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Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K/A 2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999 Commission File Number 1-5620
SAFEGUARD SCIENTIFICS, INC.
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA 23-1609753
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE, WAYNE, PA 19087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 293-0600
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of Each Class on which registered
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COMMON STOCK ($.10 PAR VALUE) NEW YORK STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
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Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of common stock held by non-affiliates (based on the
closing price on the New York Stock Exchange) on March 17, 2000 was
approximately $9.3 billion. For purposes of determining this amount only,
Registrant has defined affiliates as including (a) the executive officers named
in Part III of this 10-K report, (b) all directors of Registrant, and (c) each
stockholder that has informed Registrant by March 17, 2000 that it is the
beneficial owner of 10% or more of the outstanding common stock of Registrant.
The number of shares outstanding of the Registrant's Common Stock, as of March
17, 2000 was 107,329,089, taking into account a 3-for-1 split of our Common
Stock effective March 20, 2000. Unless otherwise specifically stated, the
information in this report reflects this 3-for-1 split.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) THE FOLLOWING FINANCIAL STATEMENTS AND SCHEDULES ARE FILED AS PART OF THIS
REPORT:
Consolidated Financial Statements
Balance Sheets - December 31, 1999 and 1998
Operations - years ended December 31, 1999, 1998, and 1997
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Shareholders' Equity - years ended December 31, 1999, 1998, and 1997
Comprehensive Income - years ended December 31, 1999, 1998, and 1997
Cash Flows - years ended December 31, 1999, 1998, and 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report
Statement of Management's Financial Responsibility
Financial Statement Schedules
Independent Auditors' Report
Schedule I - Condensed Consolidated Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts
The exhibits required to be filed as part of this Report are listed in the
exhibit index below.
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EXHIBITS
The following is a list of exhibits required by Item 601 of Regulation S-K
filed as part of this Report. Where so indicated by footnote, exhibits which
were previously filed are incorporated by reference. For exhibits incorporated
by reference, the location of the exhibit in the previous filing is indicated
in parentheses.
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EXHIBIT NO. EXHIBIT
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2.1 Asset Purchase Agreement, dated as of May 10, 1999 by and between CompuCom Systems, Inc. and Entex
Information Services, Inc.(15) (Exhibit 2.1)
3.1 Amended and Restated Articles of Incorporation of Safeguard(7) (Exhibit 3.1)
3.2 By-laws of Safeguard, as amended(19) (Exhibit 3)
4.1** 1990 Stock Option Plan, as amended(7) (Exhibit 4.3)
4.2** Stock Option Plan for Non-Employee Directors(4) (Exhibit 4.8)
4.3** Safeguard Scientifics, Inc. Amended and Restated Stock Savings Plan(5) (Exhibit 4.9)
4.4** First Amendment to Safeguard Scientifics, Inc. Stock Savings Plan(7) (Exhibit 4.6)
4.5** Safeguard Scientifics, Inc. Stock Savings Plan Trust Agreement(2) (Exhibit 4.2)
4.6 Safeguard Scientifics, Inc. 1999 Equity Compensation Plan(16) (Exhibit 4.1)
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4.7 Indenture, dated as of June 9, 1999, between Safeguard Scientifics, Inc. and Chase Manhattan Trust
Company, National Association, as trustee, including the form of 5.0% Convertible Subordinated Note due
2006(17) (Exhibit 4.2)
4.8 Purchase Agreement of Safeguard Scientifics, Inc. to issue and sell to Credit Suisse First Boston
Corporation Convertible Subordinated Notes due June 15, 2006. (Exhibits omitted)(16) (Exhibit 4.3)
4.9 Registration Rights Agreement between Safeguard Scientifics, Inc. and Credit Suisse First Boston Corporation(17)
(Exhibit 4.4)
4.10 Rights Agreement dated as of March 1, 2000 between Safeguard Scientifics, Inc. and ChaseMellon Shareholder
Services LLC, as Rights Agent(19) (Exhibit 4)
4.11 Designation of Series A Junior Participating Preferred Shares(20) (Exhibit 4.11)
10.1** Safeguard Scientifics Money Purchase Pension Plan(3) (Exhibit 10.3)
10.2** First Amendment to Safeguard Scientifics Money Purchase Pension Plan(4) (Exhibit 10.2)
10.3** Second Amendment to Safeguard Scientifics Money Purchase Pension Plan(5) (Exhibit 10.3)
10.4** Third Amendment to Safeguard Scientifics Money Purchase Pension Plan(6) (Exhibit 10.4)
10.5** Safeguard Scientifics Money Purchase Pension Plan Trust Agreement(3) (Exhibit 10.4)
10.6** Safeguard Scientifics, Inc. Long Term Incentive Plan, as amended and restated effective June 15, 1994(5)
(Exhibit 10.6)
10.7** Safeguard Scientifics, Inc. Deferred Compensation Plan(1) (Exhibit 10.12)
10.8 Asset Acquisition Agreement dated April 15, 1997 for the sale of certain assets of Premier Solutions
Ltd. to a subsidiary of Sungard Data Systems Inc. (exhibits omitted)(8) (Exhibit 10.1)
10.9 Stock Exchange Agreement dated as of February 26, 1999 among Safeguard Scientifics, Inc., aligne
incorporated, and the shareholders of aligne incorporated (exhibits and schedules omitted)(13) (Exhibit
10.12)
10.10 Transaction Agreement dated February 28, 2000 between Safeguard Scientifics, Inc. and Textron Inc. (19)
(Exhibit 10)
10.11 Amended and Restated Credit Agreement, dated April 17, 1998, among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc., Safeguard Delaware, Inc. and PNC Bank, N.A. (exhibits omitted)(10) (Exhibit
10.1)
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10.12 Amendment dated April 12, 1999 to Amended and Restated Credit Agreement among Safeguard Scientifics,
Inc., Safeguard Scientifics (Delaware), Inc., Safeguard Delaware, Inc. and PNC Bank, N.A. (Exhibits
omitted)(14) (Exhibit 10.1)
10.13 Amendment dated March 29, 1999 to Amended and Restated Credit Agreement(21) (Exhibit 10.13)
10.14 Amendment dated August , 1999 to Amended and Restated Credit Agreement(21) (Exhibit 10.14)
10.15 Amendment dated February 17, 2000 to Amended and Restated Credit Agreement(20) (Exhibit 10.15)
10.16 Amended and Restated Credit Agreement, dated as of November 3, 1997, among CompuCom Systems, Inc., certain
lenders party hereto, and NationsBank of Texas, N.A., as administrative lender (exhibits and schedules omitted)(9)
(Exhibit 10.27)
10.17 Amendment No. 1 to Amended and Restated Credit Agreement, dated as of June 26, 1998, among CompuCom
Systems, Inc., certain lenders party hereto, and NationsBank of Texas, N.A., as administrative lender
(exhibits omitted)(11) (Exhibit 10.2)
10.18 Non-Competition, Referral and Non-Disclosure Agreement dated as of May 10, 1999, by and between CompuCom
Systems, Inc. and ENTEX Information Services, Inc.(15) (Exhibit 10.1)
10.19 CompuCom Receivables MasterTrust I Pooling and Servicing Agreement, dated as of May 7, 1999, between
Norwest Bank Minnesota National Association, CompuCom Systems, Inc., and CSI Funding, Inc.(16) (Exhibit
10.14)
10.20 CompuCom Receivables MasterTrust I Pooling and Servicing Agreement Series 1999-1 Supplement, dated as of
May 7, 1999, among PNC Bank, National Association, Market Street Capital Corporation, Norwest Bank
Minnesota, National Association, CompuCom Systems, Inc., and CSI Funding, Inc.(16) (Exhibit 10.5)
10.21 Inventory and Working Capital Financing Agreement, dated as of May 11, 1999, between IBM Credit
Corporation and CompuCom Systems, Inc.(16) (Exhibit 10.6)
10.22 Attachment A to Inventory and Working Capital Financing Agreement dated May 11, 1999.(16) (Exhibit 10.7)
10.23 Receivables Contribution and Sale Agreement dated May 7, 1999 between CompuCom Systems, Inc. and CSI Funding,
Inc. (16) (Exhibit 10.8)
10.24** Term Note dated October 22, 1998 from Edward Anderson to CompuCom Systems, Inc.(13) (Exhibit 10.25)
10.25** Pledge Agreement dated October 22, 1998 from Edward Anderson to CompuCom Systems, Inc.(13) (Exhibit 10.26)
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10.26** First Amendment to Term Note dated February 19, 1999 from Edward Anderson to CompuCom Systems,
Inc.(13) (Exhibit 10.23)
10.27** Stock Option Grant Agreement between CompuCom Systems, Inc. and Thomas C. Lynch, dated as of October 22,
1998(12) (Exhibit 10.4)
10.28** Term Note dated December 23, 1998 from Thomas Lynch to CompuCom Systems, Inc.(13) (Exhibit 10.28)
10.29** Pledge Agreement dated December 23, 1998 from Thomas Lynch to CompuCom Systems, Inc.(13) (Exhibit 10.29)
10.30** Term Note dated December 23, 1998 from Thomas Lynch to Safeguard Scientifics, Inc.(13) (Exhibit 10.30)
10.31** Security Agreement dated December 23, 1998 between Thomas Lynch and Safeguard Scientifics,
Inc.(13) (Exhibit 10.31)
10.32** Form of Promissory Notes dated June 11, 1999 given by certain executives for advances by Safeguard of income tax
withholdings on restricted stock grants.(31) (Exhibit 10.2)
10.33** Form of Promissory Notes dated August 27, 1999 given by certain executives for advances by Safeguard of
income tax withholdings on restricted stock grants.(18) (Exhibit 10.9)
10.34** Term Note dated July 22, 1999, between Safeguard Delaware, Inc. and John Halvey(18) (Exhibit 10.10)
10.35** Form of Promissory Notes dated November 3, 1999 given by certain executives for advances by Safeguard of
income tax withholdings on restricted stock grants(20) (Exhibit 10.35)
10.36** Form of Promissory Notes dated December 1, 1999 given by certain executives for advances by Safeguard of
income tax withholdings on restricted stock grants(20) (Exhibit 10.36)
10.37** Form of Promissory Notes dated February 3, 2000 given by certain executives for advances by Safeguard of
income tax withholdings on restricted stock grants(20) (Exhibit 10.37)
10.38** Stock option Grant by Safeguard Scientifics, Inc. to Harry Wallaesa dated March 1, 2000(20) (Exhibit 10.38)
10.39** Executive Employment Agreement dated November 1, 1999 between J. Edward Coleman and CompuCom Systems,
Inc. (20) (Exhibit 10.39)
10.40 Sails Mandatorily Exchangeable Securities Contract dated as of March 25, 1999 among Safeguard Scientifics, Inc.,
Safeguard Scientifics (Delaware), Inc., Credit Suisse Financial Products and CSFP Capital Inc. has Agent*
10.41 Sails Pledge Agreement dated as of March 25, 1999 among Safeguard Scientifics (Delaware), Inc, Credit Suisse
Financial Products, and Credit Suisse First Boston, New York, as Collateral Agent (exhibits omitted)*
10.42 Sails Mandatorily Exchangeable Securities Contract dated as of August 30, 1999 among Safeguard Scientifics, Inc.,
Safeguard Scientifics (Delaware), Inc., Credit Suisse Financial Products and CSFP Capital, Inc. as Agent*
10.43 Sails Pledge Agreement dated as of August 30, 1999 among Safeguard Scientifics (Delaware), Inc., Credit Suisse
Financial Products, and Credit Suisse First Boston, New York, as Collateral Agent (exhibits omitted)*
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11 Computation of Per Share Income(20) (included in Note 15 to the Consolidated Financial Statements on
page 66 of Safeguard's Annual Report to Stockholders for year ended December 31, 1999, which page is
filed as part of Exhibit 13 hereto)
13 Pages 35 to 74 of Annual Report to Stockholders for year ended December 31, 1999(21) (Exhibit 13)
21 List of Subsidiaries(20) (Exhibit 21)
23.1 Consent of KPMG LLP, Independent auditors(21) (Exhibit 23.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent accountants(21) (Exhibit 23.2)
27 Financial Data Schedule for the year ended December 31, 1999(20) (Exhibit 27)
99.1 Consolidated Financial Statements of Cambridge Technology Partners (Massachusetts), Inc.(21) (Exhibit 99.1)
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* Filed herewith
** These exhibits relate to compensatory plans, contracts or arrangements in
which directors and/or executive officers of the registrant may
participate.
(1) Filed on March 30, 1987 as an exhibit to Annual Report on Form 10-K
(No. 1-5620) and incorporated herein by reference.
(2) Filed on December 13, 1991 as an exhibit to Form 8-K (No. 1-5620) and
incorporated herein by reference.
(3) Filed on March 30, 1992 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(4) Filed on March 30, 1994 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(5) Filed on March 30, 1995 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(6) Filed on April 1, 1996 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(7) Filed on March 31, 1997 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(8) Filed May 15, 1997 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
(9) Filed March 31, 1998 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(10) Filed on May 15, 1998 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
(11) Filed August 14, 1998 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
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(12) Filed November 16, 1998 as an exhibit to Form 10-Q (No. 1-5620) and
incorporated herein by reference.
(13) Filed on March 31, 1999 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(14) Incorporated by reference from registrant's Form 10-Q for the quarter
ended March 31, 1999 dated May 17, 1999 and made a part hereof by such
reference.
(15) Incorporated by reference from registrant's 8-K dated May 10, 1999 and
made a part hereof by such reference.
(16) Incorporated by reference from registrant's Form 10-Q for the quarter
ended June 30, 1999 dated August 16, 1999 and made a part hereof by
such reference.
(17) Incorporated by reference from registrant's Form 10-Q/A for the quarter
ended June 30, 1999 dated September 2, 1999 and made a part hereof by
such reference.
(18) Incorporated by reference from registrant's Form 10-Q for the quarter
ended September 31, 1999 dated November 15, 1999 and made a part hereof
by such reference.
(19) Incorporated by reference from registrant's Current Report on Form 8-K
filed on February 29, 2000
(20) Filed on March 17, 2000 as an exhibit to Form 10-K (No. 1-5620) and
incorporated herein by reference.
(21) Filed on March 30, 2000 as an exhibit to Form 10-K/A (No. 1-5620) and
incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 14, 2000 SAFEGUARD SCIENTIFICS, INC.
By: /s/ Warren V. Musser
-----------------------------------
Warren V. Musser,
Chairman and Chief Executive Officer
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Exhibit 10.40
SAILS MANDATORILY EXCHANGEABLE SECURITIES CONTRACT
dated as of
March 25, 1999
among
SAFEGUARD SCIENTIFICS, INC.,
SAFEGUARD SCIENTIFICS (DELAWARE), INC.,
CREDIT SUISSE FINANCIAL PRODUCTS
and
CSFP CAPITAL, INC., as Agent
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions .................................................... 1
ARTICLE 2
SALE AND PURCHASE
SECTION 2.01. Sale and Purchase .............................................. 5
SECTION 2.02. Purchase Price ................................................. 6
SECTION 2.03. Payment for and Delivery of Contract Shares .................... 6
SECTION 2.04. Cash Settlement Option ......................................... 7
ARTICLE 3
TERMINATION BY SELLERS
SECTION 3.01. Termination by Seller .......................................... 7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 4.01. Representations and Warranties of Seller ....................... 8
ARTICLE 5
CONDITIONS TO BUYER'S OBLIGATIONS
SECTION 5.01. Conditions ..................................................... 10
ARTICLE 6
COVENANTS
SECTION 6.01. Taxes .......................................................... 11
SECTION 6.02. Forward Contract ............................................... 12
SECTION 6.03. Notices ........................................................ 12
SECTION 6.04. Further Assurances ............................................. 12
SECTION 6.05. Actions That Could Cause Either Seller to Become an Affiliate .. 13
SECTION 6.06. Securities Contract ............................................ 13
SECTION 6.07. Sales of Common Stock .......................................... 13
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ARTICLE 7
ADJUSTMENTS
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SECTION 7.01. Dilution Adjustments ........................................... 14
SECTION 7.02. Reorganization Events .......................................... 15
SECTION 7.03. Provisions Relating to Reorganization Events and Spin-Offs ..... 16
SECTION 7.04. Termination and Payment ........................................ 16
ARTICLE 8
ACCELERATION
SECTION 8.01. Acceleration ................................................... 17
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices ........................................................ 19
SECTION 9.02. Governing Law; Submission to Jurisdiction; Severability;
Waiver of Jury Trial ........................................... 19
SECTION 9.03. Confidentiality ................................................ 20
SECTION 9.04. Entire Agreement ............................................... 20
SECTION 9.05. Amendments, Waivers ............................................ 20
SECTION 9.06. No Third Party Rights, Successors and Assigns .................. 20
SECTION 9.07. Calculation Agent .............................................. 21
SECTION 9.08. Matters Related to CSFP Capital, Inc., as Agent ................ 21
SECTION 9.09. Joint and Several Liability .................................... 21
SECTION 9.10. Counterparts ................................................... 21
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SAILS MANDATORILY EXCHANGEABLE SECURITIES CONTRACT
THIS AGREEMENT is made as of this 25th day of March, 1999 among SAFEGUARD
SCIENTIFICS, INC., a Pennsylvania corporation ("PARENT"), SAFEGUARD SCIENTIFICS
(DELAWARE), INC., a Delaware corporation ("SUBSIDIARY", each of Parent and
Subsidiary, a "SELLER"), CSFP CAPITAL, INC., as agent (the "AGENT") hereunder,
and CREDIT SUISSE FINANCIAL PRODUCTS ("BUYER").
WHEREAS, Sellers own shares of common stock (the "COMMON STOCK") of
Tellabs, Inc., a Delaware corporation (the "ISSUER"), or security entitlements
in respect thereof;
WHEREAS, Subsidiary has agreed, pursuant to the Pledge Agreement (as
defined herein), to grant Buyer a security interest in certain shares of Common
Stock to secure the obligations of Sellers hereunder;
WHEREAS, Sellers and Buyer are willing to sell and purchase such shares of
Common Stock, or security entitlements in respect thereof, at the time and on
the terms set forth herein;
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. As used herein, the following words and phrases
shall have the following meanings:
"ACCELERATION AMOUNT" has the meaning provided in Section 8.01.
"ACCELERATION AMOUNT NOTICE" has the meaning provided in Section 8.01.
"ACCELERATION DATE" has the meaning provided in Section 8.01.
"ACCELERATION EVENT" has the meaning provided in Section 8.01.
"BANKRUPTCY CODE" has the meaning provided in Section 6.06.
"BASE AMOUNT" has the meaning provided in Section 2.01.
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"BUSINESS DAY" means any day on which commercial banks are open for
business in New York City.
"CALCULATION AGENT" means Credit Suisse Financial Products.
"CASH SETTLEMENT AMOUNT" means an amount of cash equal to the product of
the Maturity Price and the number of shares of Common Stock (or security
entitlements in respect thereof) required to be delivered (but for Section 2.04)
pursuant to Section 2.03(b) on the Maturity Date.
"CLOSING PRICE" of any security on any date of determination means the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security on the Exchange on such date or, if such security
is not listed on a national securities exchange or quoted on a national
automated quotation system, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of such
security on such date as determined by the Calculation Agent in a commercially
reasonable manner.
"COLLATERAL AGENT" has the meaning provided in the Pledge Agreement.
"CONTRACT SHARES" has the meaning provided in Section 2.03(b).
"EXCHANGE" means, at any time, the principal national securities exchange
or automated quotation system, if any, on which the Common Stock is listed or
quoted at such time.
"EXCHANGE BUSINESS DAY" means any day that is (or, but for the occurrence
of a Market Disruption Event, would have been) a trading day on the Exchange,
other than a day on which trading on the Exchange is scheduled to close prior to
its regular weekday closing time.
"EXCHANGE RATE" has the meaning provided in Section 2.03(c).
"FREE STOCK" means Common Stock (or security entitlements in respect
thereof) that is not subject to any Transfer Restrictions in the hands of either
Seller immediately prior to delivery to Buyer hereunder and would not upon
delivery to Buyer be subject to any Transfer Restrictions in the hands of Buyer.
"ISSUE PRICE" has the meaning provided in Section 2.03(c).
"LIEN" means any lien, mortgage, security interest, pledge, charge or
encumbrance of any kind.
"MARKET DISRUPTION EVENT" means the occurrence or the existence on any
Exchange Business Day during the one-half hour period ending at the close of
trading on the relevant exchange of any suspension of or limitation in trading
(by reason of movements in price exceeding limits permitted by the relevant
exchange or otherwise) in
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the Common Stock or in listed options on the Common Stock, if any, if, in the
determination of the Calculation Agent, such suspension or limitation is
material.
"MARKET VALUE" means, as of any date with respect to any share of Common
Stock, the Closing Price per share of Common Stock for the Exchange Business Day
prior to such date.
"MARKETABLE SECURITIES" means shares of common stock of a Publicly-Traded
Entity that are not subject to any Transfer Restrictions.
"MATURITY DATE" means March 28, 2002.
"MATURITY PRICE" means the average of the Closing Prices per share of the
Common Stock on the 20 Trading Days beginning 30 Exchange Business Days
immediately prior to the Maturity Date, provided that if there are not 20
Trading Days during the period beginning 30 Exchange Business Days immediately
prior to the Maturity Date and ending on the Exchange Business Day immediately
prior to the Maturity Date, the Maturity Price shall be the market value of the
Common Stock during such period as determined by the Calculation Agent in its
discretion in a commercially reasonable manner.
"NEW COMMON STOCK" has the meaning provided in Section 7.01(c).
"OPTIONAL TERMINATION DATE" has the meaning provided in Section 3.01.
"ORIGINAL COMMON STOCK" has the meaning provided in Section 7.01(c).
"PAYMENT DATE" has the meaning provided in Section 2.03(a).
"PERSON" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PLEDGE AGREEMENT" means the SAILS Pledge Agreement dated as of the date
hereof among Subsidiary, Buyer and the Collateral Agent, as amended from time to
time.
"PUBLICLY-TRADED ENTITY" means a surviving or continuing corporation of the
Issuer (or any successor) following a Reorganization Event, or a corporation the
capital stock of which is distributed in a Spin-Off, the common stock of which
is traded on any national securities exchange or automatic interdealer quotation
system in the United States; provided that, in the case of a Reorganization
Event, the product of (i) the Closing Price of such surviving or continuing
corporation's common stock on the Exchange Business Day immediately succeeding
such Reorganization Event multiplied by (ii) the number of shares of such
surviving or continuing corporations common stock held by non-affiliates of such
corporation shall not be less than the product of (A) the Closing Price of the
Common Stock on the Exchange Business Day immediately preceding such
Reorganization Event and (B) the number of shares of Common Stock held by
non-affiliates of the Issuer.
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"POTENTIAL ADJUSTMENT EVENT" has the meaning provided in Section 7.01.
"PURCHASE PRICE" has the meaning provided in Section 2.02.
"REORGANIZATION EVENT" has the meaning provided in Section 7.02.
"REPLACEMENT VALUE" has the meaning provided in Section 8.01.
"RESTRICTION TERMINATION DATE" means the earliest of (i) August 3, 1999,
and (ii) if this Agreement shall terminate pursuant to Section 7.02, or if an
Acceleration Date shall occur pursuant to Article 8, the date that Buyer, in its
discretion, notifies Seller in writing that sales of Common Stock (and security
entitlements in respect thereof) are permissible.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPIN-OFF" has the meaning provided in Section 7.01.
"TERMINATION AMOUNT NOTICE" has the meaning provided in Section 7.04.
"TERMINATION DATE" means, with respect to any Reorganization Event, the
closing date of such Reorganization Event.
"THRESHOLD PRICE" has the meaning provided in Section 2.03(c).
"TRADING DAY" is defined as any Exchange Business Day on which there is not
a Market Disruption Event.
"TRANSFER RESTRICTION" means, with respect to any share of Common Stock (or
security entitlements in respect thereof) or other item of collateral pledged
under the Pledge Agreement, any condition to or restriction on the ability of
the holder thereof to sell, assign or otherwise transfer such share of Common
Stock (or security entitlements in respect thereof) or other item of collateral
or to enforce the provisions thereof or of any document related thereto whether
set forth in such item of Collateral itself or in any document related thereto,
including, without limitation, (i) any requirement that any sale, assignment or
other transfer or enforcement of such share of Common Stock (or security
entitlements in respect thereof) or other item of collateral be consented to or
approved by any Person, including, without limitation, the issuer thereof or any
other obligor thereon, (ii) any limitations on the type or status, financial or
otherwise, of any purchaser, pledgee, assignee or transferee of such share of
Common Stock (or security entitlements in respect thereof) or other item of
collateral, (iii) any requirement of the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other document of any Person to the
issuer of, any other obligor on or any registrar or transfer agent for, such
share of Common Stock (or security entitlements in respect thereof) or other
item of collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such share of Common Stock (or security entitlements in respect
thereof) or other item of collateral and (iv) any registration or qualification
requirement or prospectus delivery requirement for such share of Common Stock
(or security entitlements in respect thereof) or other item of
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collateral pursuant to any federal, state or foreign securities law (including,
without limitation, any such requirement arising as a result of Rule 144 or Rule
145 under the Securities Act); provided that the required delivery of any
assignment, instruction or entitlement order from the seller, pledgor, assignor
or transferor of such share of Common Stock (or security entitlements in respect
thereof) or other item of collateral, together with any evidence of the
corporate or other authority of such Person, shall not constitute a "TRANSFER
RESTRICTION".
ARTICLE 2
SALE AND PURCHASE
SECTION 2.01. Sale and Purchase. Upon the terms and subject to the
conditions of this Agreement, Sellers jointly and severally agree to sell to
Buyer, and Buyer agrees to purchase and acquire from Sellers, the number of
shares of Common Stock (or security entitlements in respect thereof) equal to
the product of 1,000,000 (subject to reduction as provided in Section 3.01, the
"BASE AMOUNT") and the Exchange Rate.
SECTION 2.02. Purchase Price. The purchase price (the "PURCHASE PRICE")
shall be $71,205,076.20 in cash.
SECTION 2.03. Payment for and Delivery of Contract Shares. (a) Upon the
terms and subject to the conditions of this Agreement, Buyer shall deliver to
Subsidiary the Purchase Price on March 30, 1999 (the "PAYMENT DATE") at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017, or at such other place as shall be agreed upon by Buyer and Sellers, paid
by certified or official bank check or checks duly endorsed to, or payable to
the order of, Subsidiary, or in immediately available funds by wire transfer to
an account designated by Subsidiary.
(b) On the Maturity Date, Sellers agree, subject to Section 2.04, to
deliver to Buyer a number of shares of Free Stock (the "CONTRACT SHARES") equal
to the product of (A) the Base Amount and (B) the Exchange Rate, rounded down to
the nearest whole number, and cash in an amount equal to the value (based on the
Maturity Price) of any fractional share not delivered as a result of such
rounding. If (x) by 10:00 A.M., New York City time on the Maturity Date, Sellers
have not otherwise effected such delivery of Common Stock (or security
entitlements in respect thereof) or delivered cash in lieu thereof pursuant to
Section 2.04 and (y) the Common Stock and security entitlements in respect
thereof then held by the Collateral Agent as collateral under the Pledge
Agreement is Free Stock, then (i) Sellers shall be deemed not to have elected to
deliver cash in lieu of shares of Free Stock pursuant to Section 2.04
(notwithstanding any notice by either Seller to the contrary) and (ii) the
delivery provided by this Section 2.03(b) shall be effected by delivery by the
Collateral Agent to Buyer of a number of shares of Free Stock then held by the
Collateral Agent as collateral under the Pledge Agreement equal to the number
thereof required to be delivered by Sellers to Buyer pursuant to this Section
2.03(b); provided that, notwithstanding the foregoing and without limiting the
generality
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of Section 8.01, if Sellers give notice of their election to deliver cash in
lieu of shares of Free Stock on the Maturity Date pursuant to Section 2.04 and
fails to deliver the Cash Settlement Amount on the Maturity Date as provided in
Section 2.04, Sellers shall be in breach of this Agreement and shall be liable
to Buyer for any losses incurred by Buyer or its affiliates as a result of such
breach, including without limitation losses incurred in connection with any
decrease in the Closing Price of the Common Stock subsequent to the fifth
Exchange Business Day immediately preceding the Maturity Date.
(c) The "EXCHANGE RATE" shall be determined by the Calculation Agent in
accordance with the following formula, and is subject to adjustment as a result
of certain events as provided in Article 7 and as provided in Section 6(i) of
the Pledge Agreement: (i) if the Maturity Price is less than the Threshold Price
but greater than $90.5917 (the "ISSUE PRICE"), the Exchange Rate shall be a
ratio (rounded upward or downward to the nearest 1/10,000th or, if there is not
a nearest 1/10,000th, to the next lower 1/10,000th) equal to the Issue Price
divided by the Maturity Price, (ii) if the Maturity Price is equal to or greater
than the Threshold Price, the Exchange Rate shall be a ratio (rounded upward or
downward to the nearest 1/10,000th or, if there is not a nearest 1/10,000th, to
the next lower 1/10,000th) equal to the Issue Price divided by the Threshold
Price and (iii) if the Maturity Price is equal to or less than the Issue Price,
the Exchange Rate shall be one (1). "THRESHOLD PRICE" means $111.4278, provided
that if for any period during the term of this Agreement a Rehypothecation
Unavailability (as defined in the Pledge Agreement) shall not have occurred or
shall not be continuing, then the Threshold Price shall be increased by an
amount equal to the product of $1.8118 and a fraction, the numerator of which
shall equal the number of days during the term of this Agreement on which a
Rehypothecation Unavailability shall not have occurred or shall not be
continuing and the denominator of which shall equal 1084.
SECTION 2.04. Cash Settlement Option. Sellers may, upon written notice
delivered to Buyer at least 35 Exchange Business Days prior to the Maturity
Date, elect to deliver the Cash Settlement Amount to Buyer on the Maturity Date
by wire transfer of immediately available funds to an account designated by
Buyer, in lieu of the shares of Common Stock (or security entitlements in
respect thereof) to be delivered on the Maturity Date pursuant to Section
2.03(b).
ARTICLE 3
TERMINATION BY SELLERS
SECTION 3.01. Termination by Seller. Sellers may terminate this Agreement
in whole or in part upon 35 Exchange Business Days' prior written notice to
Buyer (the termination date specified in such notice, the "OPTIONAL TERMINATION
DATE"). If Sellers terminate this Agreement in whole, Sellers shall make a cash
payment, by wire transfer of immediately available funds to an account
designated by Buyer, to Buyer on the Optional Termination Date in an amount
equal to the Replacement Value (calculated in the manner
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set forth in Section 8.01 as if the Optional Termination Date were the
Acceleration Date). If Sellers terminate this Agreement in part, Sellers shall
specify the number of shares of Common Stock with respect to which this
Agreement is to be terminated and (i) Sellers shall make a cash payment, by wire
transfer of immediately available funds to an account designated by Buyer, to
Buyer on the Optional Termination Date in an amount equal to the Replacement
Value (calculated in the manner set forth in Section 8.01 as if the Optional
Termination Date were the Acceleration Date, provided that for purposes of such
calculation, the Base Amount shall be deemed to be such number of shares of
Common Stock with respect to which this Agreement is to be terminated) and (ii)
the Base Amount shall be reduced by such number of shares of Common Stock with
respect to which this Agreement is to be terminated.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 4.01. Representations and Warranties of Seller. Each Seller
represents and warrants to Buyer that:
(a) Such Seller is a corporation duly organized and existing in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power to own its properties and to carry on its
business as now being conducted.
(b) The execution and delivery of this Agreement and (in the case of
Subsidiary) the Pledge Agreement and the performance by such Seller of its
obligations hereunder and thereunder do not violate or conflict with any
law applicable to it, any order or judgment of any court or other agency of
government applicable to it or any of its assets or any contractual
restriction binding on or affecting it or any of its assets.
(c) All government and other consents that are required to have been
obtained by it with respect to this Agreement or (in the case of
Subsidiary) the Pledge Agreement have been obtained and are in full force
and effect and all conditions of any such consents have been complied with.
(d) It has the requisite corporate power and authority to enter into
and perform this Agreement and (in the case of Subsidiary) the Pledge
Agreement and to deliver the Contract Shares in accordance with the terms
hereof. The execution and delivery of this Agreement and (in the case of
Subsidiary) the Pledge Agreement by Seller and the consummation by such
Seller of the transactions contemplated hereby and thereby (including the
delivery by Sellers of the Contract Shares) have been duly authorized by
all necessary corporate action. This Agreement and (in the case of
Subsidiary) the Pledge Agreement have been duly executed and delivered by
such Seller. Its obligations under this Agreement and (in the case of
Subsidiary) the Pledge Agreement constitute its legal, valid and binding
obligations, enforceable in accordance with their respective terms (subject
to applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless
of whether enforcement is sought in a proceeding in equity or at law)).
(e) No Acceleration Event or event that, with the giving of notice or
the lapse of time or both, would constitute an Acceleration Event has
occurred and is continuing and no such event would occur as a result of its
entering into or
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performing its obligations under this Agreement or (in the case of
Subsidiary) the Pledge Agreement.
(f) There is not pending or, to its knowledge, threatened against it
or any of its affiliates any action, suit or proceeding at law or in equity
or before any court, tribunal, governmental body, agency or official or any
arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or (in the case of Subsidiary)
the Pledge Agreement or its ability to perform its obligations under this
Agreement or (in the case of Subsidiary) the Pledge Agreement.
(g) It is acting for its own account, and has made its own independent
decision to enter into this Agreement and (in the case of Subsidiary) the
Pledge Agreement and as to whether this Agreement and the Pledge Agreement
are appropriate or proper for it based upon its own judgment and upon
advice of such advisors as it deems necessary. It acknowledges and agrees
that it is not relying, and has not relied, upon any communication (written
or oral) of Buyer or any affiliate, employee or agent of Buyer with respect
to the legal, accounting, tax or other implications of this Agreement and
(in the case of Subsidiary) the Pledge Agreement and that it has conducted
its own analyses of the legal, accounting, tax and other implications
hereof and thereof; it being understood that information and explanations
related to the terms and conditions of this Agreement or (in the case of
Subsidiary) the Pledge Agreement shall not be considered investment advice
or a recommendation to enter into this Agreement or (in the case of
Subsidiary) the Pledge Agreement. It is entering into this Agreement and
(in the case of Subsidiary) the Pledge Agreement with a full understanding
of all of the terms and risks hereof and thereof (economic and otherwise)
and is capable of evaluating and understanding (on its own behalf or
through independent professional advice), and understands and accepts, the
terms, conditions and risks. It is also capable of assuming (financially
and otherwise), and assumes, those risks. It acknowledges that neither
Buyer nor any affiliate, employee or agent of Buyer is acting as a
fiduciary for or an advisor to it in respect of this Agreement or (in the
case of Subsidiary) the Pledge Agreement.
(h) It is not an "affiliate", within the meaning of Rule 144 under the
Securities Act, of the Issuer. From the date three months prior to the date
hereof until the Restriction Termination Date, Seller has not, without the
written consent of Buyer, sold any shares of Common Stock (or security
entitlements in respect thereof) or hedged (through swaps, options, short
sales or otherwise) any long position in the Common Stock (or security
entitlements in respect thereof), other than sales or hedges that would
not, if aggregated with sales of a number of shares of Common Stock equal
to the Base Amount, exceed the volume limits set forth in Rule 144(e) under
the Securities Act for any three month period. Seller does not know or have
any reason to believe that the Company has not complied with the reporting
requirements contained in Rule 144(c)(1) under the Securities Act.
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(i) Delivery of shares of Common Stock (or security entitlements in
respect thereof) by it pursuant to Section 2.03(b) or Section 8.01 will
pass to Buyer title to such shares (or security entitlements) free and
clear of any Liens or Transfer Restrictions, except for those created
pursuant to the Pledge Agreement.
(j) It has a valid business purpose for entering into this Agreement,
and the transaction contemplated hereby is consistent with its overall
investment strategy.
ARTICLE 5
CONDITIONS TO BUYER'S OBLIGATIONS
SECTION 5.01. Conditions. The obligation of Buyer to deliver the Purchase
Price on the Payment Date is subject to the satisfaction of the following
conditions:
(a) The representations and warranties of each Seller contained in
Article 4 and in the Pledge Agreement shall be true and correct as of the
Payment Date.
(b) The Pledge Agreement shall have been executed by the parties
thereto, and Subsidiary shall have delivered to the Collateral Agent in
accordance therewith the collateral required to be delivered pursuant to
Section 1(b) thereof.
(c) Sellers shall have performed all of the covenants and obligations
to be performed by them hereunder and (in the case of Subsidiary) under the
Pledge Agreement on or prior to the Payment Date.
(d) There shall not have occurred, in the reasonable determination of
Buyer, any material decrease in the public float or daily trading volume of
the Common Stock.
(e) Sellers shall have delivered to Buyer on or prior to the Payment
Date an opinion of counsel acceptable to Buyer to the effect set forth in
Annex A.
ARTICLE 6
COVENANTS
SECTION 6.01. Taxes. Sellers shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of any Common Stock (or
security entitlements in respect thereof) pursuant hereto. Sellers further agree
to make all payments in respect of this Agreement free and clear of, and without
withholding or deduction for or on account of,
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any present or future taxes, duties, fines, penalties, assessments or other
governmental charges of whatsoever nature (or interest on any taxes, duties,
fines, penalties, assessments or other governmental charges of whatsoever
nature) imposed, levied, collected, withheld or assessed by, within or on behalf
of (a) the United States or any political subdivision or governmental authority
thereof or therein having power to tax or (b) any jurisdiction from or through
which payment on the Agreement is made by the either Seller, or any political
subdivision or governmental authority thereof or therein having power to tax. In
the event such withholding or deduction is imposed, Sellers jointly and
severally agree to indemnify the Buyer for the full amount of such withholding
or deduction, as well as any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto.
SECTION 6.02. Forward Contract. Each Seller hereby agrees that: (i) it will
not treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary
income; (ii) it will not treat the delivery of any portion of the shares of
Common Stock (or security entitlements in respect thereof) or cash to be
delivered pursuant to this Agreement as the payment of interest or ordinary
income; (iii) it will treat this Agreement in its entirety as a forward contract
for the delivery of such shares of Common Stock (or security entitlements in
respect thereof) or cash; and (iv) it will not take any action (including filing
any tax return or form or taking any position in any tax proceeding) that is
inconsistent with the obligations contained in (i) through (iii).
Notwithstanding the preceding sentence, either Seller may take any action or
position required by law, provided that such Seller deliver to Buyer an
unqualified opinion of counsel, nationally recognized as expert in Federal tax
matters and acceptable to Buyer, to the effect that such action or position is
required by a statutory change or a Treasury regulation or applicable court
decision published after the date of this Agreement.
SECTION 6.03. Notices. Each Seller will cause to be delivered to Buyer:
(a) Immediately upon the occurrence of any Acceleration Event
hereunder, notice of such occurrence; and
(b) In case at any time prior to the Maturity Date such Seller or any
officer of such Seller receives notice that any event requiring that an
adjustment be calculated pursuant to Article 7 hereof shall have occurred
or be pending, then such Seller shall promptly cause to be delivered to
Buyer a notice identifying such event and stating, if known to such Seller,
the date on which such event occurred or is to occur and, if applicable,
the record date relating to such event. Such Seller shall cause further
notices to be delivered to Buyer if such Seller or any officer of such
Seller shall subsequently receive notice of any further or revised
information regarding the terms or timing of such event or any record date
relating thereto.
SECTION 6.04. Further Assurances. From time to time from and after the date
hereof through the Maturity Date, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things
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necessary, proper and advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement in accordance with
the terms and conditions hereof, including (i) using reasonable best efforts to
remove any legal impediment to the consummation of such transactions and (ii)
the execution and delivery of all such deeds, agreements, assignments and
further instruments of transfer and conveyance necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement in
accordance with the terms and conditions hereof.
SECTION 6.05. Actions That Could Cause Either Seller to Become an
Affiliate. Each Seller shall notify Buyer immediately of its intention to (i)
purchase Common Stock (or security entitlements in respect thereof) or any other
equity security of the Issuer in an amount that would cause such Seller to
become the beneficial owner, directly or indirectly, of more than three percent
of the outstanding shares of any equity security of the Issuer, (ii) accept a
position as an officer or director of the Company, (iii) take any action that
would cause such Seller to possess, directly or indirectly, the power to direct
or cause the direction of the management and policies of the Issuer, whether by
ownership of voting securities, by contract or otherwise, or (iv) take any other
action that could reasonably be expected to result in such Seller becoming an
"affiliate," within the meaning of Rule 144 under the Securities Act, of the
Issuer. Each Seller shall not take any such action unless a period of fifteen
Business Days shall have elapsed after receipt of such notice by Buyer and Buyer
shall not have objected in writing to such action during such period.
SECTION 6.06. Securities Contract. The parties hereto recognize that the
Collateral Agent is a "financial institution" within the meaning of Section
101(22) of Title 11 of the United States Code (the "BANKRUPTCY CODE") and is
acting as agent and custodian for Buyer in connection with this Agreement and
that Buyer is a "customer" of the Collateral Agent within the meaning of said
Section 101(22). The parties hereto further recognize that this Agreement is a
"securities contract," as such term is defined in Section 741(7) of the
Bankruptcy Code, entitled to the protection of Section 555 of the Bankruptcy
Code.
SECTION 6.07. Sales of Common Stock. Seller agrees that it shall not,
without the prior written consent of Buyer, sell any shares of Common Stock (or
security entitlements in respect thereof) or hedge (through swaps, options,
short sales or otherwise) any long position in the Common Stock (or security
entitlements in respect thereof), other than sales or hedges that would not, if
aggregated with sales of a number of shares of Common Stock equal to the Base
Amount, exceed the volume limits set forth in Rule 144(e) under the Securities
Act for any three month period, until the Restriction Termination Date.
ARTICLE 7
ADJUSTMENTS
SECTION 7.01. Dilution Adjustments. (a) Following the declaration by the
Issuer of the terms of any Potential Adjustment Event occurring prior to the
Maturity Date, the
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Calculation Agent will determine whether such Potential Adjustment Event has a
diluting or concentrative effect on the theoretical value of the Common Stock
and, if so, will (i) make the corresponding adjustment, if any, to any one or
more of the Base Amount, the Exchange Rate, the Threshold Price, the Issue
Price, the Maturity Price, the Cash Settlement Amount, any Closing Price and any
other variable relevant to the exercise, settlement or payment terms hereof or
of the Pledge Agreement as the Calculation Agent determines appropriate to
account for that diluting or concentrative effect and (ii) determine the
effective date of the adjustment. The Calculation Agent may (but need not)
determine the appropriate adjustment by reference to the adjustment in respect
of such Potential Adjustment Event made by an options exchange to options on the
Common Stock traded on that options exchange.
(b) For these purposes, "POTENTIAL ADJUSTMENT EVENT" means any of the
following:
(i) a subdivision, consolidation or reclassification of shares of
Common Stock (which does not constitute a Reorganization Event), or a free
distribution or dividend of any shares of Common Stock to existing holders
of Common Stock by way of bonus, capitalization or similar issue;
(ii) a distribution or dividend to existing holders of Common Stock of
(A) shares of Common Stock, or (B) other share capital or securities
granting the right to payment of dividends and/or the proceeds of
liquidation of the Company equally or proportionately with such payments to
holders of Common Stock, or (C) other types of securities, rights or
warrants or other assets, in any case for payment (cash or other) at less
than the prevailing market price as determined by the Calculation Agent;
(iii) a cash dividend;
(iv) a call by the Issuer in respect of shares of Common Stock that
are not fully paid;
(v) a repurchase by the Issuer of shares of Common Stock, whether out
of profits or capital and whether the consideration for such repurchase is
cash, securities or otherwise; or
(vi) any other similar event that may have a diluting or concentrative
effect on the theoretical value of the Common Stock.
Without limiting the foregoing, the parties acknowledge that the
Calculation Agent will make adjustments to the Base Amount, the Threshold Price,
the Issue Price and any other variable relevant to the exercise, settlement or
payment terms hereof or of the Pledge Agreement as the Calculation Agent
determines appropriate to account for the value of all cash dividends (ordinary
or extraordinary) with respect to the Common Stock.
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(c) Notwithstanding the foregoing, in the event of a distribution of shares
of capital stock of a subsidiary of the Issuer that is a Publicly-Traded Entity
(a "SPIN-OFF") made to holders of shares of Common Stock, the Exchange Rate in
effect immediately prior to such Spin-Off shall be adjusted so that Buyer shall
thereafter be entitled to receive, on the Maturity Date, in addition to the
number of shares of Common Stock required to be delivered on the Maturity Date,
the number of shares of common stock of such Publicly-Traded Entity that Buyer
would have owned or been entitled to receive immediately following such Spin-Off
had the shares of Common Stock required to be delivered to Buyer hereunder on
the Maturity Date been delivered immediately prior to such Spin-Off. Following a
Spin-Off, "Original Common Stock" shall mean the common stock of the Issuer and
"New Common Stock" shall mean the common equity securities of the
Publicly-Traded Entity resulting from such Spin-Off.
SECTION 7.02. Reorganization Events. In the event of (i) any consolidation
or merger of the Issuer with or into another entity (other than a merger or
consolidation in which the Issuer is the continuing corporation and in which the
Common Stock outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of the Issuer or another
corporation), (ii) any sale, transfer, lease or conveyance of the property of
the Issuer as an entirety or substantially as an entirety, (iii) any statutory
exchange of securities of the Issuer with another corporation (other than in
connection with a merger or acquisition) or (iv) any liquidation, dissolution or
winding up of the Issuer (any such event, a "REORGANIZATION EVENT"), then (A) if
the surviving or continuing corporation is a Publicly-Traded Entity, the
Exchange Rate in effect immediately prior to such Reorganization Event shall be
adjusted so that Buyer shall thereafter be entitled to receive, on the Maturity
Date, the number of shares of common stock of the Publicly-Traded Entity that
Buyer would have owned or been entitled to receive immediately following such
Reorganization Event had the shares of Common Stock required to be delivered to
Buyer hereunder on the Maturity Date been delivered immediately prior to such
Reorganization Event or (B) if the surviving or continuing corporation is not a
Publicly-Traded Entity, this Agreement shall terminate and Sellers shall make a
payment or delivery to Buyer as provided in Section 7.04.
SECTION 7.03. Provisions Relating to Reorganization Events and Spin-Offs.
If a Reorganization Event occurs and clause (B) of Section 7.02 does not apply,
the surviving or continuing corporation shall be deemed to be the "Issuer" and
the common equity securities of such corporation shall be deemed to be the
"Common Stock". If a Spin-Off occurs, the Issuer and the Publicly-Traded Entity
resulting from the Spin-Off shall each be deemed to be the "Issuer" and the
Original Common Stock and the New Common Stock shall each be deemed to be the
"Common Stock". Following any Spin-Off, the Calculation Agent shall calculate
further adjustments pursuant to this Article 7 by applying the methodology set
forth in this Article 7 to both the Original Common Stock and the New Common
Stock.
SECTION 7.04. Termination and Payment. Following termination of this
Agreement as a result of any Reorganization Event, the Calculation Agent shall
determine the Replacement Value in the manner provided in Section 8.01
(calculated, for purposes of this Section 7.04, as if the Termination Date were
the Acceleration Date, and
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representing the fair replacement value (including both intrinsic and time
value) to Buyer of an agreement with terms that would preserve for Buyer the
economic equivalent of the payments and deliveries that Buyer and its affiliates
would, but for the occurrence of the Reorganization Event, have been entitled to
receive after the Termination Date hereunder). As promptly as reasonably
practicable after calculation of the Replacement Value, the Calculation Agent
shall deliver to Buyer and Sellers a notice (the "TERMINATION AMOUNT NOTICE")
specifying the Replacement Value. Not later than three Business Days following
delivery of a Termination Amount Notice, Sellers shall make a cash payment, by
wire transfer of immediately available funds to an account designated by Buyer,
to Buyer in an amount equal to the Replacement Value. Notwithstanding the
foregoing, to the extent that any Marketable Securities are received by holders
of Common Stock in such Reorganization Event, then in lieu of delivering cash as
provided in the immediately preceding sentence, Sellers may deliver Marketable
Securities with an equal value (as determine by the Calculation Agent in its
discretion in a commercially reasonable manner).
ARTICLE 8
ACCELERATION
SECTION 8.01. Acceleration. If one or more of the following events (each an
"ACCELERATION EVENT") shall occur:
(a) any legal proceeding shall have been instituted or any other event
shall have occurred or condition shall exist that in Buyer's reasonable
judgment could have a material adverse effect on the financial condition of
either Seller or on either Seller's ability to perform such Seller's
obligations hereunder, or that provides a reasonable basis to call into
question the validity or binding effect of any agreement of such Seller
hereunder or under the Pledge Agreement;
(b) such Seller makes an assignment for the benefit of creditors,
files a petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions or applies to any tribunal for any receiver of or any trustee for
such Seller or any substantial part of such Seller's property, commences
any proceeding relating to such Seller under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect, or there
is commenced against or with respect to such Seller or any substantial
portion of Seller's property any such proceeding and an order for relief is
issued or such proceeding remains undismissed for a period of 30 days;
(c) at any time, any representation made or repeated or deemed to have
been made or repeated by either Seller under this Agreement or the Pledge
Agreement or any certificate delivered pursuant hereto or thereto would be
incorrect or misleading if made or repeated as of such time in any respect
that, in
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the reasonable judgment of Buyer, would have a material adverse effect on
Buyer in respect of the transactions contemplated hereby;
(d) Sellers fail to deliver shares of Common Stock (or security
entitlements in respect thereof) or cash on the Maturity Date as required
by this Agreement;
(e) such Seller fails to fulfill or discharge when due any of its
other obligations, covenants or agreements under or relating to this
Agreement or the Pledge Agreement (other than the obligation referred to in
Section 8.01(d)), and such failure remains unremedied for 30 days following
notice from Buyer;
(f) due to the adoption of, or any change in, any applicable law after
the date hereof, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority with
competent jurisdiction of any applicable law after the date hereof, it
becomes unlawful for either Seller to perform any absolute or contingent
obligation to make payment or delivery hereunder or to comply with any
other material provision of this Agreement or the Pledge Agreement;
(g) in the reasonable judgement of the Calculation Agent, Buyer is
unable to hedge Buyer's exposure to this Agreement in the ordinary course
of Buyer's business through share borrowing arrangements because of the
lack of sufficient shares of Common Stock being made available by lenders
(it being understood that, at any time at which a Rehypothecation
Unavailability (as defined in the Pledge Agreement) shall not have occurred
and be continuing, there shall be deemed to be sufficient shares of Common
Stock being made available by lenders);
(h) there occurs a default under any indebtedness for money borrowed
by either Seller or its subsidiaries (except CompuCom Systems, Inc. and
Tangram Enterprise Solutions, Inc.), whether such indebtedness now exists
or shall hereafter be created, which indebtedness, individually or in the
aggregate, is in excess of $10,000,000 principal amount, which default
shall constitute a failure to pay any portion of the principal of such
indebtedness when due and payable after the expiration of any applicable
grace or cure period with respect thereto or shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable;
(i) a Collateral Event of Default within the meaning of the Pledge
Agreement shall occur;
then, upon notice to Sellers from Buyer at any time following an Acceleration
Event, an "ACCELERATION DATE" shall occur, and Sellers shall become obligated to
deliver to Buyer immediately upon receipt of the Acceleration Amount Notice a
number of shares of Free Stock equal to the Acceleration Amount; provided that
if the Collateral Agent proceeds to
16
<PAGE> 20
realize upon any collateral pledged under the Pledge Agreement and to apply the
proceeds of such realization as provided in paragraph second of Section 8(d)
thereof, then, to the extent of such application of proceeds, Sellers'
obligation to deliver Free Stock pursuant to this paragraph shall be deemed to
be an obligation to deliver an amount of cash equal to the aggregate Market
Value of such Free Stock on the Acceleration Date. The "ACCELERATION AMOUNT"
means the quotient obtained by dividing: (i) the Replacement Value by (ii) the
Market Value per share of the Common Stock on the Acceleration Date, provided
that the Acceleration Amount shall not be greater than the Base Amount.
The "REPLACEMENT VALUE" means an amount determined by the Calculation Agent
representing the fair replacement value (including both intrinsic and time
value) to Buyer of an agreement with terms that would preserve for Buyer the
economic equivalent of the payments and deliveries that Buyer and its affiliates
would, but for the occurrence of the Acceleration Date, have been entitled to
receive after the Acceleration Date hereunder (taking into account any
adjustments pursuant to Section 7.01 or pursuant to Section 6(i) of the Pledge
Agreement that may have been calculated on or prior to the Acceleration Date),
including any loss of bargain, cost of funding or, without duplication, loss or
cost incurred as a result of Buyer terminating, liquidating, obtaining or
reestablishing any hedge or related trading position.
As promptly as reasonably practicable after calculation of the Replacement
Value, the Calculation Agent shall deliver to either Seller and Buyer a notice
(the "ACCELERATION AMOUNT NOTICE") specifying the Acceleration Amount of shares
of Common Stock (or security entitlements in respect thereof) required to be
delivered by Sellers.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard forms of telecommunication. Notices to Buyer shall
be directed to it care of CSFP Capital, Inc., Eleven Madison Avenue, New York,
New York 10010, Telecopy No. (212) 325-8175, Attention: Ricardo Harewood;
notices to Sellers shall be directed to Parent at 800 the Safeguard Building,
435 Devon Park Drive, Wayne, Pennsylvania 19087 , Telecopy No. (610) 293-0601,
Attention: Chief Financial Officer.
SECTION 9.02. Governing Law; Submission to Jurisdiction; Severability;
Waiver of Jury Trial. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine and each party hereto submits to the jurisdiction of the Courts of
the State of New York and the United States District Court located in the
Borough of Manhattan in New York City.
17
<PAGE> 21
(b) To the extent permitted by law, the unenforceability or invalidity of
any provision or provisions of this Agreement shall not render any other
provision or provisions herein contained unenforceable or invalid.
(c) EACH SELLER AND BUYER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.03. Confidentiality. Except as required by law or judicial or
administrative process, or as requested by a regulatory authority or
self-regulatory organization, each party hereto agrees to keep this Agreement
and the Pledge Agreement and the transactions contemplated hereby and thereby
confidential. In the event disclosure is permitted pursuant to the preceding
sentence, the disclosing party shall (i) provide prior notice of such disclosure
to the other party, (ii) use its best efforts to minimize the extent of such
disclosure and (iii) comply with all reasonably requests of the other party to
minimize the extent of such disclosure. This Section 9.03 shall not prevent
either Seller or Buyer from disclosing information as necessary to third-party
advisors in connection with the transactions contemplated hereby or in the
Pledge Agreement; provided that such Seller or Buyer, as the case may be, shall
cause such advisors comply with the provisions of this Section 9.03 as if a
party hereto.
SECTION 9.04. Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement and understanding among the parties
with respect to its subject matter hereof and supersedes all oral communications
and prior writings with respect thereto.
SECTION 9.05. Amendments, Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Buyer and Sellers or, in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.06. No Third Party Rights, Successors and Assigns. This Agreement
is not intended and shall not be construed to create any rights in any person
other than Sellers, Buyer and their respective successors and assigns and no
other person shall assert any rights as third party beneficiary hereunder.
Whenever any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. All the covenants
and agreements herein contained by or on behalf of each Seller and Buyer shall
bind, and inure to the benefit of, their respective successors and assigns
whether so expressed or not, and shall be enforceable by and inure to the
benefit of Buyer and its successors and assigns. The rights and duties under
this Agreement may not be assigned or transferred by any party hereto without
the prior written consent of the other
18
<PAGE> 22
parties hereto; provided that Buyer may assign any of its rights or duties
hereunder to any of its affiliates without the prior written consent of Seller.
SECTION 9.07. Calculation Agent. The determinations and calculations of the
Calculation Agent shall be binding in the absence of manifest error. The
Calculation Agent will have no responsibility for good faith errors or omissions
in the determination of any Closing Price, the Maturity Price, the Exchange
Rate, the Cash Settlement Amount or any other amount as provided herein.
SECTION 9.08. Matters Related to CSFP Capital, Inc., as Agent. (a) CSFP
Capital, Inc. shall act as "agent" for Buyer and Sellers within the meaning of
Rule 15a-6 under the Securities Exchange Act of 1934.
(b) The Agent is not a principal to this Agreement and shall have no
responsibility or liability (including, without limitation, by way of guarantee,
endorsement or otherwise) to Buyer or either Seller in respect of this
Agreement, including, without limitation, in respect of the failure of Buyer or
either Seller to pay or perform under this Agreement.
(c) Each of Buyer and each Seller agrees to proceed solely against the
other to collect or recover any securities or money owing to it in connection
with or as a result of this Agreement. The Agent shall otherwise have no
liability in respect of this Agreement, except for its gross negligence or
willful misconduct in performing its duties as Agent hereunder.
(d) As a broker-dealer registered with the Securities and Exchange
Commission, CSFP Capital, Inc., in its capacity as Agent, will be responsible
for (i) effecting the transaction contemplated in this Agreement, (ii) issuing
all required notices, confirmations and statements to Buyer and Sellers and
(iii) maintaining books and records relating to this Agreement.
SECTION 9.09. Joint and Several Liability. Sellers' obligations hereunder
shall be joint and several.
SECTION 9.10. Counterparts. This Agreement may be executed in any number of
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.
SELLER:
SAFEGUARD SCIENTIFICS, INC.
19
<PAGE> 23
By: /s/ Michael W. Miles
------------------------------------------
Name: Michael W. Miles
Title: Senior Vice President
SELLER:
SAFEGUARD SCIENTIFICS
(DELAWARE), INC.
By: /s/ Michael W. Miles
------------------------------------------
Name: Michael W. Miles
Title: Vice President
BUYER:
CREDIT SUISSE FINANCIAL
PRODUCTS
By: /s/ Edmond Curtin
------------------------------------------
Name: Edmond Curtin
Title: Director - Legal and Compliance Department
By: /s/ Therese Cochrane
------------------------------------------
Name: Therese Cochrane
Title: Director - Legal and Compliance Department
20
<PAGE> 24
AGENT:
CSFP CAPITAL, INC.
By: /s/ Manuel J. Alvarez
----------------------------
Name: Manuel J. Alvarez
Title: Director
21
<PAGE> 1
Exhibit 10.41
SAILS PLEDGE AGREEMENT
dated as of
March 25, 1999
among
SAFEGUARD SCIENTIFICS (DELAWARE), INC.,
CREDIT SUISSE FINANCIAL PRODUCTS
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. The Security Interests.................................................................. 1
SECTION 2. Definitions............................................................................. 2
SECTION 3. Representations and Warranties of Pledgor............................................... 4
SECTION 4. Representations, Warranties and Agreements of the Collateral Agent...................... 6
SECTION 5. Certain Covenants of Pledgor............................................................ 6
SECTION 6. Administration of the Collateral and Valuation of the Securities........................ 8
SECTION 7. Income and Voting Rights in Collateral.................................................. 11
SECTION 8. Remedies upon Acceleration Events....................................................... 12
SECTION 9. The Collateral Agent.................................................................... 15
SECTION 10. Miscellaneous........................................................................... 16
SECTION 11. Termination of Pledge Agreement......................................................... 18
</TABLE>
ii
<PAGE> 3
PLEDGE AGREEMENT
THIS AGREEMENT is made as of this 25th day of March, 1999 among
SAFEGUARD SCIENTIFICS (DELAWARE), INC. ("Pledgor"), CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as collateral agent (the "COLLATERAL AGENT") hereunder for the
benefit of CREDIT SUISSE FINANCIAL PRODUCTS ("SECURED PARTY"), and Secured
Party.
WHEREAS, pursuant to the SAILS Mandatorily Exchangeable Securities
Contract (as amended from time to time, the "SECURITIES CONTRACT") dated as of
the date hereof among Pledgor, CSFP Capital, Inc., as Agent, and Secured Party,
Parent and Pledgor have jointly and severally agreed to sell and Secured Party
has agreed to purchase shares of common stock (the "COMMON STOCK") of Tellabs,
Inc., a Delaware corporation (the "ISSUER") (or security entitlements in respect
thereof), or cash in lieu thereof, subject to the terms and conditions of the
Securities Contract;
WHEREAS, it is a condition to the obligations of Secured Party under
the Securities Contract that Pledgor, the Collateral Agent and Secured Party
enter into this Agreement and that Pledgor grant the pledge provided for herein;
NOW, THEREFORE, in consideration of their mutual covenants contained
herein and to secure the performance by Parent and Pledgor of their obligations
under the Securities Contract and the observance and performance of the
covenants and agreements contained herein and in the Securities Contract, the
parties hereto, intending to be legally bound, hereby mutually covenant and
agree as follows:
SECTION 1. The Security Interests. In order to secure the full and
punctual observance and performance of the covenants and agreements contained
herein and in the Securities Contract:
(a) Pledgor hereby assigns and pledges to the Collateral Agent, as
agent of and for the benefit of Secured Party, and grants to the Collateral
Agent, as agent of and for the benefit of Secured Party, security interests in
and to, and a lien upon and right of set-off against, and transfers to the
Collateral Agent, as agent of and for the benefit of Secured Party, as and by
way of a security interest having priority over all other security interests,
with power of sale, all of its right, title and interest in and to (i) the
Pledged Items described in paragraph (b); (ii) all additions to and
substitutions for such Pledged Items (including, without limitation, any
securities, instruments or other property delivered or pledged pursuant to
Section 5(a) or 6(b)); (iii) all income, proceeds and collections received or to
be received, or derived or to be derived, now or any time hereafter (whether
before or after the commencement of any proceeding under applicable bankruptcy,
insolvency or similar law, by or against Pledgor, with respect to Pledgor) from
or in connection with the Pledged Items (including, without limitation, any
shares of capital stock issued by the Issuer in respect of any Common Stock (or
security entitlements in respect thereof) constituting Collateral or any cash,
securities or other
<PAGE> 4
property distributed in respect of or exchanged for any Common Stock (or
security entitlements in respect thereof) constituting Collateral, or into which
any such Common Stock (or security entitlements in respect thereof) is
converted, in connection with any Merger Event, and any security entitlements in
respect of any of the foregoing); and (iv) all powers and rights now owned or
hereafter acquired under or with respect to the Pledged Items (such Pledged
Items, additions, substitutions, proceeds, collections, powers and rights being
herein collectively called the "COLLATERAL"). The Collateral Agent shall have
all of the rights, remedies and recourses with respect to the Collateral
afforded a secured party by the UCC, in addition to, and not in limitation of,
the other rights, remedies and recourses afforded to the Collateral Agent by
this Agreement.
(b) On or prior to the Payment Date, Pledgor shall deliver to the
Collateral Agent in pledge hereunder Eligible Collateral consisting of a number
of shares of Common Stock (or security entitlements in respect thereof) equal to
the Base Amount, in the manner provided in Section 6(c).
(c) In the event that the Issuer at any time issues to Pledgor in
respect of any Common Stock (or security entitlements in respect thereof)
constituting Collateral hereunder any additional or substitute shares of capital
stock of any class (or any security entitlements in respect thereof), Pledgor
shall immediately pledge and deliver to the Collateral Agent in accordance with
Section 6(c) all such shares and security entitlements as additional Collateral
hereunder.
(d) The Security Interests are granted as security only and shall not
subject the Collateral Agent or Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of Pledgor or the Issuer with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 2. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Securities
Contract. As used herein, the following words and phrases shall have the
following meanings:
"AUTHORIZED OFFICER" of Pledgor means any officer as to whom Pledgor
shall have delivered notice to the Collateral Agent that such officer is
authorized to act hereunder on behalf of Pledgor.
"COLLATERAL" has the meaning provided in Section 1(a).
"COLLATERAL AGENT" means the financial institution identified as such
in the preliminary paragraph hereof, or any successor appointed in accordance
with Section 9.
"COLLATERAL EVENT OF DEFAULT" means, at any time, the occurrence of
either of the following: (A) failure of the Collateral to include, as Eligible
Collateral, at least the Maximum Deliverable Number of shares of Common Stock or
(B) failure at any time of the Security Interests to constitute valid and
perfected security interests in all of the
2
<PAGE> 5
Collateral, subject to no prior or equal Lien, or assertion of such by either
Parent or Pledgor in writing.
"DEFAULT SETTLEMENT DATE" has the meaning provided in Section 8(a).
"DIVIDEND PROCEEDS" has the meaning provided in Section 7(a).
"ELIGIBLE COLLATERAL" means Common Stock or security entitlements in
respect thereof, provided that Pledgor has good and marketable title thereto,
free of all Liens (other than the Security Interests) and Transfer Restrictions
(other than the Existing Transfer Restrictions) and that the Collateral Agent
has a valid, first priority perfected security interest therein, a first lien
thereon and control with respect thereto, and provided further that to the
extent the number of shares of Common Stock or security entitlements in respect
thereof pledged hereunder exceeds at any time the Maximum Deliverable Number
thereof, such excess shares shall not be Eligible Collateral.
"EXISTING TRANSFER RESTRICTIONS" means Transfer Restrictions imposed by
Rule 145(c) under the Securities Act.
"LOCATION" means, with respect to any party, the place such party is
"deemed located" within the meaning of Section 9-103(3)(d) of the UCC.
"MAXIMUM DELIVERABLE NUMBER" means, on any date, a number of shares of
Common Stock or security entitlements in respect thereof equal to the Base
Amount on such date multiplied successively by each adjustment that shall have
been calculated on or prior to such date pursuant to Article 7 of the Securities
Contract.
"OTHER LIENS" has the meaning specified in Section 4(e).
"PLEDGED ITEMS" means, as of any date, any and all securities and
instruments delivered by Pledgor to be held by the Collateral Agent under this
Agreement as Collateral.
"REHYPOTHECATION UNAVAILABILITY" shall be deemed to occur if at any
time any of the Eligible Collateral pledged hereunder is unavailable for
rehypothecation by the Collateral Agent pursuant to Section 6(i) (as a result of
Pledgor withholding consent to rehypothecate any such Eligible Collateral, as a
result of Parent or Pledgor causing the Collateral Agent to take possession of
such Collateral pursuant to the proviso to Section 6(i) or otherwise).
"SECURITY INTERESTS" means the security interests in the Collateral
created hereby.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
3
<PAGE> 6
SECTION 3. Representations and Warranties of Pledgor. Pledgor hereby
represents and warrants to the Collateral Agent and Secured Party that:
(a) Pledgor (i) acquired all of the Eligible Collateral delivered
pursuant to Section 1(b) on August 3, 1998, owns and, subject to the Collateral
Agent's right to rehypothecate Collateral pursuant to Section 6(i), at all times
prior to the release of the Collateral pursuant to the terms of this Agreement,
will own the Collateral free and clear of any Liens (other than the Security
Interests) or Transfer Restrictions (other than the Existing Transfer
Restrictions) and (ii) is not and will not become a party to or otherwise bound
by any agreement, other than this Agreement, that (x) restricts in any manner
the rights of any present or future owner of the Collateral with respect thereto
or (y) provides any person other than the Pledgor, the Collateral Agent, the
Secured Party or any securities intermediary through whom any Collateral is held
(but, in the case of any such securities intermediary, only with respect of
Collateral held through it) with control (as defined in Section 8-106 of the
UCC) with respect to any Collateral.
(b) Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be effective to perfect a
lien, security interest or other encumbrance of any kind on such Collateral.
(c) All shares of Common Stock at any time pledged hereunder (or in
respect of which security entitlements are pledged hereunder) are and will be
issued by an issuer organized under the laws of the United States, any State
thereof or the District of Columbia and (i) certificated (and the certificate or
certificates in respect of such shares of Common Stock are and will be located
in the United States) and registered in the name of Pledgor or held through a
securities intermediary whose securities intermediary's jurisdiction (within the
meaning of Section 8-110(e) of the UCC) is located in the United States or (ii)
uncertificated and either registered in the name of Pledgor or held through a
securities intermediary whose securities intermediary's jurisdiction (within the
meaning of Section 8-110(e) of the UCC) is located in the United States.
(d) Subject to the Collateral Agent's right to rehypothecate Collateral
pursuant to Section 6(i), upon (i) the delivery of certificates evidencing any
Common Stock to the Collateral Agent in accordance with Section 6(c)(A) or the
registration of uncertificated Common Stock in the name of the Collateral Agent
or its nominee in accordance with Section 6(c)(B), the Collateral Agent will
have, for the benefit of Secured Party, a valid and, as long as the Collateral
Agent retains possession of such certificates or such uncertificated Common
Stock remains so registered, perfected security interest therein, in respect of
which the Collateral Agent will have control, subject to no prior Lien and (ii)
the crediting of any Common Stock to a securities account of the Collateral
Agent in accordance with Section 6(c)(C), the Collateral Agent will have, for
the benefit of Secured Party, a valid and, so long as such Common Stock
continues to be credited to the account of the Collateral Agent with the
applicable
4
<PAGE> 7
securities intermediary, perfected security interest in a securities entitlement
in respect thereof, in respect of which the Collateral Agent will have control
subject to no prior Lien.
(e) No registration, recordation or filing with any governmental body,
agency or official is required in connection with the execution and delivery of
this Agreement or necessary for the validity or enforceability hereof or for the
perfection or enforcement of the Security Interests.
(f) Pledgor and Parent have not performed and will not perform any acts
that might prevent the Collateral Agent from enforcing any of the terms of this
Agreement or that might limit the Collateral Agent in any such enforcement.
(g) The Location of Pledgor is the address set forth in Section 10(d),
and under the Uniform Commercial Code as in effect in such Location, no local
filing is required to perfect a security interest in collateral consisting of
general intangibles.
SECTION 4. Representations, Warranties and Agreements of the Collateral
Agent. The Collateral Agent represents and warrants to, and agrees with, Pledgor
and Secured Party that:
(a) The Collateral Agent is a duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and
has all powers and all material governmental licenses, authorizations, consents
and approvals required to enter into, and perform its obligations under, this
Agreement.
(b) The execution, delivery and performance by the Collateral Agent of
this Agreement have been duly authorized by all necessary action on the part of
the Collateral Agent and do not and will not violate, contravene or constitute a
default under any provision of applicable law or regulation or of the
constitutive documents of the Collateral Agent or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Collateral Agent.
(c) This Agreement constitutes a valid and binding agreement of the
Collateral Agent enforceable against the Collateral Agent in accordance with its
terms.
(d) Subject to Sections 6(i) and 6(j), the Collateral Agent has not and
will not enter into any agreement pursuant to which any person other than the
Pledgor, the Collateral Agent, the Secured Party or any securities intermediary
through whom any Collateral is held (but in the case of any such securities
intermediary only in respect of Collateral held through it) has or will have
control (within the meaning of Section 8-106 of the UCC) with respect to any
Collateral.
(e) The Collateral Agent hereby agrees that all liens, pledges and
other security interests of any kind or nature held by it (other than liens,
pledges and security interests arising hereunder) in any of the Collateral
securing any obligation to the
5
<PAGE> 8
Collateral Agent (either in such capacity or in any other capacity)
(collectively, "OTHER LIENS") shall be subordinate and junior to the liens,
pledges and security interests in the Collateral arising hereunder and that the
Collateral Agent will take no action to enforce any Other Liens so long as any
obligation under the Securities Contract or hereunder (whether or not then due)
should remain unsatisfied.
SECTION 5. Certain Covenants of Pledgor. Pledgor agrees that, so long
as any of the obligations of Parent or Pledgor under the Securities Contract
remain outstanding:
(a) Pledgor shall ensure at all times that a Collateral Event of
Default shall not occur, and shall pledge additional Collateral in the manner
described in Sections 6(b) and 6(c) as necessary to cause such requirement to be
met.
(b) Pledgor shall, at the expense of either Parent or Pledgor and in
such manner and form as Secured Party or the Collateral Agent may require, give,
execute, deliver, file and record any financing statement, notice, instrument,
document, agreement or other papers that may be necessary or desirable in order
to create, preserve, perfect, substantiate or validate any security interest
granted pursuant hereto or to enable the Collateral Agent to exercise and
enforce its rights and the rights of Secured Party hereunder with respect to
such security interest. To the extent permitted by applicable law, Pledgor
hereby authorizes the Collateral Agent to execute and file, in the name of
Pledgor or otherwise, UCC financing or continuation statements (which may be
carbon, photographic, photostatic or other reproductions of this Agreement or of
a financing statement relating to this Agreement) that the Collateral Agent in
its sole discretion may deem necessary or appropriate to further perfect, or
maintain the perfection of, the Security Interests.
(c) Pledgor shall warrant and defend its title to the Collateral,
subject to the rights of the Collateral Agent and Secured Party, against the
claims and demands of all persons. The Collateral Agent and Secured Party (or,
as they may agree, one of them) may elect, but without an obligation to do so,
to discharge any Lien of any third party on any of the Collateral.
(d) Pledgor agrees that it shall not change (1) its name, identity or
corporate structure in any manner or (2) its Location, unless in either case (A)
it shall have given the Collateral Agent not less than 30 days' prior notice
thereof and (B) such change shall not cause any of the Security Interests to
become unperfected or subject any Collateral to any other Lien.
(e) Pledgor agrees that it shall not (1) create or permit to exist any
Lien (other than the Security Interests) or any Transfer Restriction (other than
the Existing Transfer Restrictions) upon or with respect to the Collateral, (2)
sell or otherwise dispose of, or grant any option with respect to, any of the
Collateral or (3) enter into or consent to any agreement pursuant to which any
person other than the Pledgor, the Collateral Agent, the Secured Party and any
securities intermediary through whom any of the Collateral is held (but in the
case of any such securities intermediary only in respect of Collateral held
6
<PAGE> 9
through it) has or will have control (within the meaning of Section 8-106 of the
UCC) in respect of any Collateral.
SECTION 6. Administration of the Collateral and Valuation of the
Securities. (a) The Collateral Agent shall determine on each Business Day
whether a Collateral Event of Default shall have occurred.
(b) Pledgor may pledge additional Collateral hereunder at any time.
Concurrently with the delivery of any additional Eligible Collateral, Pledgor
shall deliver to the Collateral Agent a certificate of an Authorized Officer
Pledgor substantially in the form of Exhibit A hereto and dated the date of such
delivery, (A) identifying the additional items of Eligible Collateral being
pledged and (B) certifying that with respect to such items of additional
Eligible Collateral the representations and warranties contained in paragraphs
(a), (b), (c), (d) and (e) of Section 3 are true and correct with respect to
such Eligible Collateral on and as of the date thereof. Pledgor hereby covenants
and agrees to take all actions required under Section 6(c) and any other actions
necessary to create for the benefit of the Collateral Agent a valid, first
priority, perfected security interest in, and a first lien upon, such additional
Eligible Collateral.
(c) Any delivery of Common Stock (or security entitlement in respect
thereof) as Collateral to the Collateral Agent by Pledgor shall be effected (A)
in the case of Collateral consisting of certificated Common Stock registered in
the name of Pledgor, by delivery of certificates representing such Common Stock
to the Collateral Agent, accompanied by any required transfer tax stamps, and in
suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, all in form and substance satisfactory to the Collateral Agent, (B)
in the case of Collateral consisting of uncertificated Common Stock registered
in the name of Pledgor, by transmission by Pledgor of an instruction to the
issuer of such Common Stock instructing such issuer to register such Common
Stock in the name of the Collateral Agent or its nominee, accompanied by any
required transfer tax stamps, and the issuer's compliance with such instructions
or (C) in the case of Common Stock in respect of which security entitlements are
held by Pledgor through a securities intermediary, by the crediting of such
Common Stock, accompanied by any required transfer tax stamps, to a securities
account of the Collateral Agent at such securities intermediary or, at the
option of the Collateral Agent, at another securities intermediary satisfactory
to the Collateral Agent. Upon delivery of any such Pledged Item under this
Agreement, the Collateral Agent shall examine such Pledged Item and any
certificates delivered pursuant to Section 6(b) or otherwise pursuant to the
terms hereof in connection therewith to determine that they comply as to form
with the requirements for Eligible Collateral.
(d) If on any Business Day the Collateral Agent determines that a
Collateral Event of Default shall have occurred, the Collateral Agent shall
promptly notify Parent and Pledgor of such determination by telephone call to
Parent and to an Authorized Officer of Pledgor followed by a written
confirmation of such call.
7
<PAGE> 10
(e) If on any Business Day the Collateral Agent determines that no
Acceleration Event or failure by Pledgor to meet any of its obligations under
Sections 5 or 6 hereof has occurred and is continuing, Pledgor may obtain the
release from the Security Interests of any Collateral upon delivery to the
Collateral Agent of a written notice from an Authorized Officer of Pledgor
indicating the items of Collateral to be released so long as, after such
release, no Collateral Event of Default shall have occurred.
(f) On the Maturity Date, unless (i) Parent or Pledgor shall have
otherwise effected the deliveries required by Section 2.03(b) of the Securities
Contract or shall have delivered the Cash Settlement Amount to Secured Party in
lieu of shares of Common Stock (or security entitlements in respect thereof) in
accordance with Section 2.04 of the Securities Contract on the Maturity Date or
(ii) the Common Stock (or security entitlements in respect thereof) then held by
the Collateral Agent hereunder is not Free Stock, the Collateral Agent shall
deliver (and Pledgor hereby irrevocably instructs the Collateral Agent to
deliver, in whole or partial, as the case may be, satisfaction of Pledgor's
obligations to deliver shares of Common Stock (or security entitlements in
respect thereof) to Secured Party on the Maturity Date pursuant to the
Securities Contract) to Secured Party shares of Common Stock (or security
entitlements in respect thereof) then held by it hereunder representing the
number of shares of Common Stock (or security entitlements in respect thereof)
required to be delivered under the Securities Contract on the Maturity Date.
Upon any such delivery, Secured Party shall hold such shares of Common Stock (or
security entitlements in respect thereof) absolutely and free from any claim or
right whatsoever (including, without limitation, any claim or right of Pledgor).
(g) The Collateral Agent may at any time or from time to time, in its
sole discretion, cause any or all of the Common Stock pledged hereunder (or in
respect of which security entitlements are pledged hereunder) registered in the
name of Pledgor or its nominee to be transferred of record into the name of the
Collateral Agent or its nominee. Pledgor shall promptly give to the Collateral
Agent copies of any notices or other communications received by Pledgor with
respect to Common Stock (or security entitlements in respect thereof) pledged
hereunder registered, or held through a securities intermediary, in the name of
Parent or its nominee, or Pledgor or its nominee and the Collateral Agent shall
promptly give to Pledgor copies of any notices and communications received by
the Collateral Agent with respect to Common Stock (or security entitlements in
respect thereof) pledged hereunder registered, or held through a securities
intermediary, in the name of the Collateral Agent or its nominee.
(h) Pledgor agrees that either Parent or Pledgor shall forthwith upon
demand pay to the Collateral Agent:
(i) the amount of any taxes that the Collateral Agent or
Secured Party may have been required to pay by reason of the Security
Interests or to free any of the Collateral from any Lien thereon, and
8
<PAGE> 11
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, that the Collateral Agent or Secured Party may incur in
connection with (A) the enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of the Security Interests, (B)
the collection, sale or other disposition of any of the Collateral, (C)
the exercise by the Collateral Agent of any of the rights conferred
upon it hereunder or (D) any Acceleration Event.
Any such amount not paid on demand shall bear interest (computed on the basis of
a year of 360 days and payable for the actual number of days elapsed) at a rate
per annum equal to the lesser of (i) Secured Party's cost of borrowing as
determined by the Calculation Agent or (ii) 5% plus the prime rate as published
from time to time in The Wall Street Journal, Eastern Edition.
(i) Without limiting the rights and obligations of the parties under
this Agreement, the Collateral Agent shall, notwithstanding Section 9-207 of the
UCC, have the right, upon the consent of Pledgor (which consent need not be in
writing), to sell, lend, pledge, rehypothecate, assign, invest, use, commingle
or otherwise dispose of, or otherwise use in its business (collectively,
"REHYPOTHECATE"), any Collateral it holds, free from any claim or right of any
nature whatsoever of Parent or Pledgor, including any equity or right of
redemption by Parent or Pledgor; provided that the Collateral Agent will not
lend any Collateral except pursuant to arrangements that (i) give the Collateral
Agent the right to take possession of such Collateral (or substitute Collateral)
upon five Business Days' notice, and the Collateral Agent shall exercise such
right upon notice from Parent, Pledgor or Secured Party, and (ii) provide that
the borrower of any Collateral consisting of Common Stock shall pay or deliver
to the Collateral Agent, for the account of Pledgor, the amount of any dividends
or distributions paid on the borrowed Common Stock, and any such delivery or
payment received by the Collateral Agent shall become proceeds of the Collateral
hereunder and (except in the case of extraordinary dividends or distributions)
shall be subject to payment or delivery over to the Pledgor pursuant to Section
7(a).
(j) Notwithstanding any other provision of this Agreement and Section
9-207 of the UCC, the Collateral Agent shall have the right to pledge the
Collateral to an affiliate of Secured Party in connection with hedging
transactions in respect of the Securities Contract entered into among Secured
Party and its affiliates in the ordinary course of business, which pledge shall
have no effect on the rights and obligations of Pledgor, the Collateral Agent or
Secured Party hereunder.
SECTION 7. Income and Voting Rights in Collateral. (a) The Collateral
Agent shall have the right to receive and retain as Collateral hereunder (i) all
proceeds (other than interest, or dividends or distributions that are not
extraordinary dividends or distributions) of the Collateral and (ii) upon the
occurrence and during the continuance of an Acceleration Event, all proceeds of
the Collateral, including, without limitation, interest, or dividends or
distributions that are not extraordinary dividends or distributions
9
<PAGE> 12
("DIVIDEND PROCEEDS"), and Pledgor shall take all such action as the Collateral
Agent shall deem necessary or appropriate to give effect to such right. All such
proceeds that are received by Pledgor shall be received in trust for the benefit
of the Collateral Agent and Secured Party and, if the Collateral Agent so
directs (but only, in the case of Dividend Proceeds, upon the occurrence and
during the continuance of an Acceleration Event), shall be segregated from other
funds of Parent or Pledgor and shall, forthwith upon demand by the Collateral
Agent (but only, in the case of Dividend Proceeds, upon the occurrence and
during the continuance of an Acceleration Event), be paid over to the Collateral
Agent as Collateral in the same form as received (with any necessary
endorsement). The Collateral Agent shall pay or deliver over to Pledgor any
proceeds of any Collateral that the Collateral Agent receives but does not have
the right to retain hereunder. After all Acceleration Events have been cured,
the Collateral Agent's right to retain Dividend Proceeds under this Section 7(a)
shall cease and the Collateral Agent shall pay or deliver over to Pledgor any
such Collateral consisting of Dividend Proceeds retained by it during the
continuance of an Acceleration Event.
(b) Unless an Acceleration Event shall have occurred and be continuing,
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Collateral (other than Collateral
that has been rehypothecated by the Collateral Agent pursuant to Section 6(i)),
and the Collateral Agent shall, upon receiving a written request from Parent or
Pledgor accompanied by a certificate of an Authorized Officer of Pledgor stating
that no Acceleration Event has occurred and is continuing, deliver to Pledgor or
as specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of the Collateral that is
registered, or held through a securities intermediary, in the name of the
Collateral Agent or its nominee as shall be specified in such request and shall
be in form and substance satisfactory to the Collateral Agent.
(c) If an Acceleration Event shall have occurred and be continuing, the
Collateral Agent shall have the right, to the extent permitted by law, and
Pledgor shall take all such action as may be necessary or appropriate to give
effect to such right, to vote and to give consents, ratifications and waivers,
and to take any other action with respect to any or all of the Collateral with
the same force and effect as if the Collateral Agent were the absolute and sole
owner thereof.
SECTION 8. Remedies upon Acceleration Events. (a) If any Acceleration
Event shall have occurred and be continuing, the Collateral Agent may exercise
on behalf of Secured Party all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, without being required to give any notice,
except as herein provided or as may be required by mandatory provisions of law,
shall: (i) deliver all Collateral consisting of shares of Common Stock (or
security entitlements in respect thereof) (but not in excess of the number
thereof deliverable under the Securities Contract at such time) to Secured Party
on the date of the Acceleration Amount Notice relating to such Acceleration
Event (the "DEFAULT SETTLEMENT DATE") in satisfaction of Parent's and Pledgor's
obligations to deliver Common Stock (or security entitlements in respect
thereof) under the Securities
10
<PAGE> 13
Contract, whereupon Secured Party shall hold such shares of Common Stock (or
security entitlements in respect thereof) absolutely free from any claim or
right of whatsoever kind, including any equity or right of redemption of Parent
or Pledgor that may be waived or any other right or claim of Parent or Pledgor,
and Pledgor, to the extent permitted by law, hereby specifically waives all
rights of redemption, stay or appraisal that Pledgor or Parent has or may have
under any law now existing or hereafter adopted; and (ii) if such delivery shall
be insufficient to satisfy in full all of the obligations of Parent and Pledgor
under the Securities Contract or hereunder, sell all of the remaining
Collateral, or such lesser portion thereof as may be necessary to generate
proceeds sufficient to satisfy in full all of the obligations of Parent or
Pledgor under the Securities Contract or hereunder, at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery, and at such price or prices as the Collateral Agent may
deem satisfactory. Pledgor covenants and agrees that it will execute and deliver
such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sale may be made in compliance
with law. Upon any such sale the Collateral Agent shall have the right to
deliver, assign and transfer to the buyer thereof the Collateral so sold. Each
buyer at any such sale shall hold the Collateral so sold absolutely and free
from any claim or right of whatsoever kind, including any equity or right of
redemption of Parent or Pledgor that may be waived or any other right or claim
of Parent or Pledgor, and Pledgor, to the extent permitted by law, hereby
specifically waive all rights of redemption, stay or appraisal that Pledgor or
Parent has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 9-504 of the UCC shall (1) in
case of a public sale, state the time and place fixed for such sale, (2) in case
of sale at a broker's board or on a securities exchange, state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or the portion thereof so being sold, will first be offered for sale at such
board or exchange, and (3) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the buyer
thereof, but the Collateral Agent shall not incur any liability in case of the
failure of such buyer to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold upon like notice. The
Collateral Agent, instead of exercising the power of sale herein conferred upon
it, may proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
11
<PAGE> 14
(b) Pledgor hereby irrevocably appoints the Collateral Agent its true
and lawful attorney, with full power of substitution, in the name of Pledgor,
the Collateral Agent or Secured Party or otherwise, for the sole use and benefit
of the Collateral Agent and Secured Party, but at the expense of either Parent
or Pledgor, to the extent permitted by law, to exercise, at any time and from
time to time while an Acceleration Event has occurred and is continuing, all or
any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as
if the Collateral Agent were the absolute owner thereof (including,
without limitation, the giving of instructions and entitlement orders
in respect thereof), and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
provided that the Collateral Agent shall give Parent and Pledgor not less than
one day's prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral that
threatens to decline speedily in value, including, without limitation, equity
securities, or is of a type customarily sold on a recognized market. The
Collateral Agent and Pledgor agree that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
(c) Upon any delivery or sale of all or any part of any Collateral made
either under the power of delivery or sale given hereunder or under judgment or
decree in any judicial proceedings for foreclosure or otherwise for the
enforcement of this Agreement, the Collateral Agent is hereby irrevocably
appointed the true and lawful attorney of Pledgor, in the name and stead of
Pledgor, to make all necessary deeds, bills of sale, instruments of assignment,
transfer or conveyance of the property, and all instructions and entitlement
orders in respect of the property thus delivered or sold. For that purpose the
Collateral Agent may execute all such documents, instruments, instructions and
entitlement orders. This power of attorney shall be deemed coupled with an
interest, and Pledgor hereby ratifies and confirms that which its attorney
acting under such power, or such attorney's successors or agents, shall lawfully
do by virtue of this Agreement. If so requested by the Collateral Agent, by
Secured Party or by any buyer of the Collateral or a portion thereof, Parent or
Pledgor shall further ratify and confirm any such delivery or sale by executing
and delivering to the Collateral Agent, to Secured Party or to such buyer or
buyers at the expense of Pledgor all proper deeds, bills of sale, instruments of
assignment, conveyance or transfer, releases, instructions and entitlement
orders as may be designated in any such request.
12
<PAGE> 15
(d) In the case of an Acceleration Event, the Collateral Agent may
proceed to realize upon the security interest in the Collateral against any one
or more of the types of Collateral, at any time, as the Collateral Agent shall
determine in its sole discretion subject to the foregoing provisions of this
Section 8. The proceeds of any sale of, or other realization upon, or other
receipt from, any of the Collateral shall be applied by the Collateral Agent in
the following order of priorities:
first, to the payment to the Collateral Agent of the expenses
of such sale or other realization, including reasonable compensation to
the Collateral Agent and its agents and counsel, and all expenses,
liabilities and advances incurred or made by the Collateral Agent in
connection therewith, including brokerage fees in connection with the
sale by the Collateral Agent of any Collateral;
second, to the payment to Secured Party of an amount equal to
the aggregate Market Value of a number of shares of Common Stock equal
to (i) the number of shares of Common Stock (or security entitlements
in respect thereof) that would be required to be delivered under
Section 7.01 of the Securities Contract on the Default Settlement Date
without giving effect to the proviso therein minus (ii) the number of
shares of Common Stock (or security entitlements in respect thereof)
delivered by the Collateral Agent to Secured Party on the Default
Settlement Date as described in Section 8(a);
finally, if all of the obligations of Parent and Pledgor
hereunder and under the Securities Contract have been fully discharged
or sufficient funds have been set aside by the Collateral Agent at the
request of Parent or Pledgor for the discharge thereof, any remaining
proceeds shall be released to Pledgor.
SECTION 9. The Collateral Agent. (a) Secured Party hereby irrevocably
appoints and authorizes the Collateral Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Collateral Agent by the terms hereof, together with all such powers as are
reasonably incidental thereto.
(b) The obligations of the Collateral Agent hereunder are only those
expressly set forth in this Agreement.
(c) The Collateral Agent may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(d) Neither the Collateral Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or not taken by it in
connection with this Agreement (1) with the consent or at the request of Secured
Party or (2) in the absence of its own gross negligence or willful misconduct.
The Collateral Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other
13
<PAGE> 16
writing (which may be a bank wire, telex or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
(e) Pledgor shall indemnify the Collateral Agent against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from the Collateral Agent's gross negligence
or willful misconduct) that the Collateral Agent may suffer or incur in
connection with this Agreement or any action taken or omitted by the Collateral
Agent hereunder.
(f) Beyond the exercise of reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent, bailee, clearing
corporation or securities intermediary or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any agent, bailee, clearing corporation or securities intermediary
selected by the Collateral Agent in good faith (or selected by an agent, bailee,
clearing corporation or securities intermediary so selected by the Collateral
Agent or by any agent, bailee, clearing corporation or securities intermediary
selected in accordance with this parenthetical phrase).
(g) Any corporation or association into which the Collateral Agent may
be converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its agency business and assets as a whole or substantially as a
whole, or any corporation or association resulting from any such conversion,
sale, merger, consolidation or transfer to which it is a party, shall, subject
to the prior written consent of Secured Party, be and become a successor
Collateral Agent hereunder and vested with all of the title to the Collateral
and all of the powers, discretions, immunities, privileges and other matters as
was its predecessor without, except as provided above, the execution or filing
of any instrument or any further act, deed or conveyance on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
SECTION 10. Miscellaneous. (a) Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party. All the covenants and agreements herein contained by or
on behalf of Pledgor and the Collateral Agent shall bind, and inure to the
benefit of, their respective successors and assigns whether so expressed or not,
and shall be enforceable by and inure to the benefit of Secured Party and its
successors and assigns.
(b) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Pledgor, the Collateral Agent and Secured Party or, in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in
14
<PAGE> 17
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
(c) All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard forms of telecommunication. Notices to Pledgor shall be directed to it
at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, Pennsylvania 19087,
Telecopy No. (610) 293-0601, Attention: Chief Financial Officer; notices to the
Collateral Agent shall be directed to it at Five World Trade Center, New York,
New York 10048, Telecopy No. (212) 325-0728, Attention: Carl Paravati; notices
to Secured Party shall be directed to it in care of CSFP Capital, Inc., Eleven
Madison Avenue, New York, New York 10010, Telecopy No. (212) 325-8175,
Attention: Ricardo Harewood.
(d) This Agreement shall in all respects be construed in accordance
with and governed by the laws of the State of New York without reference to
choice of law doctrine (provided that as to Pledged Items located in any
jurisdiction other than the State of New York, the Collateral Agent on behalf of
Secured Party shall, in addition to any rights under the laws of the State of
New York, have all of the rights to which a secured party is entitled under the
laws of such other jurisdiction) and each party hereto submits to the
jurisdiction of the Courts of the State of New York. The parties hereto hereby
agree that the Collateral Agent's jurisdiction, within the meaning of Section
8-110(e) of the UCC, insofar as it acts as a securities intermediary hereunder
or in respect hereof, is the State of New York. To the extent permitted by law,
the unenforceability or invalidity of any provision or provisions of this
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(e) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) This Agreement may be executed, acknowledged and delivered in any
number of counterparts and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
SECTION 11. Termination of Pledge Agreement. This Agreement and the
rights hereby granted by Pledgor in the Collateral shall cease, terminate and be
void upon fulfillment of all of the obligations of Pledgor under the Securities
Contract and hereunder. Any Collateral remaining at the time of such termination
shall be fully released and discharged from the Security Interests and delivered
to Pledgor by the Collateral Agent, all at the request and expense of Pledgor.
15
<PAGE> 18
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
PARENT:
SAFEGUARD SCIENTIFICS, INC.
By: /s/ Michael W. Miles
--------------------------
Name: Michael W. Miles
Title: Senior Vice President
PLEDGOR:
SAFEGUARD SCIENTIFICS
(DELAWARE), INC.
By: /s/ Michael W. Miles
--------------------------
Name: Michael W. Miles
Title: Vice President
COLLATERAL AGENT:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH
as Collateral Agent
By: /s/ Peter J. Murray
--------------------------
Name: Peter J. Murray
Title: Managing Director
/s/ William Dueker, Jr.
------------------------------
Name: William Dueker, Jr.
Title: Director
16
<PAGE> 19
SECURED PARTY:
CREDIT SUISSE FINANCIAL
PRODUCTS
By: /s/ Edmond Curtin
--------------------------------
Name: Edmond Curtin
Title: Director - Legal and
Compliance Department
By: /s/ Therese Cochrane
--------------------------------
Name: Therese Cochrane
Title: Director - Legal and
Compliance Department
17
<PAGE> 1
Exhibit 10.42
SAILS MANDATORILY EXCHANGEABLE SECURITIES CONTRACT
dated as of
August 25, 1999
among
SAFEGUARD SCIENTIFICS, INC.,
SAFEGUARD SCIENTIFICS (DELAWARE), INC.,
CREDIT SUISSE FINANCIAL PRODUCTS
and
CSFP CAPITAL, INC., as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions .................................................... 1
ARTICLE 2
SALE AND PURCHASE
SECTION 2.01. Sale and Purchase .............................................. 5
SECTION 2.02. Purchase Price ................................................. 6
SECTION 2.03. Payment for and Delivery of Contract Shares .................... 6
SECTION 2.04. Cash Settlement Option ......................................... 7
ARTICLE 3
TERMINATION BY SELLERS
SECTION 3.01. Termination by Seller .......................................... 7
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION 4.01. Representations and Warranties of Seller ....................... 8
ARTICLE 5
CONDITIONS TO BUYER'S OBLIGATIONS
SECTION 5.01. Conditions ..................................................... 10
ARTICLE 6
COVENANTS
SECTION 6.01. Taxes .......................................................... 11
SECTION 6.02. Forward Contract ............................................... 11
SECTION 6.03. Notices ........................................................ 12
SECTION 6.04. Further Assurances ............................................. 12
SECTION 6.05. Actions That Could Cause Either Seller to Become an Affiliate .. 12
SECTION 6.06. Securities Contract ............................................ 13
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 7
ADJUSTMENTS
<S> <C>
SECTION 7.01. Dilution Adjustments ........................................... 13
SECTION 7.02. Reorganization Events .......................................... 15
SECTION 7.03. Provisions Relating to Reorganization Events and Spin-Offs ..... 15
SECTION 7.04. Termination and Payment ........................................ 15
ARTICLE 8
ACCELERATION
SECTION 8.01. Acceleration ................................................... 16
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices ........................................................ 19
SECTION 9.02. Governing Law; Submission to Jurisdiction; Severability;
Waiver of Jury Trial ........................................... 19
SECTION 9.03. Confidentiality ................................................ 19
SECTION 9.04. Entire Agreement ............................................... 20
SECTION 9.05. Amendments, Waivers ............................................ 20
SECTION 9.06. No Third Party Rights, Successors and Assigns .................. 20
SECTION 9.07. Calculation Agent .............................................. 20
SECTION 9.08. Matters Related to CSFP Capital, Inc., as Agent ................ 20
SECTION 9.09. Joint and Several Liability .................................... 21
SECTION 9.10. Counterparts ................................................... 21
</TABLE>
iii
<PAGE> 4
SAILS MANDATORILY EXCHANGEABLE SECURITIES CONTRACT
THIS AGREEMENT is made as of this 25th day of August, 1999 among
SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation ("PARENT"), SAFEGUARD
SCIENTIFICS (DELAWARE), INC., a Delaware corporation ("SUBSIDIARY", each of
Parent and Subsidiary, a "SELLER"), CSFP CAPITAL, INC., as agent (the "AGENT")
hereunder, and CREDIT SUISSE FINANCIAL PRODUCTS ("BUYER").
WHEREAS, Sellers own shares of common stock (the "COMMON STOCK") of
Tellabs, Inc., a Delaware corporation (the "ISSUER"), or security entitlements
in respect thereof;
WHEREAS, Subsidiary has agreed, pursuant to the Pledge Agreement (as
defined herein), to grant Buyer a security interest in certain shares of Common
Stock to secure the obligations of Sellers hereunder;
WHEREAS, Sellers and Buyer are willing to sell and purchase such shares
of Common Stock, or security entitlements in respect thereof, at the time and on
the terms set forth herein;
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
Article 1.
DEFINITIONS
SECTION .1.01 Definitions. As used herein, the following words and phrases shall
have the following meanings:
"ACCELERATION AMOUNT" has the meaning provided in Section 8.01.
"ACCELERATION AMOUNT NOTICE" has the meaning provided in Section 8.01.
"ACCELERATION DATE" has the meaning provided in Section 8.01.
"ACCELERATION EVENT" has the meaning provided in Section 8.01.
"BANKRUPTCY CODE" has the meaning provided in Section 6.06.
"BASE AMOUNT" has the meaning provided in Section 2.01.
"BUSINESS DAY" means any day on which commercial banks are open for
business in New York City.
"CALCULATION AGENT" means Credit Suisse Financial Products.
4
<PAGE> 5
"CASH SETTLEMENT AMOUNT" means an amount of cash equal to the product
of the Maturity Price and the number of shares of Common Stock (or security
entitlements in respect thereof) required to be delivered (but for Section 2.04)
pursuant to Section 2.03(b) on the Maturity Date.
"CLOSING PRICE" of any security on any date of determination means the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such security on the Exchange on such date or, if such security
is not listed on a national securities exchange or quoted on a national
automated quotation system, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of such
security on such date as determined by the Calculation Agent in a commercially
reasonable manner.
"COLLATERAL AGENT" has the meaning provided in the Pledge Agreement.
"CONTRACT SHARES" has the meaning provided in Section 2.03(b).
"EXCHANGE" means, at any time, the principal national securities
exchange or automated quotation system, if any, on which the Common Stock is
listed or quoted at such time.
"EXCHANGE BUSINESS DAY" means any day that is (or, but for the
occurrence of a Market Disruption Event, would have been) a trading day on the
Exchange, other than a day on which trading on the Exchange is scheduled to
close prior to its regular weekday closing time.
"EXCHANGE RATE" has the meaning provided in Section 2.03(c).
"FREE STOCK" means Common Stock (or security entitlements in respect
thereof) that is not subject to any Transfer Restrictions in the hands of either
Seller immediately prior to delivery to Buyer hereunder and would not upon
delivery to Buyer be subject to any Transfer Restrictions in the hands of Buyer.
"ISSUE PRICE" has the meaning provided in Section 2.03(c).
"LIEN" means any lien, mortgage, security interest, pledge, charge or
encumbrance of any kind.
"MARKET DISRUPTION EVENT" means the occurrence or the existence on any
Exchange Business Day during the one-half hour period ending at the close of
trading on the relevant exchange of any suspension of or limitation in trading
(by reason of movements in price exceeding limits permitted by the relevant
exchange or otherwise) in the Common Stock or in listed options on the Common
Stock, if any, if, in the determination of the Calculation Agent, such
suspension or limitation is material.
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"MARKET VALUE" means, as of any date with respect to any share of
Common Stock, the Closing Price per share of Common Stock for the Exchange
Business Day prior to such date.
"MARKETABLE SECURITIES" means shares of common stock of a
Publicly-Traded Entity that are not subject to any Transfer Restrictions.
"MATURITY DATE" means August 30, 2002.
"MATURITY PRICE" means the average of the Closing Prices per share of
the Common Stock on the 20 Trading Days beginning 30 Exchange Business Days
immediately prior to the Maturity Date, provided that if there are not 20
Trading Days during the period beginning 30 Exchange Business Days immediately
prior to the Maturity Date and ending on the Exchange Business Day immediately
prior to the Maturity Date, the Maturity Price shall be the market value of the
Common Stock during such period as determined by the Calculation Agent in its
discretion in a commercially reasonable manner.
"NEW COMMON STOCK" has the meaning provided in Section 7.01(c).
"OPTIONAL TERMINATION DATE" has the meaning provided in Section 3.01.
"ORIGINAL COMMON STOCK" has the meaning provided in Section 7.01(c).
"PAYMENT DATE" has the meaning provided in Section 2.03(a).
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PLEDGE AGREEMENT" means the SAILS Pledge Agreement dated as of the
date hereof among Subsidiary, Buyer and the Collateral Agent, as amended from
time to time.
"PUBLICLY-TRADED ENTITY" means a surviving or continuing corporation of
the Issuer (or any successor) following a Reorganization Event, or a corporation
the capital stock of which is distributed in a Spin-Off, the common stock of
which is traded on any national securities exchange or automatic interdealer
quotation system in the United States; provided that, in the case of a
Reorganization Event, the product of (i) the Closing Price of such surviving or
continuing corporation's common stock on the Exchange Business Day immediately
succeeding such Reorganization Event multiplied by (ii) the number of shares of
such surviving or continuing corporations common stock held by non-affiliates of
such corporation shall not be less than the product of (A) the Closing Price of
the Common Stock on the Exchange Business Day immediately preceding such
Reorganization Event and (B) the number of shares of Common Stock held by
non-affiliates of the Issuer.
"POTENTIAL ADJUSTMENT EVENT" has the meaning provided in Section 7.01.
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"PURCHASE PRICE" has the meaning provided in Section 2.02.
"REORGANIZATION EVENT" has the meaning provided in Section 7.02.
"REPLACEMENT VALUE" has the meaning provided in Section 8.01.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPIN-OFF" has the meaning provided in Section 7.01.
"TERMINATION AMOUNT NOTICE" has the meaning provided in Section 7.04.
"TERMINATION DATE" means, with respect to any Reorganization Event, the
closing date of such Reorganization Event.
"THRESHOLD PRICE" has the meaning provided in Section 2.03(c).
"TRADING DAY" is defined as any Exchange Business Day on which there is
not a Market Disruption Event.
"TRANSFER RESTRICTION" means, with respect to any share of Common Stock
(or security entitlements in respect thereof) or other item of collateral
pledged under the Pledge Agreement, any condition to or restriction on the
ability of the holder thereof to sell, assign or otherwise transfer such share
of Common Stock (or security entitlements in respect thereof) or other item of
collateral or to enforce the provisions thereof or of any document related
thereto whether set forth in such item of Collateral itself or in any document
related thereto, including, without limitation, (i) any requirement that any
sale, assignment or other transfer or enforcement of such share of Common Stock
(or security entitlements in respect thereof) or other item of collateral be
consented to or approved by any Person, including, without limitation, the
issuer thereof or any other obligor thereon, (ii) any limitations on the type or
status, financial or otherwise, of any purchaser, pledgee, assignee or
transferee of such share of Common Stock (or security entitlements in respect
thereof) or other item of collateral, (iii) any requirement of the delivery of
any certificate, consent, agreement, opinion of counsel, notice or any other
document of any Person to the issuer of, any other obligor on or any registrar
or transfer agent for, such share of Common Stock (or security entitlements in
respect thereof) or other item of collateral, prior to the sale, pledge,
assignment or other transfer or enforcement of such share of Common Stock (or
security entitlements in respect thereof) or other item of collateral and (iv)
any registration or qualification requirement or prospectus delivery requirement
for such share of Common Stock (or security entitlements in respect thereof) or
other item of collateral pursuant to any federal, state or foreign securities
law (including, without limitation, any such requirement arising as a result of
Rule 144 or Rule 145 under the Securities Act); provided that the required
delivery of any assignment, instruction or entitlement order from the seller,
pledgor, assignor or transferor of such share of Common Stock (or security
entitlements in respect thereof) or other item of collateral, together with any
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evidence of the corporate or other authority of such Person, shall not
constitute a "TRANSFER RESTRICTION".
ARTICLE 2.
SALE AND PURCHASE
SECTION .2.01 Sale and Purchase. Upon the terms and subject to the
conditions of this Agreement, Sellers jointly and severally agree to sell to
Buyer, and Buyer agrees to purchase and acquire from Sellers, the number of
shares of Common Stock (or security entitlements in respect thereof) equal to
the product of 1,374,408 (subject to reduction as provided in Section 3.01, the
"BASE AMOUNT") and the Exchange Rate.
SECTION .2.02 Purchase Price. The purchase price (the "PURCHASE PRICE")
shall be $68,103,732.80 in cash.
SECTION .2.03 Payment for and Delivery of Contract Shares.
(a) Upon the terms and subject to the conditions of this Agreement,
Buyer shall deliver to Subsidiary the Purchase Price on August 30, 1999 (the
"PAYMENT DATE") at the offices of Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York 10017, or at such other place as shall be agreed upon by
Buyer and Sellers, paid by certified or official bank check or checks duly
endorsed to, or payable to the order of, Subsidiary, or in immediately available
funds by wire transfer to an account designated by Subsidiary.
(b) On the Maturity Date, Sellers agree, subject to Section 2.04, to
deliver to Buyer a number of shares of Free Stock (the "CONTRACT SHARES") equal
to the product of (A) the Base Amount and (B) the Exchange Rate, rounded down to
the nearest whole number, and cash in an amount equal to the value (based on the
Maturity Price) of any fractional share not delivered as a result of such
rounding. If (x) by 10:00 A.M., New York City time on the Maturity Date, Sellers
have not otherwise effected such delivery of Common Stock (or security
entitlements in respect thereof) or delivered cash in lieu thereof pursuant to
Section 2.04 and (y) the Common Stock and security entitlements in respect
thereof then held by the Collateral Agent as collateral under the Pledge
Agreement is Free Stock, then (i) Sellers shall be deemed not to have elected to
deliver cash in lieu of shares of Free Stock pursuant to Section 2.04
(notwithstanding any notice by either Seller to the contrary) and (ii) the
delivery provided by this Section 2.03(b) shall be effected by delivery by the
Collateral Agent to Buyer of a number of shares of Free Stock then held by the
Collateral Agent as collateral under the Pledge Agreement equal to the number
thereof required to be delivered by Sellers to Buyer pursuant to this Section
2.03(b); provided that, notwithstanding the foregoing and without limiting the
generality of Section 8.01, if Sellers give notice of their election to deliver
cash in lieu of shares of Free Stock on the Maturity Date pursuant to Section
2.04 and fails to deliver the Cash Settlement Amount on the Maturity Date as
provided
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in Section 2.04, Sellers shall be in breach of this Agreement and shall be
liable to Buyer for any losses incurred by Buyer or its affiliates as a result
of such breach, including without limitation losses incurred in connection with
any decrease in the Closing Price of the Common Stock subsequent to the fifth
Exchange Business Day immediately preceding the Maturity Date.
(c) The "EXCHANGE RATE" shall be determined by the Calculation Agent in
accordance with the following formula, and is subject to adjustment as a result
of certain events as provided in Article 7 and as provided in Section 6(i) of
the Pledge Agreement: (i) if the Maturity Price is less than the Threshold Price
but greater than $63.0424 (the "ISSUE PRICE"), the Exchange Rate shall be a
ratio (rounded upward or downward to the nearest 1/10,000th or, if there is not
a nearest 1/10,000th, to the next lower 1/10,000th) equal to the Issue Price
divided by the Maturity Price, (ii) if the Maturity Price is equal to or greater
than the Threshold Price, the Exchange Rate shall be a ratio (rounded upward or
downward to the nearest 1/10,000th or, if there is not a nearest 1/10,000th, to
the next lower 1/10,000th) equal to the Issue Price divided by the Threshold
Price and (iii) if the Maturity Price is equal to or less than the Issue Price,
the Exchange Rate shall be one (1). "THRESHOLD PRICE" means $77.5421, provided
that if for any period during the term of this Agreement a Rehypothecation
Unavailability (as defined in the Pledge Agreement) shall not have occurred or
shall not be continuing, then the Threshold Price shall be increased by an
amount equal to the product of $1.2609 and a fraction, the numerator of which
shall equal the number of days during the term of this Agreement on which a
Rehypothecation Unavailability shall not have occurred or shall not be
continuing and the denominator of which shall equal 1,096.
SECTION .2.04 Cash Settlement Option. Sellers may, upon written notice
delivered to Buyer at least 35 Exchange Business Days prior to the Maturity
Date, elect to deliver the Cash Settlement Amount to Buyer on the Maturity Date
by wire transfer of immediately available funds to an account designated by
Buyer, in lieu of the shares of Common Stock (or security entitlements in
respect thereof) to be delivered on the Maturity Date pursuant to Section
2.03(b).
ARTICLE 3.
TERMINATION BY SELLERS
SECTION .3.01 Termination by Seller. Sellers may terminate this
Agreement in whole or in part upon 35 Exchange Business Days' prior written
notice to Buyer (the termination date specified in such notice, the "OPTIONAL
TERMINATION DATE"). If Sellers terminate this Agreement in whole, Sellers shall
make a cash payment, by wire transfer of immediately available funds to an
account designated by Buyer, to Buyer on the Optional Termination Date in an
amount equal to the Replacement Value (calculated in the manner set forth in
Section 8.01 as if the Optional Termination Date were the Acceleration Date). If
Sellers terminate this Agreement in part, Sellers shall specify the number of
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shares of Common Stock with respect to which this Agreement is to be terminated
and (i) Sellers shall make a cash payment, by wire transfer of immediately
available funds to an account designated by Buyer, to Buyer on the Optional
Termination Date in an amount equal to the Replacement Value (calculated in the
manner set forth in Section 8.01 as if the Optional Termination Date were the
Acceleration Date, provided that for purposes of such calculation, the Base
Amount shall be deemed to be such number of shares of Common Stock with respect
to which this Agreement is to be terminated) and (ii) the Base Amount shall be
reduced by such number of shares of Common Stock with respect to which this
Agreement is to be terminated.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLERS
SECTION .4.01 Representations and Warranties of Seller. Each Seller
represents and warrants to Buyer that:
(a) Such Seller is a corporation duly organized and existing in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted.
(b) The execution and delivery of this Agreement and (in the case of
Subsidiary) the Pledge Agreement and the performance by such Seller of its
obligations hereunder and thereunder do not violate or conflict with any law
applicable to it, any order or judgment of any court or other agency of
government applicable to it or any of its assets or any contractual restriction
binding on or affecting it or any of its assets.
(c) All government and other consents that are required to have been
obtained by it with respect to this Agreement or (in the case of Subsidiary) the
Pledge Agreement have been obtained and are in full force and effect and all
conditions of any such consents have been complied with.
(d) It has the requisite corporate power and authority to enter into
and perform this Agreement and (in the case of Subsidiary) the Pledge Agreement
and to deliver the Contract Shares in accordance with the terms hereof. The
execution and delivery of this Agreement and (in the case of Subsidiary) the
Pledge Agreement by Seller and the consummation by such Seller of the
transactions contemplated hereby and thereby (including the delivery by Sellers
of the Contract Shares) have been duly authorized by all necessary corporate
action. This Agreement and (in the case of Subsidiary) the Pledge Agreement have
been duly executed and delivered by such Seller. Its obligations under this
Agreement and (in the case of Subsidiary) the Pledge Agreement constitute its
legal, valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability,
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to equitable principles of general application (regardless of whether
enforcement is sought in a proceeding in equity or at law)).
(e) No Acceleration Event or event that, with the giving of notice or
the lapse of time or both, would constitute an Acceleration Event has occurred
and is continuing and no such event would occur as a result of its entering into
or performing its obligations under this Agreement or (in the case of
Subsidiary) the Pledge Agreement.
(f) There is not pending or, to its knowledge, threatened against it or
any of its affiliates any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or any
arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or (in the case of Subsidiary) the Pledge Agreement
or its ability to perform its obligations under this Agreement or (in the case
of Subsidiary) the Pledge Agreement.
(g) It is acting for its own account, and has made its own independent
decision to enter into this Agreement and (in the case of Subsidiary) the Pledge
Agreement and as to whether this Agreement and the Pledge Agreement are
appropriate or proper for it based upon its own judgment and upon advice of such
advisors as it deems necessary. It acknowledges and agrees that it is not
relying, and has not relied, upon any communication (written or oral) of Buyer
or any affiliate, employee or agent of Buyer with respect to the legal,
accounting, tax or other implications of this Agreement and (in the case of
Subsidiary) the Pledge Agreement and that it has conducted its own analyses of
the legal, accounting, tax and other implications hereof and thereof; it being
understood that information and explanations related to the terms and conditions
of this Agreement or (in the case of Subsidiary) the Pledge Agreement shall not
be considered investment advice or a recommendation to enter into this Agreement
or (in the case of Subsidiary) the Pledge Agreement. It is entering into this
Agreement and (in the case of Subsidiary) the Pledge Agreement with a full
understanding of all of the terms and risks hereof and thereof (economic and
otherwise) and is capable of evaluating and understanding (on its own behalf or
through independent professional advice), and understands and accepts, the
terms, conditions and risks. It is also capable of assuming (financially and
otherwise), and assumes, those risks. It acknowledges that neither Buyer nor any
affiliate, employee or agent of Buyer is acting as a fiduciary for or an advisor
to it in respect of this Agreement or (in the case of Subsidiary) the Pledge
Agreement.
(h) It is not an "affiliate", within the meaning of Rule 144 under the
Securities Act, of the Issuer. Seller does not know or have any reason to
believe that the Company has not complied with the reporting requirements
contained in Rule 144(c)(1) under the Securities Act.
(i) Delivery of shares of Common Stock (or security entitlements in
respect thereof) by it pursuant to Section 2.03(b) or Section 8.01 will pass to
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Buyer title to such shares (or security entitlements) free and clear of any
Liens or Transfer Restrictions, except for those created pursuant to the Pledge
Agreement.
(j) It has a valid business purpose for entering into this Agreement,
and the transaction contemplated hereby is consistent with its overall
investment strategy.
ARTICLE 5.
CONDITIONS TO BUYER'S OBLIGATIONS
SECTION .5.01 Conditions. The obligation of Buyer to deliver the
Purchase Price on the Payment Date is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of each Seller contained in
Article 4 and in the Pledge Agreement shall be true and correct as of the
Payment Date.
(b) The Pledge Agreement shall have been executed by the parties
thereto, and Subsidiary shall have delivered to the Collateral Agent in
accordance therewith the collateral required to be delivered pursuant to Section
1(b) thereof.
(c) Sellers shall have performed all of the covenants and obligations
to be performed by them hereunder and (in the case of Subsidiary) under the
Pledge Agreement on or prior to the Payment Date.
(d) There shall not have occurred, in the reasonable determination of
Buyer, any material decrease in the public float or daily trading volume of the
Common Stock.
(e) Sellers shall have delivered to Buyer on or prior to the Payment
Date an opinion of counsel acceptable to Buyer to the effect set forth in Annex
A.
ARTICLE 6.
COVENANTS
SECTION .6.01 Taxes. Sellers shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of any Common Stock (or
security entitlements in respect thereof) pursuant hereto. Sellers further agree
to make all payments in respect of this Agreement free and clear of, and without
withholding or deduction for or on account of, any present or future taxes,
duties, fines, penalties, assessments or other governmental charges of
whatsoever nature (or interest on any taxes, duties, fines, penalties,
assessments or other governmental charges of whatsoever nature) imposed, levied,
collected, withheld
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or assessed by, within or on behalf of () the United States or any political
subdivision or governmental authority thereof or therein having power to tax or
() any jurisdiction from or through which payment on the Agreement is made by
the either Seller, or any political subdivision or governmental authority
thereof or therein having power to tax. In the event such withholding or
deduction is imposed, Sellers jointly and severally agree to indemnify the Buyer
for the full amount of such withholding or deduction, as well as any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto.
SECTION .6.02 Forward Contract. Each Seller hereby agrees that: (i) it
will not treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary
income; (ii) it will not treat the delivery of any portion of the shares of
Common Stock (or security entitlements in respect thereof) or cash to be
delivered pursuant to this Agreement as the payment of interest or ordinary
income; (iii) it will treat this Agreement in its entirety as a forward contract
for the delivery of such shares of Common Stock (or security entitlements in
respect thereof) or cash; and (iv) it will not take any action (including filing
any tax return or form or taking any position in any tax proceeding) that is
inconsistent with the obligations contained in (i) through (iii).
Notwithstanding the preceding sentence, either Seller may take any action or
position required by law, provided that such Seller deliver to Buyer an
unqualified opinion of counsel, nationally recognized as expert in Federal tax
matters and acceptable to Buyer, to the effect that such action or position is
required by a statutory change or a Treasury regulation or applicable court
decision published after the date of this Agreement.
SECTION .6.03 Notices. Each Seller will cause to be delivered to Buyer:
(a) Immediately upon the occurrence of any Acceleration Event
hereunder, notice of such occurrence; and
(b) In case at any time prior to the Maturity Date such Seller or any
officer of such Seller receives notice that any event requiring that an
adjustment be calculated pursuant to Article 7 hereof shall have occurred or be
pending, then such Seller shall promptly cause to be delivered to Buyer a notice
identifying such event and stating, if known to such Seller, the date on which
such event occurred or is to occur and, if applicable, the record date relating
to such event. Such Seller shall cause further notices to be delivered to Buyer
if such Seller or any officer of such Seller shall subsequently receive notice
of any further or revised information regarding the terms or timing of such
event or any record date relating thereto.
SECTION .6.04 Further Assurances. From time to time from and after the
date hereof through the Maturity Date, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper and advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
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Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof.
SECTION .6.05 Actions That Could Cause Either Seller to Become an
Affiliate. Each Seller shall notify Buyer immediately of its intention to (i)
purchase Common Stock (or security entitlements in respect thereof) or any other
equity security of the Issuer in an amount that would cause such Seller to
become the beneficial owner, directly or indirectly, of more than three percent
of the outstanding shares of any equity security of the Issuer, (ii) accept a
position as an officer or director of the Company, (iii) take any action that
would cause such Seller to possess, directly or indirectly, the power to direct
or cause the direction of the management and policies of the Issuer, whether by
ownership of voting securities, by contract or otherwise, or (iv) take any other
action that could reasonably be expected to result in such Seller becoming an
"affiliate," within the meaning of Rule 144 under the Securities Act, of the
Issuer. Each Seller shall not take any such action unless a period of fifteen
Business Days shall have elapsed after receipt of such notice by Buyer and Buyer
shall not have objected in writing to such action during such period.
SECTION .6.06 Securities Contract. The parties hereto recognize that
the Collateral Agent is a "financial institution" within the meaning of Section
101(22) of Title 11 of the United States Code (the "BANKRUPTCY CODE") and is
acting as agent and custodian for Buyer in connection with this Agreement and
that Buyer is a "customer" of the Collateral Agent within the meaning of said
Section 101(22). The parties hereto further recognize that this Agreement is a
"securities contract," as such term is defined in Section 741(7) of the
Bankruptcy Code, entitled to the protection of Section 555 of the Bankruptcy
Code.
ARTICLE 7.
ADJUSTMENTS
SECTION .7.01 Dilution Adjustments.
(a) Following the declaration by the Issuer of the terms of any
Potential Adjustment Event occurring prior to the Maturity Date, the Calculation
Agent will determine whether such Potential Adjustment Event has a diluting or
concentrative effect on the theoretical value of the Common Stock and, if so,
will (i) make the corresponding adjustment, if any, to any one or more of the
Base Amount, the Exchange Rate, the Threshold Price, the Issue Price, the
Maturity Price, the Cash Settlement Amount, any Closing Price and any other
variable relevant to the exercise, settlement or payment terms hereof or of the
Pledge Agreement as the Calculation Agent determines appropriate to account for
that
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diluting or concentrative effect and (ii) determine the effective date of the
adjustment. The Calculation Agent may (but need not) determine the appropriate
adjustment by reference to the adjustment in respect of such Potential
Adjustment Event made by an options exchange to options on the Common Stock
traded on that options exchange.
(b) For these purposes, "POTENTIAL ADJUSTMENT EVENT" means any of the
following:
(i) a subdivision, consolidation or reclassification of shares
of Common Stock (which does not constitute a Reorganization Event), or
a free distribution or dividend of any shares of Common Stock to
existing holders of Common Stock by way of bonus, capitalization or
similar issue;
(ii) a distribution or dividend to existing holders of Common
Stock of (A) shares of Common Stock, or (B) other share capital or
securities granting the right to payment of dividends and/or the
proceeds of liquidation of the Issuer equally or proportionately with
such payments to holders of Common Stock, or (C) other types of
securities, rights or warrants or other assets, in any case for payment
(cash or other) at less than the prevailing market price as determined
by the Calculation Agent;
(iii) a cash dividend;
(iv) a call by the Issuer in respect of shares of Common Stock
that are not fully paid;
(v) a repurchase by the Issuer of shares of Common Stock,
whether out of profits or capital and whether the consideration for
such repurchase is cash, securities or otherwise; or
(vi) any other similar event that may have a diluting or
concentrative effect on the theoretical value of the Common Stock.
Without limiting the foregoing, the parties acknowledge that the
Calculation Agent will make adjustments to the Base Amount, the Threshold Price,
the Issue Price and any other variable relevant to the exercise, settlement or
payment terms hereof or of the Pledge Agreement as the Calculation Agent
determines appropriate to account for the value of all cash dividends (ordinary
or extraordinary) with respect to the Common Stock.
(c) Notwithstanding the foregoing, in the event of a distribution of
shares of capital stock of a subsidiary of the Issuer that is a Publicly-Traded
Entity (a "SPIN-OFF") made to holders of shares of Common Stock, the Exchange
Rate in effect immediately prior to such Spin-Off shall be adjusted so that
Buyer shall thereafter be entitled to receive, on the Maturity Date, in addition
to the number of shares of Common Stock required to be delivered on the Maturity
Date, the number of shares of common stock of such Publicly-Traded Entity that
Buyer
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would have owned or been entitled to receive immediately following such Spin-Off
had the shares of Common Stock required to be delivered to Buyer hereunder on
the Maturity Date been delivered immediately prior to such Spin-Off. Following a
Spin-Off, "Original Common Stock" shall mean the common stock of the Issuer and
"New Common Stock" shall mean the common equity securities of the
Publicly-Traded Entity resulting from such Spin-Off.
SECTION .7.02 Reorganization Events. In the event of (i) any
consolidation or merger of the Issuer with or into another entity (other than a
merger or consolidation in which the Issuer is the continuing corporation and in
which the Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Issuer or another corporation), (ii) any sale, transfer, lease or conveyance of
the property of the Issuer as an entirety or substantially as an entirety, (iii)
any statutory exchange of securities of the Issuer with another corporation
(other than in connection with a merger or acquisition) or (iv) any liquidation,
dissolution or winding up of the Issuer (any such event, a "REORGANIZATION
EVENT"), then (A) if the surviving or continuing corporation is a
Publicly-Traded Entity, the Exchange Rate in effect immediately prior to such
Reorganization Event shall be adjusted so that Buyer shall thereafter be
entitled to receive, on the Maturity Date, the number of shares of common stock
of the Publicly-Traded Entity that Buyer would have owned or been entitled to
receive immediately following such Reorganization Event had the shares of Common
Stock required to be delivered to Buyer hereunder on the Maturity Date been
delivered immediately prior to such Reorganization Event or (B) if the surviving
or continuing corporation is not a Publicly-Traded Entity, this Agreement shall
terminate and Sellers shall make a payment or delivery to Buyer as provided in
Section 7.04.
SECTION .7.03 Provisions Relating to Reorganization Events and
Spin-Offs. If a Reorganization Event occurs and clause (B) of Section 7.02 does
not apply, the surviving or continuing corporation shall be deemed to be the
"Issuer" and the common equity securities of such corporation shall be deemed to
be the "Common Stock". If a Spin-Off occurs, the Issuer and the Publicly-Traded
Entity resulting from the Spin-Off shall each be deemed to be the "Issuer" and
the Original Common Stock and the New Common Stock shall each be deemed to be
the "Common Stock". Following any Spin-Off, the Calculation Agent shall
calculate further adjustments pursuant to this Article 7 by applying the
methodology set forth in this Article 7 to both the Original Common Stock and
the New Common Stock.
SECTION .7.04 Termination and Payment. Following termination of this
Agreement as a result of any Reorganization Event, the Calculation Agent shall
determine the Replacement Value in the manner provided in Section 8.01
(calculated, for purposes of this Section 7.04, as if the Termination Date were
the Acceleration Date, and representing the fair replacement value (including
both intrinsic and time value) to Buyer of an agreement with terms that would
preserve for Buyer the economic equivalent of the payments and deliveries that
Buyer and its affiliates would, but for the occurrence of the Reorganization
Event, have been
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entitled to receive after the Termination Date hereunder). As promptly as
reasonably practicable after calculation of the Replacement Value, the
Calculation Agent shall deliver to Buyer and Sellers a notice (the "TERMINATION
AMOUNT NOTICE") specifying the Replacement Value. Not later than three Business
Days following delivery of a Termination Amount Notice, Sellers shall make a
cash payment, by wire transfer of immediately available funds to an account
designated by Buyer, to Buyer in an amount equal to the Replacement Value.
Notwithstanding the foregoing, to the extent that any Marketable Securities are
received by holders of Common Stock in such Reorganization Event, then in lieu
of delivering cash as provided in the immediately preceding sentence, Sellers
may deliver Marketable Securities with an equal value (as determined by the
Calculation Agent in its discretion in a commercially reasonable manner).
Article 8.
ACCELERATION
SECTION .8.01 Acceleration. If one or more of the following events
(each an "ACCELERATION EVENT") shall occur:
(a) any legal proceeding shall have been instituted or any other event
shall have occurred or condition shall exist that in Buyer's reasonable judgment
could have a material adverse effect on the financial condition of either Seller
or on either Seller's ability to perform such Seller's obligations hereunder, or
that provides a reasonable basis to call into question the validity or binding
effect of any agreement of such Seller hereunder or under the Pledge Agreement;
(b) such Seller makes an assignment for the benefit of creditors, files
a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver of or any trustee for such Seller or
any substantial part of such Seller's property, commences any proceeding
relating to such Seller under any reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect, or there is commenced against or with respect to such
Seller or any substantial portion of Seller's property any such proceeding and
an order for relief is issued or such proceeding remains undismissed for a
period of 30 days;
(c) at any time, any representation made or repeated or deemed to have
been made or repeated by either Seller under this Agreement or the Pledge
Agreement or any certificate delivered pursuant hereto or thereto would be
incorrect or misleading if made or repeated as of such time in any respect that,
in the reasonable judgment of Buyer, would have a material adverse effect on
Buyer in respect of the transactions contemplated hereby;
(d) Sellers fail to deliver shares of Common Stock (or security
entitlements in respect thereof) or cash on the Maturity Date as required by
this Agreement;
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(e) such Seller fails to fulfill or discharge when due any of its other
obligations, covenants or agreements under or relating to this Agreement or the
Pledge Agreement (other than the obligation referred to in Section 8.01(d)), and
such failure remains unremedied for 30 days following notice from Buyer;
(f) due to the adoption of, or any change in, any applicable law after
the date hereof, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law after the date hereof, it becomes unlawful
for either Seller to perform any absolute or contingent obligation to make
payment or delivery hereunder or to comply with any other material provision of
this Agreement or the Pledge Agreement;
(g) in the reasonable judgement of the Calculation Agent, Buyer is
unable to hedge Buyer's exposure to this Agreement in the ordinary course of
Buyer's business through share borrowing arrangements because of the lack of
sufficient shares of Common Stock being made available by lenders (it being
understood that, at any time at which a Rehypothecation Unavailability (as
defined in the Pledge Agreement) shall not have occurred and be continuing,
there shall be deemed to be sufficient shares of Common Stock being made
available by lenders);
(h) there occurs a default under any indebtedness for money borrowed by
either Seller or its subsidiaries (except CompuCom Systems, Inc. and Tangram
Enterprise Solutions, Inc.), whether such indebtedness now exists or shall
hereafter be created, which indebtedness, individually or in the aggregate, is
in excess of $10,000,000 principal amount, which default shall constitute a
failure to pay any portion of the principal of such indebtedness when due and
payable after the expiration of any applicable grace or cure period with respect
thereto or shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable;
(i) a Collateral Event of Default within the meaning of the Pledge
Agreement shall occur;
then, upon notice to Sellers from Buyer at any time following an Acceleration
Event, an "ACCELERATION DATE" shall occur, and Sellers shall become obligated to
deliver to Buyer immediately upon receipt of the Acceleration Amount Notice a
number of shares of Free Stock equal to the Acceleration Amount; provided that
if the Collateral Agent proceeds to realize upon any collateral pledged under
the Pledge Agreement and to apply the proceeds of such realization as provided
in paragraph second of Section 8(d) thereof, then, to the extent of such
application of proceeds, Sellers" obligation to deliver Free Stock pursuant to
this paragraph shall be deemed to be an obligation to deliver an amount of cash
equal to the aggregate Market Value of such Free Stock on the Acceleration Date.
The "ACCELERATION AMOUNT" means the quotient obtained by dividing: (i) the
Replacement Value by (ii) the Market Value per share of the Common Stock on the
Acceleration Date, provided that the Acceleration Amount shall not be greater
than the Base Amount.
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The "REPLACEMENT VALUE" means an amount determined by the Calculation
Agent representing the fair replacement value (including both intrinsic and time
value) to Buyer of an agreement with terms that would preserve for Buyer the
economic equivalent of the payments and deliveries that Buyer and its affiliates
would, but for the occurrence of the Acceleration Date, have been entitled to
receive after the Acceleration Date hereunder (taking into account any
adjustments pursuant to Section 7.01 or pursuant to Section 6(i) of the Pledge
Agreement that may have been calculated on or prior to the Acceleration Date),
including any loss of bargain, cost of funding or, without duplication, loss or
cost incurred as a result of Buyer terminating, liquidating, obtaining or
reestablishing any hedge or related trading position.
As promptly as reasonably practicable after calculation of the
Replacement Value, the Calculation Agent shall deliver to either Seller and
Buyer a notice (the "ACCELERATION AMOUNT NOTICE") specifying the Acceleration
Amount of shares of Common Stock (or security entitlements in respect thereof)
required to be delivered by Sellers.
Article 9.
MISCELLANEOUS
SECTION .9.01 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard forms of telecommunication. Notices to Buyer shall
be directed to it care of CSFP Capital, Inc., Eleven Madison Avenue, New York,
New York 10010, Telecopy No. (212) 325-8175, Attention: Ricardo Harewood;
notices to Sellers shall be directed to Parent at 800 the Safeguard Building,
435 Devon Park Drive, Wayne, Pennsylvania 19087 , Telecopy No. (610) 293-0601,
Attention: Chief Financial Officer.
SECTION .9.02 Governing Law; Submission to Jurisdiction; Severability;
Waiver of Jury Trial. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine and each party hereto submits to the jurisdiction of the Courts of
the State of New York and the United States District Court located in the
Borough of Manhattan in New York City.
(b) To the extent permitted by law, the unenforceability or invalidity
of any provision or provisions of this Agreement shall not render any other
provision or provisions herein contained unenforceable or invalid.
(c) EACH SELLER AND BUYER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION .9.03 Confidentiality. Except as required by law or judicial or
administrative process, or as requested by a regulatory authority or
self-regulatory organization, each party hereto agrees to keep this Agreement
and
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the Pledge Agreement and the transactions contemplated hereby and thereby
confidential. In the event disclosure is permitted pursuant to the preceding
sentence, the disclosing party shall (i) provide prior notice of such disclosure
to the other party, (ii) use its best efforts to minimize the extent of such
disclosure and (iii) comply with all reasonable requests of the other party to
minimize the extent of such disclosure. This Section 9.03 shall not prevent
either Seller or Buyer from disclosing information as necessary to third-party
advisors in connection with the transactions contemplated hereby or in the
Pledge Agreement; provided that such Seller or Buyer, as the case may be, shall
cause such advisors comply with the provisions of this Section 9.03 as if a
party hereto.
SECTION .9.04 Entire Agreement. Except as expressly set forth herein,
this Agreement constitutes the entire agreement and understanding among the
parties with respect to its subject matter hereof and supersedes all oral
communications and prior writings with respect thereto.
SECTION .9.05 Amendments, Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Buyer and Sellers or, in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION .9.06 No Third Party Rights, Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in any
person other than Sellers, Buyer and their respective successors and assigns and
no other person shall assert any rights as third party beneficiary hereunder.
Whenever any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. All the covenants
and agreements herein contained by or on behalf of each Seller and Buyer shall
bind, and inure to the benefit of, their respective successors and assigns
whether so expressed or not, and shall be enforceable by and inure to the
benefit of Buyer and its successors and assigns. The rights and duties under
this Agreement may not be assigned or transferred by any party hereto without
the prior written consent of the other parties hereto; provided that (i) Buyer
may assign or transfer any of its rights or duties hereunder to any of its
affiliates or any special purpose company sponsored or managed by Buyer or any
of its affiliates without the prior written consent of Seller and (ii) the Agent
may assign or transfer any of its rights or duties hereunder without the prior
written consent of the other parties hereto.
SECTION .9.07 Calculation Agent. The determinations and calculations of
the Calculation Agent shall be binding in the absence of manifest error. The
Calculation Agent will have no responsibility for good faith errors or omissions
in the determination of any Closing Price, the Maturity Price, the
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Exchange Rate, the Cash Settlement Amount or any other amount as provided
herein.
SECTION .9.08 Matters Related to CSFP Capital, Inc., as Agent. (CSFP
Capital, Inc. shall act as "agent" for Buyer and Sellers within the meaning of
Rule 15a-6 under the Securities Exchange Act of 1934.
(b) The Agent is not a principal to this Agreement and shall have no
responsibility or liability (including, without limitation, by way of guarantee,
endorsement or otherwise) to Buyer or either Seller in respect of this
Agreement, including, without limitation, in respect of the failure of Buyer or
either Seller to pay or perform under this Agreement.
(c) Each of Buyer and each Seller agrees to proceed solely against the
other to collect or recover any securities or money owing to it in connection
with or as a result of this Agreement. The Agent shall otherwise have no
liability in respect of this Agreement, except for its gross negligence or
willful misconduct in performing its duties as Agent hereunder.
(d) As a broker-dealer registered with the Securities and Exchange
Commission, CSFP Capital, Inc., in its capacity as Agent, will be responsible
for (i) effecting the transaction contemplated in this Agreement, (ii) issuing
all required notices, confirmations and statements to Buyer and Sellers and
(iii) maintaining books and records relating to this Agreement.
SECTION .9.09 Joint and Several Liability. Sellers' obligations
hereunder shall be joint and several.
SECTION .9.10 Counterparts. This Agreement may be executed in any
number of counterparts, and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
SELLER:
SAFEGUARD SCIENTIFICS, INC.
By: /s/ Michael W. Miles
------------------------------
Name: Michael W. Miles
Title: Senior Vice President
and CFO
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SELLER:
SAFEGUARD SCIENTIFICS
(DELAWARE), INC.
By: /s/ Michael W. Miles
------------------------------
Name: Michael W. Miles
Title: Senior Vice President
and CFO
BUYER:
CREDIT SUISSE FINANCIAL PRODUCTS
By: /s/ Edmond Curtin
-----------------------------
Name: Edmond Curtin
Title: Director - Legal and
Compliance Department
By: /s/ David Bonham
-----------------------------
Name: David Bonham
Title: Director-Legal and
Compliance Department
AGENT:
CSFP CAPITAL, INC.
By: /s/ Darren Malcolm
----------------------------
Name: Darren Malcolm
Title: Vice President
22
<PAGE> 1
Exhibit 10.43
SAILS PLEDGE AGREEMENT
dated as of
August 25, 1999
among
SAFEGUARD SCIENTIFICS (DELAWARE), INC.,
CREDIT SUISSE FINANCIAL PRODUCTS
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. The Security Interests:...............................................................1
SECTION 2. Definitions:..........................................................................2
SECTION 3. Representations and Warranties of Pledgor:............................................4
SECTION 4. Representations, Warranties and Agreements of the Collateral Agent:...................6
SECTION 5. Certain Covenants of Pledgor..........................................................6
SECTION 6. Administration of the Collateral and Valuation of the Securities......................8
SECTION 7. Income and Voting Rights in Collateral................................................11
SECTION 8. Remedies upon Acceleration Events.....................................................12
SECTION 9. The Collateral Agent..................................................................15
SECTION 10. Miscellaneous........................................................................16
SECTION 11. Termination of Pledge Agreement......................................................18
</TABLE>
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<PAGE> 3
PLEDGE AGREEMENT
THIS AGREEMENT is made as of this 25th day of August, 1999 among
SAFEGUARD SCIENTIFICS (DELAWARE), INC. ("PLEDGOR"), CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as collateral agent (the "COLLATERAL AGENT") hereunder for the
benefit of CREDIT SUISSE FINANCIAL PRODUCTS ("SECURED PARTY"), and Secured
Party.
WHEREAS, pursuant to the SAILS Mandatorily Exchangeable Securities
Contract (as amended from time to time, the "SECURITIES CONTRACT") dated as of
the date hereof among Pledgor, CSFP Capital, Inc., as Agent, and Secured Party,
Parent and Pledgor have jointly and severally agreed to sell and Secured Party
has agreed to purchase shares of common stock (the "COMMON STOCK") of Tellabs,
Inc., a Delaware corporation (the "ISSUER") (or security entitlements in respect
thereof), or cash in lieu thereof, subject to the terms and conditions of the
Securities Contract;
WHEREAS, it is a condition to the obligations of Secured Party under
the Securities Contract that Pledgor, the Collateral Agent and Secured Party
enter into this Agreement and that Pledgor grant the pledge provided for herein;
NOW, THEREFORE, in consideration of their mutual covenants contained
herein and to secure the performance by Parent and Pledgor of their obligations
under the Securities Contract and the observance and performance of the
covenants and agreements contained herein and in the Securities Contract, the
parties hereto, intending to be legally bound, hereby mutually covenant and
agree as follows:
SECTION 1. The Security Interests. In order to secure the full and
punctual observance and performance of the covenants and agreements contained
herein and in the Securities Contract:
(a) Pledgor hereby assigns and pledges to the Collateral Agent, as
agent of and for the benefit of Secured Party, and grants to the Collateral
Agent, as agent of and for the benefit of Secured Party, security interests in
and to, and a lien upon and right of set-off against, and transfers to the
Collateral Agent, as agent of and for the benefit of Secured Party, as and by
way of a security interest having priority over all other security interests,
with power of sale, all of its right, title and interest in and to (i) the
Pledged Items described in paragraph (b); (ii) all additions to and
substitutions for such Pledged Items (including, without limitation, any
securities, instruments or other property delivered or pledged pursuant to
Section 5(a) or 6(b)); (iii) all income, proceeds and collections received or to
be received, or derived or to be derived, now or any time hereafter (whether
before or after the commencement of any proceeding under applicable bankruptcy,
insolvency or similar law, by or against Pledgor, with respect to Pledgor) from
or in connection with the Pledged Items (including, without limitation, any
shares of capital stock issued by the Issuer in respect of any Common Stock (or
security entitlements in respect thereof) constituting Collateral or any cash,
securities or other property distributed in respect of or exchanged for any
Common Stock (or security entitlements in respect thereof) constituting
Collateral, or into which any such Common Stock (or security entitlements in
respect thereof) is converted, in connection with any
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<PAGE> 4
Merger Event, and any security entitlements in respect of any of the foregoing);
and (iv) all powers and rights now owned or hereafter acquired under or with
respect to the Pledged Items (such Pledged Items, additions, substitutions,
proceeds, collections, powers and rights being herein collectively called the
"Collateral"). The Collateral Agent shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the UCC, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded to the Collateral Agent by this Agreement.
(b) On or prior to the Payment Date, Pledgor shall deliver to the
Collateral Agent in pledge hereunder Eligible Collateral consisting of a number
of shares of Common Stock (or security entitlements in respect thereof) equal to
the Base Amount, in the manner provided in Section 6(c).
(c) In the event that the Issuer at any time issues to Pledgor in
respect of any Common Stock (or security entitlements in respect thereof)
constituting Collateral hereunder any additional or substitute shares of capital
stock of any class (or any security entitlements in respect thereof), Pledgor
shall immediately pledge and deliver to the Collateral Agent in accordance with
Section 6(c) all such shares and security entitlements as additional Collateral
hereunder.
(d) The Security Interests are granted as security only and shall not
subject the Collateral Agent or Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of Pledgor or the Issuer with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 2. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Securities
Contract. As used herein, the following words and phrases shall have the
following meanings:
"AUTHORIZED OFFICER" of Pledgor means any officer as to whom Pledgor
shall have delivered notice to the Collateral Agent that such officer is
authorized to act hereunder on behalf of Pledgor.
"COLLATERAL" has the meaning provided in Section 1(a).
"COLLATERAL AGENT" means the financial institution identified as such
in the preliminary paragraph hereof, or any successor appointed in accordance
with Section 9.
"COLLATERAL EVENT OF DEFAULT" means, at any time, the occurrence of
either of the following: (A) failure of the Collateral to include, as Eligible
Collateral, at least the Maximum Deliverable Number of shares of Common Stock or
(B) failure at any time of the Security Interests to constitute valid and
perfected security interests in all of the Collateral, subject to no prior or
equal Lien, or assertion of such by either Parent or Pledgor in writing.
"DEFAULT SETTLEMENT DATE" has the meaning provided in Section 8(a).
"DIVIDEND PROCEEDS" has the meaning provided in Section 7(a).
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<PAGE> 5
"ELIGIBLE COLLATERAL" means Common Stock or security entitlements in
respect thereof, provided that Pledgor has good and marketable title thereto,
free of all Liens (other than the Security Interests) and Transfer Restrictions
(other than the Existing Transfer Restrictions) and that the Collateral Agent
has a valid, first priority perfected security interest therein, a first lien
thereon and control with respect thereto, and provided further that to the
extent the number of shares of Common Stock or security entitlements in respect
thereof pledged hereunder exceeds at any time the Maximum Deliverable Number
thereof, such excess shares shall not be Eligible Collateral.
"EXISTING TRANSFER RESTRICTIONS" means Transfer Restrictions imposed by
Rule 145(c) under the Securities Act.
"LOCATION" means, with respect to any party, the place such party is
"deemed located" within the meaning of Section 9-103(3)(d) of the UCC.
"MAXIMUM DELIVERABLE NUMBER" means, on any date, a number of shares of
Common Stock or security entitlements in respect thereof equal to the Base
Amount on such date multiplied successively by each adjustment that shall have
been calculated on or prior to such date pursuant to Article 7 of the Securities
Contract.
"OTHER LIENS" has the meaning specified in Section 4(e).
"PLEDGED ITEMS" means, as of any date, any and all securities and
instruments delivered by Pledgor to be held by the Collateral Agent under this
Agreement as Collateral.
"REHYPOTHECATION UNAVAILABILITY" shall be deemed to occur if at any
time any of the Eligible Collateral pledged hereunder is unavailable for
rehypothecation by the Collateral Agent pursuant to Section 6(i) (as a result of
Pledgor withholding consent to rehypothecate any such Eligible Collateral, as a
result of Parent or Pledgor causing the Collateral Agent to take possession of
such Collateral pursuant to the proviso to Section 6(i) or otherwise).
"SECURITY INTERESTS" means the security interests in the Collateral
created hereby.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
SECTION 3. Representations and Warranties of Pledgor. Pledgor hereby
represents and warrants to the Collateral Agent and Secured Party that:
(a) Pledgor (i) acquired all of the Eligible Collateral delivered
pursuant to Section 1(b) on August 3, 1998, owns and, subject to the Collateral
Agent's right to rehypothecate Collateral pursuant to Section 6(i), at all times
prior to the release of the Collateral pursuant to the terms of this Agreement,
will own the Collateral free and clear of any Liens (other than the Security
Interests) or Transfer Restrictions (other than the Existing Transfer
Restrictions) and (ii) is not and will not become a party to or otherwise bound
by any agreement, other than this Agreement, that (x) restricts in any manner
the
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<PAGE> 6
rights of any present or future owner of the Collateral with respect thereto or
(y) provides any person other than the Pledgor, the Collateral Agent, the
Secured Party or any securities intermediary through whom any Collateral is held
(but, in the case of any such securities intermediary, only with respect of
Collateral held through it) with control (as defined in Section 8-106 of the
UCC) with respect to any Collateral.
(b) Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests, no financing
statement, security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be effective to perfect a
lien, security interest or other encumbrance of any kind on such Collateral.
(c) All shares of Common Stock at any time pledged hereunder (or in
respect of which security entitlements are pledged hereunder) are and will be
issued by an issuer organized under the laws of the United States, any State
thereof or the District of Columbia and (i) certificated (and the certificate or
certificates in respect of such shares of Common Stock are and will be located
in the United States) and registered in the name of Pledgor or held through a
securities intermediary whose securities intermediary's jurisdiction (within the
meaning of Section 8-110(e) of the UCC) is located in the United States or (ii)
uncertificated and either registered in the name of Pledgor or held through a
securities intermediary whose securities intermediary's jurisdiction (within the
meaning of Section 8-110(e) of the UCC) is located in the United States.
(d) Subject to the Collateral Agent's right to rehypothecate Collateral
pursuant to Section 6(i), upon (i) the delivery of certificates evidencing any
Common Stock to the Collateral Agent in accordance with Section 6(c)(A) or the
registration of uncertificated Common Stock in the name of the Collateral Agent
or its nominee in accordance with Section 6(c)(B), the Collateral Agent will
have, for the benefit of Secured Party, a valid and, as long as the Collateral
Agent retains possession of such certificates or such uncertificated Common
Stock remains so registered, perfected security interest therein, in respect of
which the Collateral Agent will have control, subject to no prior Lien and (ii)
the crediting of any Common Stock to a securities account of the Collateral
Agent in accordance with Section 6(c)(C), the Collateral Agent will have, for
the benefit of Secured Party, a valid and, so long as such Common Stock
continues to be credited to the account of the Collateral Agent with the
applicable securities intermediary, perfected security interest in a securities
entitlement in respect thereof, in respect of which the Collateral Agent will
have control subject to no prior Lien.
(e) No registration, recordation or filing with any governmental body,
agency or official is required in connection with the execution and delivery of
this Agreement or necessary for the validity or enforceability hereof or for the
perfection or enforcement of the Security Interests.
(f) Pledgor and Parent have not performed and will not perform any acts
that might prevent the Collateral Agent from enforcing any of the terms of this
Agreement or that might limit the Collateral Agent in any such enforcement.
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(g) The Location of Pledgor is the address set forth in Section 10(d),
and under the Uniform Commercial Code as in effect in such Location, no local
filing is required to perfect a security interest in collateral consisting of
general intangibles.
SECTION 4. Representations, Warranties and Agreements of the Collateral
Agent. The Collateral Agent represents and warrants to, and agrees with, Pledgor
and Secured Party that:
(a) The Collateral Agent is a duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and
has all powers and all material governmental licenses, authorizations, consents
and approvals required to enter into, and perform its obligations under, this
Agreement.
(b) The execution, delivery and performance by the Collateral Agent of
this Agreement have been duly authorized by all necessary action on the part of
the Collateral Agent and do not and will not violate, contravene or constitute a
default under any provision of applicable law or regulation or of the
constitutive documents of the Collateral Agent or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Collateral Agent.
(c) This Agreement constitutes a valid and binding agreement of the
Collateral Agent enforceable against the Collateral Agent in accordance with its
terms.
(d) Subject to Sections 6(i) and 6(j), the Collateral Agent has not and
will not enter into any agreement pursuant to which any person other than the
Pledgor, the Collateral Agent, the Secured Party or any securities intermediary
through whom any Collateral is held (but in the case of any such securities
intermediary only in respect of Collateral held through it) has or will have
control (within the meaning of Section 8-106 of the UCC) with respect to any
Collateral.
(e) The Collateral Agent hereby agrees that all liens, pledges and
other security interests of any kind or nature held by it (other than liens,
pledges and security interests arising hereunder) in any of the Collateral
securing any obligation to the Collateral Agent (either in such capacity or in
any other capacity) (collectively, "OTHER LIENS") shall be subordinate and
junior to the liens, pledges and security interests in the Collateral arising
hereunder and that the Collateral Agent will take no action to enforce any Other
Liens so long as any obligation under the Securities Contract or hereunder
(whether or not then due) should remain unsatisfied.
SECTION 5. Certain Covenants of Pledgor. Pledgor agrees that, so long
as any of the obligations of Parent or Pledgor under the Securities Contract
remain outstanding:
(a) Pledgor shall ensure at all times that a Collateral Event of
Default shall not occur, and shall pledge additional Collateral in the manner
described in Sections 6(b) and 6(c) as necessary to cause such requirement to be
met.
(b) Pledgor shall, at the expense of either Parent or Pledgor and in
such manner and form as Secured Party or the Collateral Agent may require, give,
execute, deliver, file
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and record any financing statement, notice, instrument, document, agreement or
other papers that may be necessary or desirable in order to create, preserve,
perfect, substantiate or validate any security interest granted pursuant hereto
or to enable the Collateral Agent to exercise and enforce its rights and the
rights of Secured Party hereunder with respect to such security interest. To the
extent permitted by applicable law, Pledgor hereby authorizes the Collateral
Agent to execute and file, in the name of Pledgor or otherwise, UCC financing or
continuation statements (which may be carbon, photographic, photostatic or other
reproductions of this Agreement or of a financing statement relating to this
Agreement) that the Collateral Agent in its sole discretion may deem necessary
or appropriate to further perfect, or maintain the perfection of, the Security
Interests.
(c) Pledgor shall warrant and defend its title to the Collateral,
subject to the rights of the Collateral Agent and Secured Party, against the
claims and demands of all persons. The Collateral Agent and Secured Party (or,
as they may agree, one of them) may elect, but without an obligation to do so,
to discharge any Lien of any third party on any of the Collateral.
(d) Pledgor agrees that it shall not change (1) its name, identity or
corporate structure in any manner or (2) its Location, unless in either case (A)
it shall have given the Collateral Agent not less than 30 days' prior notice
thereof and (B) such change shall not cause any of the Security Interests to
become unperfected or subject any Collateral to any other Lien.
(e) Pledgor agrees that it shall not (1) create or permit to exist any
Lien (other than the Security Interests) or any Transfer Restriction (other than
the Existing Transfer Restrictions) upon or with respect to the Collateral, (2)
sell or otherwise dispose of, or grant any option with respect to, any of the
Collateral or (3) enter into or consent to any agreement pursuant to which any
person other than the Pledgor, the Collateral Agent, the Secured Party and any
securities intermediary through whom any of the Collateral is held (but in the
case of any such securities intermediary only in respect of Collateral held
through it) has or will have control (within the meaning of Section 8- 106 of
the UCC) in respect of any Collateral.
SECTION 6. Administration of the Collateral and Valuation of the
Securities. (a) The Collateral Agent shall determine on each Business Day
whether a Collateral Event of Default shall have occurred.
(b) Pledgor may pledge additional Collateral hereunder at any time.
Concurrently with the delivery of any additional Eligible Collateral, Pledgor
shall deliver to the Collateral Agent a certificate of an Authorized Officer
Pledgor substantially in the form of Exhibit A hereto and dated the date of such
delivery, (A) identifying the additional items of Eligible Collateral being
pledged and (B) certifying that with respect to such items of additional
Eligible Collateral the representations and warranties contained in paragraphs
(a), (b), (c), (d) and (e) of Section 3 are true and correct with respect to
such Eligible Collateral on and as of the date thereof. Pledgor hereby covenants
and agrees to take all actions required under Section 6(c) and any other actions
necessary to create for
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<PAGE> 9
the benefit of the Collateral Agent a valid, first priority, perfected security
interest in, and a first lien upon, such additional Eligible Collateral.
(c) Any delivery of Common Stock (or security entitlement in respect
thereof) as Collateral to the Collateral Agent by Pledgor shall be effected (A)
in the case of Collateral consisting of certificated Common Stock registered in
the name of Pledgor, by delivery of certificates representing such Common Stock
to the Collateral Agent, accompanied by any required transfer tax stamps, and in
suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, all in form and substance satisfactory to the Collateral Agent, (B)
in the case of Collateral consisting of uncertificated Common Stock registered
in the name of Pledgor, by transmission by Pledgor of an instruction to the
issuer of such Common Stock instructing such issuer to register such Common
Stock in the name of the Collateral Agent or its nominee, accompanied by any
required transfer tax stamps, and the issuer's compliance with such instructions
or (C) in the case of Common Stock in respect of which security entitlements are
held by Pledgor through a securities intermediary, by the crediting of such
Common Stock, accompanied by any required transfer tax stamps, to a securities
account of the Collateral Agent at such securities intermediary or, at the
option of the Collateral Agent, at another securities intermediary satisfactory
to the Collateral Agent. Upon delivery of any such Pledged Item under this
Agreement, the Collateral Agent shall examine such Pledged Item and any
certificates delivered pursuant to Section 6(b) or otherwise pursuant to the
terms hereof in connection therewith to determine that they comply as to form
with the requirements for Eligible Collateral.
(d) If on any Business Day the Collateral Agent determines that a
Collateral Event of Default shall have occurred, the Collateral Agent shall
promptly notify Parent and Pledgor of such determination by telephone call to
Parent and to an Authorized Officer of Pledgor followed by a written
confirmation of such call.
(e) If on any Business Day the Collateral Agent determines that no
Acceleration Event or failure by Pledgor to meet any of its obligations under
Sections 5 or 6 hereof has occurred and is continuing, Pledgor may obtain the
release from the Security Interests of any Collateral upon delivery to the
Collateral Agent of a written notice from an Authorized Officer of Pledgor
indicating the items of Collateral to be released so long as, after such
release, no Collateral Event of Default shall have occurred.
(f) On the Maturity Date, unless (i) Parent or Pledgor shall have
otherwise effected the deliveries required by Section 2.03(b) of the Securities
Contract or shall have delivered the Cash Settlement Amount to Secured Party in
lieu of shares of Common Stock (or security entitlements in respect thereof) in
accordance with Section 2.04 of the Securities Contract on the Maturity Date or
(ii) the Common Stock (or security entitlements in respect thereof) then held by
the Collateral Agent hereunder is not Free Stock, the Collateral Agent shall
deliver (and Pledgor hereby irrevocably instructs the Collateral Agent to
deliver, in whole or partial, as the case may be, satisfaction of Pledgor's
obligations to deliver shares of Common Stock (or security entitlements in
respect thereof) to Secured Party on the Maturity Date pursuant to the
Securities
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<PAGE> 10
Contract) to Secured Party shares of Common Stock (or security entitlements in
respect thereof) then held by it hereunder representing the number of shares of
Common Stock (or security entitlements in respect thereof) required to be
delivered under the Securities Contract on the Maturity Date. Upon any such
delivery, Secured Party shall hold such shares of Common Stock (or security
entitlements in respect thereof) absolutely and free from any claim or right
whatsoever (including, without limitation, any claim or right of Pledgor).
(g) The Collateral Agent may at any time or from time to time, in its
sole discretion, cause any or all of the Common Stock pledged hereunder (or in
respect of which security entitlements are pledged hereunder) registered in the
name of Pledgor or its nominee to be transferred of record into the name of the
Collateral Agent or its nominee. Pledgor shall promptly give to the Collateral
Agent copies of any notices or other communications received by Pledgor with
respect to Common Stock (or security entitlements in respect thereof) pledged
hereunder registered, or held through a securities intermediary, in the name of
Parent or its nominee, or Pledgor or its nominee and the Collateral Agent shall
promptly give to Pledgor copies of any notices and communications received by
the Collateral Agent with respect to Common Stock (or security entitlements in
respect thereof) pledged hereunder registered, or held through a securities
intermediary, in the name of the Collateral Agent or its nominee.
(h) Pledgor agrees that either Parent or Pledgor shall forthwith upon
demand pay to the Collateral Agent:
(i) the amount of any taxes that the Collateral Agent or
Secured Party may have been required to pay by reason of the Security
Interests or to free any of the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, that the Collateral Agent or Secured Party may incur in
connection with (A) the enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of the Security Interests, (B)
the collection, sale or other disposition of any of the Collateral, (C)
the exercise by the Collateral Agent of any of the rights conferred
upon it hereunder or (D) any Acceleration Event.
Any such amount not paid on demand shall bear interest (computed on the basis of
a year of 360 days and payable for the actual number of days elapsed) at a rate
per annum equal to the lesser of (i) Secured Party's cost of borrowing as
determined by the Calculation Agent or (ii) 5% plus the prime rate as published
from time to time in The Wall Street Journal, Eastern Edition.
(i) Without limiting the rights and obligations of the parties under
this Agreement, the Collateral Agent shall, notwithstanding Section 9-207 of the
UCC, have the right, upon the consent of Pledgor (which consent need not be in
writing), to sell, lend, pledge, rehypothecate, assign, invest, use, commingle
or otherwise dispose of, or
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otherwise use in its business (collectively, "REHYPOTHECATE"), any Collateral it
holds, free from any claim or right of any nature whatsoever of Parent or
Pledgor, including any equity or right of redemption by Parent or Pledgor;
provided that the Collateral Agent will not lend any Collateral except pursuant
to arrangements that (i) give the Collateral Agent the right to take possession
of such Collateral (or substitute Collateral) upon five Business Days' notice,
and the Collateral Agent shall exercise such right upon notice from Parent,
Pledgor or Secured Party, and (ii) provide that the borrower of any Collateral
consisting of Common Stock shall pay or deliver to the Collateral Agent, for the
account of Pledgor, the amount of any dividends or distributions paid on the
borrowed Common Stock, and any such delivery or payment received by the
Collateral Agent shall become proceeds of the Collateral hereunder and (except
in the case of extraordinary dividends or distributions) shall be subject to
payment or delivery over to the Pledgor pursuant to Section 7(a).
(j) Notwithstanding any other provision of this Agreement and Section
9-207 of the UCC, the Collateral Agent shall have the right to pledge the
Collateral to an affiliate of Secured Party in connection with hedging
transactions in respect of the Securities Contract entered into among Secured
Party and its affiliates in the ordinary course of business, which pledge shall
have no effect on the rights and obligations of Pledgor, the Collateral Agent or
Secured Party hereunder.
SECTION 7. Income and Voting Rights in Collateral. (a) The Collateral
Agent shall have the right to receive and retain as Collateral hereunder (i) all
proceeds (other than interest, or dividends or distributions that are not
extraordinary dividends or distributions) of the Collateral and (ii) upon the
occurrence and during the continuance of an Acceleration Event, all proceeds of
the Collateral, including, without limitation, interest, or dividends or
distributions that are not extraordinary dividends or distributions ("DIVIDEND
PROCEEDS"), and Pledgor shall take all such action as the Collateral Agent shall
deem necessary or appropriate to give effect to such right. All such proceeds
that are received by Pledgor shall be received in trust for the benefit of the
Collateral Agent and Secured Party and, if the Collateral Agent so directs (but
only, in the case of Dividend Proceeds, upon the occurrence and during the
continuance of an Acceleration Event), shall be segregated from other funds of
Parent or Pledgor and shall, forthwith upon demand by the Collateral Agent (but
only, in the case of Dividend Proceeds, upon the occurrence and during the
continuance of an Acceleration Event), be paid over to the Collateral Agent as
Collateral in the same form as received (with any necessary endorsement). The
Collateral Agent shall pay or deliver over to Pledgor any proceeds of any
Collateral that the Collateral Agent receives but does not have the right to
retain hereunder. After all Acceleration Events have been cured, the Collateral
Agent's right to retain Dividend Proceeds under this Section 7(a) shall cease
and the Collateral Agent shall pay or deliver over to Pledgor any such
Collateral consisting of Dividend Proceeds retained by it during the continuance
of an Acceleration Event.
(b) Unless an Acceleration Event shall have occurred and be continuing,
Pledgor shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Collateral (other than Collateral
that has been rehypothecated by the Collateral Agent pursuant to Section 6(i)),
and the Collateral Agent shall, upon
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<PAGE> 12
receiving a written request from Parent or Pledgor accompanied by a certificate
of an Authorized Officer of Pledgor stating that no Acceleration Event has
occurred and is continuing, deliver to Pledgor or as specified in such request
such proxies, powers of attorney, consents, ratifications and waivers in respect
of any of the Collateral that is registered, or held through a securities
intermediary, in the name of the Collateral Agent or its nominee as shall be
specified in such request and shall be in form and substance satisfactory to the
Collateral Agent.
(c) If an Acceleration Event shall have occurred and be continuing, the
Collateral Agent shall have the right, to the extent permitted by law, and
Pledgor shall take all such action as may be necessary or appropriate to give
effect to such right, to vote and to give consents, ratifications and waivers,
and to take any other action with respect to any or all of the Collateral with
the same force and effect as if the Collateral Agent were the absolute and sole
owner thereof.
SECTION 8. Remedies upon Acceleration Events. (a) If any Acceleration
Event shall have occurred and be continuing, the Collateral Agent may exercise
on behalf of Secured Party all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, without being required to give any notice,
except as herein provided or as may be required by mandatory provisions of law,
shall: (i) deliver all Collateral consisting of shares of Common Stock (or
security entitlements in respect thereof) (but not in excess of the number
thereof deliverable under the Securities Contract at such time) to Secured Party
on the date of the Acceleration Amount Notice relating to such Acceleration
Event (the "DEFAULT SETTLEMENT DATE") in satisfaction of Parent's and Pledgor's
obligations to deliver Common Stock (or security entitlements in respect
thereof) under the Securities Contract, whereupon Secured Party shall hold such
shares of Common Stock (or security entitlements in respect thereof) absolutely
free from any claim or right of whatsoever kind, including any equity or right
of redemption of Parent or Pledgor that may be waived or any other right or
claim of Parent or Pledgor, and Pledgor, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal that Pledgor or
Parent has or may have under any law now existing or hereafter adopted; and (ii)
if such delivery shall be insufficient to satisfy in full all of the obligations
of Parent and Pledgor under the Securities Contract or hereunder, sell all of
the remaining Collateral, or such lesser portion thereof as may be necessary to
generate proceeds sufficient to satisfy in full all of the obligations of Parent
or Pledgor under the Securities Contract or hereunder, at public or private sale
or at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery, and at such price or prices as the Collateral Agent may
deem satisfactory. Pledgor covenants and agrees that it will execute and deliver
such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sale may be made in compliance
with law. Upon any such sale the Collateral Agent shall have the right to
deliver, assign and transfer to the buyer thereof the Collateral so sold. Each
buyer at any such sale shall hold the Collateral so sold absolutely and free
from any claim or right of whatsoever kind, including any equity or right of
redemption of Parent or Pledgor that may be waived or any other right or claim
of Parent or Pledgor, and Parent and Pledgor, to the extent permitted by law,
hereby specifically waive all rights of redemption, stay or appraisal that
Pledgor or Parent
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<PAGE> 13
has or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 9-504 of the UCC shall (1) in case of a
public sale, state the time and place fixed for such sale, (2) in case of sale
at a broker's board or on a securities exchange, state the board or exchange at
which such sale is to be made and the day on which the Collateral, or the
portion thereof so being sold, will first be offered for sale at such board or
exchange, and (3) in the case of a private sale, state the day after which such
sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the buyer
thereof, but the Collateral Agent shall not incur any liability in case of the
failure of such buyer to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold upon like notice. The
Collateral Agent, instead of exercising the power of sale herein conferred upon
it, may proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) Pledgor hereby irrevocably appoints the Collateral Agent its true
and lawful attorney, with full power of substitution, in the name of Pledgor,
the Collateral Agent or Secured Party or otherwise, for the sole use and benefit
of the Collateral Agent and Secured Party, but at the expense of either Parent
or Pledgor, to the extent permitted by law, to exercise, at any time and from
time to time while an Acceleration Event has occurred and is continuing, all or
any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as
if the Collateral Agent were the absolute owner thereof (including,
without limitation, the giving of instructions and entitlement orders
in respect thereof), and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
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provided that the Collateral Agent shall give Parent and Pledgor not less than
one day's prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral that
threatens to decline speedily in value, including, without limitation, equity
securities, or is of a type customarily sold on a recognized market. The
Collateral Agent and Pledgor agree that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
(c) Upon any delivery or sale of all or any part of any Collateral made
either under the power of delivery or sale given hereunder or under judgment or
decree in any judicial proceedings for foreclosure or otherwise for the
enforcement of this Agreement, the Collateral Agent is hereby irrevocably
appointed the true and lawful attorney of Pledgor, in the name and stead of
Pledgor, to make all necessary deeds, bills of sale, instruments of assignment,
transfer or conveyance of the property, and all instructions and entitlement
orders in respect of the property thus delivered or sold. For that purpose the
Collateral Agent may execute all such documents, instruments, instructions and
entitlement orders. This power of attorney shall be deemed coupled with an
interest, and Pledgor hereby ratifies and confirms that which its attorney
acting under such power, or such attorney's successors or agents, shall lawfully
do by virtue of this Agreement. If so requested by the Collateral Agent, by
Secured Party or by any buyer of the Collateral or a portion thereof, Parent or
Pledgor shall further ratify and confirm any such delivery or sale by executing
and delivering to the Collateral Agent, to Secured Party or to such buyer or
buyers at the expense of Pledgor all proper deeds, bills of sale, instruments of
assignment, conveyance or transfer, releases, instructions and entitlement
orders as may be designated in any such request.
(d) In the case of an Acceleration Event, the Collateral Agent may
proceed to realize upon the security interest in the Collateral against any one
or more of the types of Collateral, at any time, as the Collateral Agent shall
determine in its sole discretion subject to the foregoing provisions of this
Section 8. The proceeds of any sale of, or other realization upon, or other
receipt from, any of the Collateral shall be applied by the Collateral Agent in
the following order of priorities:
first, to the payment to the Collateral Agent of the expenses
of such sale or other realization, including reasonable compensation to
the Collateral Agent and its agents and counsel, and all expenses,
liabilities and advances incurred or made by the Collateral Agent in
connection therewith, including brokerage fees in connection with the
sale by the Collateral Agent of any Collateral;
second, to the payment to Secured Party of an amount equal to
the aggregate Market Value of a number of shares of Common Stock equal
to (i) the number of shares of Common Stock (or security entitlements
in respect thereof) that would be required to be delivered under
Section 7.01 of the Securities Contract on the Default Settlement Date
without giving effect to the proviso therein minus (ii) the number of
shares of Common Stock (or security entitlements in respect thereof)
delivered by the Collateral Agent to Secured Party on the Default
Settlement Date as described in Section 8(a);
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finally, if all of the obligations of Parent and Pledgor
hereunder and under the Securities Contract have been fully discharged
or sufficient funds have been set aside by the Collateral Agent at the
request of Parent or Pledgor for the discharge thereof, any remaining
proceeds shall be released to Pledgor.
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SECTION 9. The Collateral Agent. (a) Secured Party hereby irrevocably
appoints and authorizes the Collateral Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Collateral Agent by the terms hereof, together with all such powers as are
reasonably incidental thereto.
(b) The obligations of the Collateral Agent hereunder are only those
expressly set forth in this Agreement.
(c) The Collateral Agent may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(d) Neither the Collateral Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or not taken by it in
connection with this Agreement (1) with the consent or at the request of Secured
Party or (2) in the absence of its own gross negligence or willful misconduct.
The Collateral Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
(e) Pledgor shall indemnify the Collateral Agent against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from the Collateral Agent's gross negligence
or willful misconduct) that the Collateral Agent may suffer or incur in
connection with this Agreement or any action taken or omitted by the Collateral
Agent hereunder.
(f) Beyond the exercise of reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent, bailee, clearing
corporation or securities intermediary or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. The Collateral Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any agent, bailee, clearing corporation or securities intermediary
selected by the Collateral Agent in good faith (or selected by an agent, bailee,
clearing corporation or securities intermediary so selected by the Collateral
Agent or by any agent, bailee, clearing corporation or securities intermediary
selected in accordance with this parenthetical phrase).
(g) Any corporation or association into which the Collateral Agent may
be converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its agency business and assets as a whole or substantially as a
whole, or any corporation or association resulting from any such conversion,
sale, merger, consolidation or transfer to which it is a party, shall, subject
to the prior written consent of Secured Party, be and become a successor
Collateral Agent hereunder and vested with
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<PAGE> 17
all of the title to the Collateral and all of the powers, discretions,
immunities, privileges and other matters as was its predecessor without, except
as provided above, the execution or filing of any instrument or any further act,
deed or conveyance on the part of any of the parties hereto, anything herein to
the contrary notwithstanding.
SECTION 10. Miscellaneous. (a) Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party. All the covenants and agreements herein contained by or
on behalf of Pledgor and the Collateral Agent shall bind, and inure to the
benefit of, their respective successors and assigns whether so expressed or not,
and shall be enforceable by and inure to the benefit of Secured Party and its
successors and assigns.
(b) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Pledgor, the Collateral Agent and Secured Party or, in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
(c) All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed or transmitted by any
standard forms of telecommunication. Notices to Pledgor shall be directed to it
at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, Pennsylvania 19087,
Telecopy No. (610) 293-0601, Attention: Chief Financial Officer; notices to the
Collateral Agent shall be directed to it at Five World Trade Center, New York,
New York 10048, Telecopy No. (212) 325-0728, Attention: Carl Paravati; notices
to Secured Party shall be directed to it in care of CSFP Capital, Inc., Eleven
Madison Avenue, New York, New York 10010, Telecopy No. (212) 325-8175,
Attention: Ricardo Harewood.
(d) This Agreement shall in all respects be construed in accordance
with and governed by the laws of the State of New York without reference to
choice of law doctrine (provided that as to Pledged Items located in any
jurisdiction other than the State of New York, the Collateral Agent on behalf of
Secured Party shall, in addition to any rights under the laws of the State of
New York, have all of the rights to which a secured party is entitled under the
laws of such other jurisdiction) and each party hereto submits to the
jurisdiction of the Courts of the State of New York. The parties hereto hereby
agree that the Collateral Agent's jurisdiction, within the meaning of Section
8-110(e) of the UCC, insofar as it acts as a securities intermediary hereunder
or in respect hereof, is the State of New York. To the extent permitted by law,
the unenforceability or invalidity of any provision or provisions of this
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
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(e) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(f) This Agreement may be executed, acknowledged and delivered in any
number of counterparts and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
SECTION 11. Termination of Pledge Agreement. This Agreement and the
rights hereby granted by Pledgor in the Collateral shall cease, terminate and be
void upon fulfillment of all of the obligations of Pledgor under the Securities
Contract and hereunder. Any Collateral remaining at the time of such termination
shall be fully released and discharged from the Security Interests and delivered
to Pledgor by the Collateral Agent, all at the request and expense of Pledgor.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
PARENT:
SAFEGUARD SCIENTIFICS, INC
By: /s/ Michael W. Miles
------------------------------------
Name: Michael W. Miles
Title: Senior Vice President and CFO
PLEDGOR:
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
By: /s/ Michael W. Miles
------------------------------------
Name: Michael W. Miles
Title: Senior Vice President and CFO
COLLATERAL AGENT:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH
as Collateral Agent
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By: /s/ James P. Moran
------------------------------------
Name: James P. Moran
Title: Director
By: /s/ Douglas E. Maher
------------------------------------
Name: Douglas E. Maher
Title: Vice President
Secured Party:
Credit Suisse Financial Products
By: /s/ Edmond Curtin
-----------------------------------
Name: Edmond Curtin
Title: Director - Legal and
Compliance Department
By: /s/ David Bonham
-----------------------------------
Name: David Bonham
Title: Director - Legal and
Compliance Department
19
