____________________ , $____ par
value per share, of Santera, hereby agrees that by the undersigned's execution
hereof (a) the undersigned is a Stockholder party to the Stockholders' Agreement
subject to all of the restrictions, conditions and obligations applicable to
Stockholders set forth in the Stockholders' Agreement and (b) all of the
Acquired Shares (and any and all shares of stock of Santera issued in respect
thereof) are and will remain subject to all of the rights, restrictions,
conditions and obligations applicable to such shares of Stock as set forth in
the Stockholders' Agreement. This Instrument of Accession shall take effect and
shall become a part of said Stockholders' Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of
Delaware.
Signature:_________________________________
Address:___________________________________
___________________________________
Date:______________________________________
Accepted:
SANTERA SYSTEMS INC.
By: ____________________________
Date: ___________________________
