-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OEVpcaOOeodbgWqCTr+6XoN5d56qHQpzqlJWPYjoF3afboRmtur6sfBgvsfmKFeC hlzt3MCPBkBZ9PCVyG4kTw== 0000950129-04-002316.txt : 20040423 0000950129-04-002316.hdr.sgml : 20040423 20040423163958 ACCESSION NUMBER: 0000950129-04-002316 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040408 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEKELEC CENTRAL INDEX KEY: 0000790705 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 952746131 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15135 FILM NUMBER: 04751519 BUSINESS ADDRESS: STREET 1: 26580 W AGOURA RD CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8188805656 MAIL ADDRESS: STREET 1: 26580 W AGOURA RD CITY: CALABASAS STATE: CA ZIP: 91302 8-K 1 v97932e8vk.htm FORM 8-K Tekelec - April 8, 2004
Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

     Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 8, 2004

TEKELEC

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation)
     
0-15135   95-2746131
  		 
 
(Commission File Number)   (I.R.S. Employer
Identification No.)
     
26580 W. Agoura Road, Calabasas, CA   91302
  		 
 
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (818) 880-5656

 

TABLE OF CONTENTS

Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
Exhibit 2.2
Exhibit 2.4
Exhibit 99.1

Table of Contents

Item 2. Acquisition or Disposition of Assets

     On April 8, 2004, Tekelec, a California corporation (“Tekelec”), completed the acquisition of all of the outstanding shares of capital stock of privately held Taqua, Inc., a Delaware corporation (“Taqua”). The acquisition was accomplished by means of a triangular merger of a new wholly owned subsidiary of Tekelec (“Merger Sub”), with and into Taqua (the “Acquisition”). As a result of the Acquisition, Taqua is the surviving corporation and a wholly owned subsidiary of Tekelec.

     The Acquisition was consummated pursuant to an Agreement and Plan of Merger dated as of February 25, 2004, as amended (the “Merger Agreement”), entered into by and among, Tekelec, Merger Sub, Taqua and Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C., as representatives of the stockholders of Taqua (the “Representatives”).

     The terms of the transaction, including the consideration paid by Tekelec, were negotiated and determined on the basis of arm’s-length negotiations by and among Tekelec, Taqua and the Representatives, and a valuation of Taqua, as determined by Tekelec’s management following Tekelec’s review and analysis of Taqua’s business and financial position and Tekelec’s discussions with its advisors and Taqua’s management and advisors. The source of funds used by Tekelec to acquire Taqua was existing cash reserves of Tekelec.

     Tekelec paid an aggregate cash amount of approximately $84,360,000 (the “Purchase Price”) to the common and preferred stockholders and warrant holders of Taqua in exchange for their interests in Taqua. By virtue of the Acquisition, Tekelec assumed any unexercised outstanding options to purchase shares of common stock of Taqua, and the assumed options were converted, based on exchange ratios specified in the Merger Agreement, into options to purchase an aggregate of approximately 500,000 shares of Tekelec Common Stock. Upon closing of the Acquisition, Tekelec also paid approximately $1,785,000 of acquisition-related expenses on behalf of Taqua.

     From the Purchase Price, $8,500,000 was deposited into escrow with U.S. Bank National Association to be held in accordance with the terms of an Escrow Agreement dated April 8, 2004 by and among Tekelec, Taqua, the Representatives and the Escrow Agent. The escrow funds will be available for the satisfaction of any indemnification claims made by Tekelec under the Merger Agreement.

     Taqua offers a portfolio of circuit and IP voice switching products and services, including next-generation packet Class 5 switches, intelligent line access gateways, application servers, and an element management system. In addition, Taqua offers a suite of professional services including network design and capacity planning, as well as installation and cutover services.

     The foregoing description of the acquisition transaction is qualified in its entirety by reference to (i) the definitive Agreement and Plan of Merger and the related Indemnification Agreement which are incorporated by reference in this Current Report on Form 8-K, and (ii) the First Amendment to Agreement and Plan of Merger and the Escrow Agreement which are included in this Current Report on Form 8-K as Exhibits 2.2 and 2.4, respectively. The announcement of the closing of the transaction is contained in a press release which is included in this Current Report as Exhibit 99.1.

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Table of Contents

Item 7. Financial Statements and Exhibits

     (a) Financial statements of businesses acquired.

     Tekelec will file financial statements under cover of Form 8-K/A no later than June 22, 2004 (60 days after this Report is required to be filed).

     (b) Pro forma financial information.

     Tekelec will file pro forma financial information under cover of Form 8-K/A no later than June 22, 2004 (60 days after this Report is required to be filed).

     (c) Exhibits

     
Exhibit    
No.
   Description
2.1
  Agreement and Plan of Merger dated as of February 25, 2004 by and among Tekelec, Buckaroo, Inc., Taqua, Inc. and, as representatives of the stockholders of Taqua, Inc., Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C. (schedules are omitted from this agreement, and Tekelec agrees to furnish supplementally a copy of any such schedule to the Commission upon request)*
 
    
2.2
  First Amendment to Agreement and Plan of Merger dated as of February 26, 2004 by and among Tekelec, Buckaroo, Inc., Taqua, Inc. and, as representatives of the stockholders of Taqua, Inc., Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C. (schedules are omitted from this agreement and Tekelec agrees to furnish supplementally a copy of any such schedule to the Commission upon request)
 
    
2.3
  Indemnification Agreement dated as of February 25, 2004 by and among Tekelec, Buckaroo, Inc., Taqua, Inc. and certain stockholders of Taqua, Inc.*
 
    
2.4
  Escrow Agreement dated as of April 8, 2004 by and among Tekelec, Taqua, Inc. and, as representatives of the stockholders of Taqua, Inc., Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C. and U.S. Bank National Association
 
    
99.1
  Press Release of Tekelec dated April 8, 2004

*   Incorporated by reference to the Company’s Current Report on Form 8-K filed on March 4, 2004 (SEC File No. 0-15135).

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Table of Contents

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  Tekelec
 		  
Dated: April 23, 2004  By:   /s/ Ronald W. Buckly   
    Ronald W. Buckly   
    Senior Vice President, Corporate Affairs and General Counsel   

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Table of Contents

         

EXHIBIT INDEX

     
Exhibit No.
   Description of Exhibit
2.2
  First Amendment to Agreement and Plan of Merger dated as of February 26, 2004 by and among Tekelec, Buckaroo, Inc., Taqua, Inc. and, as representatives of the stockholders of Taqua, Inc., Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C. (schedules are omitted from this agreement and Tekelec agrees to furnish supplementally a copy of any such schedule to the Commission upon request)
 
    
2.4
  Escrow Agreement dated as of April 8, 2004 by and among Tekelec, Taqua, Inc. and, as representatives of the stockholders of Taqua, Inc., Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C. and U.S. Bank National Association
 
    
99.1
  Press Release of Tekelec dated April 8, 2004

5

EX-2.2 3 v97932exv2w2.txt EXHIBIT 2.2 EXHIBIT 2.2 TAQUA, INC. FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER This First Amendment to Agreement and Plan of Merger (this "Amendment") dated February 26, 2004 amends that certain Agreement and Plan of Merger, dated as of February 25, 2004 (the "Merger Agreement"), by and among Tekelec, a California corporation ("Tekelec"), Buckaroo, Inc., a Delaware corporation and wholly-owned subsidiary of Tekelec, Taqua, Inc., a Delaware corporation (the "Company"), and Bessemer Venture Partners V L.P. and Columbia Capital, L.L.C., each as a Representative. All capitalized terms used herein but not otherwise defined shall have the meanings assigned to such terms in the Merger Agreement. RECITALS WHEREAS, in accordance with Section 11.4 of the Merger Agreement, the Company and Tekelec desire to amend the Merger Agreement as provided in Section 11.4 in certain respects, as more fully set forth below; NOW THEREFORE, in consideration of the premises and mutual covenants set forth in the Merger Agreement, as well as the mutual covenants set forth herein, and in accordance with Section 11.4 thereof, the parties agree as follows: I. AMENDMENTS TO SCHEDULES TO MERGER AGREEMENT. The Company and Tekelec hereby agree that the Schedules to the Merger Agreement shall be amended as follows: 1. Schedule 1.8(g) shall be deleted and replaced in its entirety with Exhibit A attached hereto. 2. Schedule 1.8(i) shall be incorporated into the Schedules to the Merger Agreement as provided on Exhibit B attached hereto. 3. Schedule 2.4(a) shall be deleted and replaced in its entirety with Exhibit C attached hereto. 4. Schedule 2.4(c) shall be deleted and replaced in its entirety with Exhibit D attached hereto. 5. Schedule 8.3(g)(i) shall be incorporated into the Schedules to the Merger Agreement as provided on Exhibit E attached hereto. II. AMENDMENTS TO THE MERGER AGREEMENT. The Company and Tekelec hereby agree that: 1. Section 1.2(b) of the Merger Agreement shall be amended such that the parenthetical "(not later than April 6, 2004)" shall be deleted in its entirety and replaced with "(not later than April 9, 2004)." 2. Section 5.12 of the Merger Agreement shall be amended to add the following at the end of such section: "Prior to the Closing Date, the Company shall be permitted to amend those certain options to purchase up to an aggregate of 1,252,025 shares of Company Common Stock at an exercise price of $.10 per share (the "Special Company Options") in order to allow the holders thereof to exercise, immediately prior to the Effective Time, the Special Company Options on a "net exercise basis" such that an aggregate number of shares of Company Common Stock of no more than 568,569 may be issuable upon exercise of such Special Company Options in full (without payment of any cash). For the avoidance of doubt, the term Aggregate Shares Deemed Outstanding shall include all shares subject to any net exercised Special Company Option, rather than the shares issuable upon net exercise. The Company shall provide Tekelec with all documentation related to any amendments or exercise of the Special Company Options in the manner described herein." 3. Section 10.1(a)(ii) of the Merger Agreement shall be deleted in its entirety and replaced with the following: "(ii) by either the Company, on the one hand, or Tekelec, on the other hand, if the Closing shall not have occurred on or before April 9, 2004, or such other date, if any, as the Company and Tekelec shall agree upon; provided that no Party may terminate this Agreement pursuant to this clause (ii) if such Party's failure to fulfill any of its obligations under this Agreement shall have directly or indirectly resulted in the failure of the Closing to occur on or before said date; provided further, that if any waiting periods (that prevent consummation of the Merger) imposed by a Government authority have not expired as of the Closing Date, such date shall automatically be extended to such date as such waiting periods expire (which shall be in no event later than July 5, 2004);" III. MISCELLANEOUS. 1. Effect of Amendment. Except as expressly amended by this Amendment, the Merger Agreement remains in full force and effect. 2. Counterparts. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the Parties hereto has executed and delivered this First Amendment to Agreement and Plan of Merger to be legally binding and effective as of the date first above written. TEKELEC By: /s/ Paul J. Pucino -------------------------------- Name: Paul J. Pucino Title: Chief Financial Officer By: /s/ Frederick M. Lax -------------------------------- Name: Frederick M. Lax Title: Chief Executive Officer TAQUA, INC. By: /s/ Donald W. Pratt, Jr. -------------------------------- Name: Donald W. Pratt, Jr. Title: Chief Financial Officer and Treasurer EX-2.4 4 v97932exv2w4.txt EXHIBIT 2.4 EXHIBIT 2.4 ESCROW AGREEMENT This ESCROW AGREEMENT (the "Escrow Agreement") is made as of April 8, 2004, between Tekelec, a California corporation ("Tekelec"), Taqua, Inc., a Delaware corporation ("Taqua"), Bessemer Venture Partners V L.P. ("Bessemer") and Columbia Capital, L.L.C. ("Columbia" and together with Bessemer, the "Representatives"), as the representatives of the holders of Company Shares, and U.S. Bank National Association (the "Escrow Agent"). RECITALS A. Tekelec and Taqua have entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of February 25, 2004, as amended February 26, 2004, pursuant to which, among other things, the parties thereto agreed to the merger of a subsidiary of Tekelec with and into Taqua. B. The transactions contemplated by the Merger Agreement are being closed (the "Closing") contemporaneously with the execution of this Escrow Agreement. C. Pursuant to the Merger Agreement, a certain portion of the Merger Consideration is to be deposited in escrow, subject to the terms and conditions of the Merger Agreement and this Escrow Agreement. D. The Escrow Agent has agreed to hold the Escrow Funds (as hereinafter defined) and disburse and apply the same in accordance with the terms and conditions of this Escrow Agreement. NOW, THEREFORE, in consideration of the promises and the mutual agreements expressed herein and in the Merger Agreement, the parties hereto agree as follows: 1. DEFINED TERMS. Unless otherwise defined herein, all capitalized terms used herein shall have the meanings attributed to them in the Merger Agreement. 2. APPOINTMENT OF ESCROW AGENT. Taqua and the Representatives, on their own behalf and on behalf of all of the holders of Company Shares, hereby appoint the Escrow Agent to serve as escrow agent hereunder and the Escrow Agent hereby accepts such appointment and agrees to act as escrow agent hereunder and to accept, hold and distribute the Escrow Funds in accordance with and subject to the terms and conditions hereof. 3. DEPOSIT OF ESCROW FUNDS AND DISBURSEMENT FUNDS. 3.1. Pursuant to Section 1.10 of the Merger Agreement, Tekelec has deposited with the Escrow Agent $8,500,000 (the "Escrow Deposit"). The Escrow Agent hereby acknowledges receipt of the Escrow Deposit. 3.2. The Escrow Deposit and any income earned thereon are referred to herein collectively as the "Escrow Funds." 3.3. Pursuant to Section 1.9(d) of the Merger Agreement, Tekelec has deposited with the Escrow Agent $150,000 (the "Disbursement Account"). The Escrow Agent hereby acknowledges receipt of the Disbursement Account. 3.4. The Disbursement Account and any income earned thereon are referred to herein collectively as the "Disbursement Funds." 4. INVESTMENTS. 4.1. The Escrow Agent shall cause the Escrow Funds and the Disbursement Funds from time to time to be invested and reinvested as directed in writing by the Representatives, in Authorized Investments, provided that all such investments shall have appropriately blended maturities but in no event shall any individual investment mature more than 91 days from the date of investment or reinvestment. For the purpose of this Escrow Agreement, "Authorized Investments" means (1) short term interest bearing or discount debt obligations issued or guaranteed by the Government of the United States and /or (2) money market funds rated AAA by Standard and Poor's which invests in short term interest bearing or discount debt obligations issued or guaranteed by the Government of the United States including funds offered by Escrow Agent. Any direction by the Representatives to the Escrow Agent as to investment or reinvestment of funds shall be in writing and shall be provided to the Escrow Agent no later than 9:00 a.m. on the day on which the investment is to be made. Any such direction received after 9:00 a.m. or received on a non-Business Day shall be deemed to have been given prior to 9:00 a.m. the next Business Day. If a direction is not received, the Escrow Agent shall not have any obligation to invest the Escrow Funds or the Disbursement Funds in Authorized Investments and pending receipt of same shall be entitled to hold such Escrow Funds or Disbursement Funds uninvested in its trust account. 4.2. All earnings, dividends or other property (including securities) received in connection with the Escrow Funds and the Disbursement Funds shall be converted into cash and invested as provided in this Section 4. The Escrow Agent shall supply a written statement to Tekelec and the Representatives monthly listing all transactions with respect to the Escrow Funds and the Disbursement Funds during each such period. 4.3. The Escrow Agent shall not be held liable for any losses incurred in the investments of any funds in Authorized Investments provided that the Escrow Agent is not grossly negligent or does not act willfully or in bad faith in connection with such investments. 5. APPLICATION OF ESCROW FUNDS TO CLAIMS OF TEKELEC. 5.1. If Tekelec claims that a Tekelec Indemnified Person has suffered Indemnified Losses for which it is entitled to indemnification under Section 9.1 of the Merger Agreement at any time prior to 11:59 p.m. on May 1, 2005 (the "Release Date"), Tekelec shall deliver the written notice required by Section 9.4 of the Merger Agreement (any notice from Tekelec under this Section 5 shall be referred to as a "Release Notice") to the Representatives and the Escrow Agent to release from the Escrow Funds such amount (the "Claimed Amount"). The parties acknowledge that there may be multiple Release Notices given by Tekelec during the 2 term hereof and that any Release Notice may be amended by Tekelec from time to time on or prior to the Release Date (e.g., to increase or decrease the Claimed Amount stated therein), any such amendment being effective as of and from the date of delivery thereof to the Escrow Agent. The Claimed Amount shall be paid by the Escrow Agent out of the Escrow Funds to or at the direction of Tekelec in accordance with the Release Notice unless the Representatives dispute the validity or amount of such claim by notifying Tekelec and the Escrow Agent in writing, containing a description in reasonable detail of the basis for the dispute and the amount in dispute (a "Dispute Notice"), within fourteen (14) calendar days after Tekelec has provided the Representatives with its Release Notice. If a Dispute Notice has not been delivered to Tekelec and the Escrow Agent within the required fourteen (14) calendar day period, the Escrow Agent shall promptly disburse from the Escrow Funds to or at the direction of Tekelec the portion of the Escrow Funds set forth in the Release Notice. 5.2. In the event that a Dispute Notice signed by the Representatives has been provided to Tekelec and the Escrow Agent within the required fourteen (14) calendar day period, the Escrow Agent shall distribute promptly to or at the direction of Tekelec the undisputed portion (if any) of the amount set forth in the Release Notice, and withhold the amount in dispute (the "Disputed Amount"), which amount shall be resolved in accordance with this Section 5.2. The Disputed Amount shall be held by the Escrow Agent in accordance with the terms hereof until the earlier to occur of the following: (i) the Representatives and Tekelec jointly direct the disbursement of the Disputed Amount by delivering written instruction to the Escrow Agent, or (ii) the Escrow Agent receives a copy of a final judgment or order of a court of competent jurisdiction (a "Directive") with respect to the Disputed Amount (which judgment or order shall also be delivered by Tekelec to the Representatives or by the Representatives to Tekelec, as the case may be). Upon receipt of such instructions or Directive, or as promptly as practicable but in no event more than fifteen (15) calendar days after receipt of such instructions or Directive, the Escrow Agent shall disburse or continue to hold (as the case may be) the Disputed Amount, as required by such instructions or Directive, as the case may be. 6. FINAL DISTRIBUTION OF ESCROW FUNDS. Promptly following the Release Date, the Escrow Agent shall release to the Representatives (for distribution by the Representatives to the Holders in accordance with this Section 6) the Escrow Funds remaining in the Escrow Account; provided, however, the Escrow Agent shall retain (and not deliver to the Representatives) such Escrow Funds in the amount equal to all Disputed Amounts outstanding on the Release Date which have not been resolved in accordance with Section 5 and all Claimed Amounts that have not then been paid to Tekelec or disputed by the Representative in accordance with Section 5 hereof. Following the resolution of any Disputed Amounts in accordance with Section 5 hereof, the Escrow Agent shall disburse the Disputed Amounts as provided in the Directive or in written instructions from Tekelec and the Representatives. Upon receipt of any amounts from the Escrow Account by the Representatives, the Representatives shall promptly (but in no event later than five (5) calendar days thereafter) distribute all such amounts (less any reasonable out of pocket costs and expenses incurred by the Representatives in connection with services hereunder to the extent such Representatives have not previously been reimbursed for such amounts) to the Persons set forth on Exhibit A attached hereto (each a "Holder"), with each Holder being entitled to receive an amount (with respect to each such Holder, such Holder's "Pro Rata Amount") equal to the aggregate amount to be so distributed 3 multiplied by the number set forth next to such Holder's name on Exhibit A under the column entitled "Pro Rata Portion;" provided, however, if any amounts distributed to Tekelec pursuant to the terms hereof were as a result of an indemnity obligation arising under Section 9.1(c) of the Merger Agreement, then (i) any Holder whose breach or violation gave rise to such indemnity obligation shall not be entitled to such Holder's Pro Rata Amount, and instead such Holder shall only be entitled to the greater of (A) $0 and (B) the difference between such Holder's Pro Rata Amount and the amount distributed to Tekelec pursuant to the terms hereof as a result of any such indemnity obligation attributable to such Holder (such amount so distributed to Tekelec the "Individual Obligation Amount") and (ii) each such Individual Obligation Amount shall be distributed to all other Holders in accordance with their Pro Rata Portions, with, for this purpose, such Pro Rata Portions increased on a pro rata basis as among such other Holders in order to allocate the breaching Holder's Pro Rata Portion among such non-breaching Holders (with respect to each such non-breaching Holder, such Holder's "Adjusted Pro Rata Portion"); provided further, if at the time of any distribution by the Representatives of Escrow Funds to the Holders, any Disputed Amount represents an amount that Tekelec has claimed it is entitled to as a result of an indemnity obligation under Section 9.1(c) of the Merger Agreement (an "Individual Obligation Disputed Amount"), then (i) all such Escrow Funds other than any Individual Obligation Disputed Amounts shall be distributed by the Representatives to the Holders, with each Holder being entitled to receive its Pro Rata Amount, except that the Holder or Holders whose alleged breach or violation is at issue with respect to any such Individual Obligation Disputed Amount shall only be entitled to receive the difference between such Holder's Pro Rata Amount of such distribution and the Individual Obligation Disputed Amount attributable to such Holder and (ii) all such Individual Obligation Disputed Amounts shall continue to be held by the Representatives until such time as the disputes with respect to such amounts have been resolved in accordance with the terms hereof, at which time such Individual Obligation Disputed Amounts shall be distributed by the Representatives in accordance with the terms hereof as if such resolution had been known at the time of the initial distribution of such Escrow Funds. The Representatives shall deliver to each Holder in connection with each distribution hereunder a statement showing the calculation of the amounts so distributed. Promptly following each such distribution, the Representatives shall also deliver to Tekelec a copy of each such statement so delivered to the Holders, together with a certificate certifying that all amounts distributed were distributed in accordance with the provisions hereof. 7. DISTRIBUTION OF DISBURSEMENT FUNDS. (a) Upon written notice from the Representatives, the Escrow Agent shall release such portion of the Disbursement Funds as the Representatives shall request in order to reimburse the Representatives for any fees, expenses or losses incurred by the Representatives in the performance of their duties hereunder and pursuant to the Merger Agreement. (b) If there are insufficient Disbursement Funds to satisfy a request made by the Representatives pursuant to Section 7(a) hereof and the Escrow Agent has released Escrow Funds following the Release Date to the Representatives in accordance with Section 6, the Representatives shall be entitled to retain the amount of such insufficiency from the Escrow Funds and such disbursement shall reduce the Escrow Funds available to the Holders. In no event shall the Representatives be entitled to reimbursement prior to the Release Date from the 4 Escrow Funds. Following the Release Date, the Representatives shall only be entitled to reimbursement if the Escrow Agent has released Escrow Funds in accordance with Section 6 to the Representatives for distribution to the Holders. Upon the Release Date, any remaining Disbursement Funds shall be distributed pro rata to the Representatives, or their successors or assigns. 8. CERTAIN COVENANTS. Tekelec and the Representatives, on their own behalf and on behalf of the Holders, hereby agree that all taxes payable with respect to the interest earnings on the Escrow Deposit shall be the responsibility of the Holders as the parties entitled to such interest earnings. Tekelec and the Representatives agree that the Escrow Agent shall report the interest earnings to the Holders on the appropriate tax forms and, to the extent required by the Code, withhold the appropriate tax. The Representatives agree that they will use their reasonable efforts to timely provide to the Escrow Agent all documents and information necessary to satisfy the reporting obligations with respect to the interest earnings, including the aggregate amount of interest earnings allocable to each Holder (or the aggregate amount includible in gross income of each Holder), the name, address, and taxpayer identification number of each Holder, and such other information as required by the tax forms. In addition, the Representatives agree that they will cooperate with the Escrow Agent to obtain each Holder's Certification of Taxpayer Identification Number on Substitute Form W-9 or Substitute Form W-8BEN from each Holder. In addition, Tekelec and the Representatives hereby agree that they will make all reasonable efforts to resolve as quickly as possible any claims still pending pursuant to Section 5 or 6 at the time a disbursement is required to made hereunder. 9. JOINT WRITTEN INSTRUCTIONS AND DIRECTIONS; DISBURSEMENTS. Notwithstanding any other provisions of this Escrow Agreement, the Escrow Agent shall deal with the Escrow Funds, or any part thereof, at any time in accordance with any directions given in an undisputed Release Notice or jointly given in writing by Tekelec and the Representatives to the Escrow Agent or in a Directive. The parties hereto agree that all disbursements required to be made hereunder shall be made to the Representatives (and by the Representatives to the Holders) by wire transfer or check and to or at the direction of Tekelec by wire transfer of immediately available funds in accordance with the wire transfer instructions specified in the notice directing the Escrow Agent to make such disbursement. All directions, notices and other actions given by the Representatives pursuant to this Escrow Agreement shall be unanimous. 10. PROVISIONS CONCERNING THE ESCROW AGENT. 10.1. This Escrow Agreement sets forth, exclusively, the duties of the Escrow Agent and no additional duties or obligations shall be inferred herefrom or implied hereby. 10.2. The Escrow Agent shall not be responsible for the validity of any documents or other property delivered to it pursuant hereto, may act and rely conclusively upon any instrument or signature believed by it to be genuine and may assume that any person purporting to give any notice or instructions hereunder, believed by the Escrow Agent to be authorized, has been duly authorized so to do. 5 10.3. The Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may in good faith do or refrain from doing in connection herewith, except to the extent that any act or omission constitutes gross negligence or willful misconduct. In no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Escrow Agent has been advised of such loss or damage and regardless of the form of action. 10.4. The Escrow Agent may consult with, and obtain advice from, legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully protected in acting in good faith in accordance with the advice of such counsel. 10.5. The Escrow Agent shall not be bound by any modification of this Escrow Agreement unless it shall have specifically consented thereto in writing. 10.6. The Representatives, on the one hand, and Tekelec, on the other hand, shall each upon demand pay to the Escrow Agent 50% of the amount of all reasonable expenses, including the reasonable fees and expenses of counsel, which the Escrow Agent may incur, and its normal fees for all services rendered, in each case in connection with the discharge of its duties, and the exercise or enforcement of the rights of the parties hereunder. The Escrow Agent may deduct any unpaid fees from the Escrow Funds. In the event Escrow Agent deducts any unpaid fees for which Tekelec is responsible hereunder from the Escrow Funds, Tekelec shall promptly deposit into the Escrow Account Tekelec's portion of such unpaid fees and in the event Escrow Agent deducts any unpaid fees for which any of the holders of Company Shares is responsible hereunder from the Escrow Funds, the Representatives shall promptly deposit into the Escrow Account such Stockholder's portion of such unpaid fees or if the Representatives fail to do so, the Escrow Agent shall deduct such amounts from the Disbursement Funds. 10.7. The Escrow Agent may resign by giving written notice in writing to Tekelec, Taqua and the Representatives of such resignation, specifying a date which such resignation shall take effect, which shall in no event be earlier than sixty (60) days after the giving of such notice, and shall be discharged from its duties and obligations upon the appointment of a successor Escrow Agent as hereafter provided and the delivery to such successor of the Escrow Funds. Immediately upon receipt of such notice, Tekelec, Taqua and the Representatives shall appoint a successor Escrow Agent who shall be mutually acceptable to them. Any such successor Escrow Agent shall deliver to Tekelec, Taqua and the Representatives and to the resigning Escrow Agent a written instrument accepting such appointment hereunder, and thereupon it shall succeed to all the rights and duties of the Escrow Agent hereunder, and shall be entitled to receive the Escrow Funds. In the event that a successor Escrow Agent shall not be so appointed by the date of resignation specified by the Escrow Agent, the Escrow Agent shall have the right to appoint as a successor Escrow Agent any national bank, and the parties hereto agree to accept any such successor Escrow Agent appointed by the Escrow Agent. 10.8. In the event of any dispute between Tekelec, Taqua or the Representatives, or between the Escrow Agent and any one or more of the other parties hereto, 6 with regard to the Escrow Agent or its duties, or any other matter concerning the disposition of the Escrow Funds or in the event that the Escrow Agent, in good faith, is in doubt as to what action it should take hereunder, the Escrow Agent may deposit the Escrow Funds with any court described in Section 11.10 of the Merger Agreement pending the decision of such court, and the Escrow Agent shall be entitled to refrain from action pending, and rely upon, the decision of such court. The rights of the Escrow Agent under this Section 10.8 are cumulative of all other rights which it may have by law or otherwise. 10.9. The parties to the Escrow Agreement (other than the Escrow Agent) hereby agree that, the Escrow Agent shall be indemnified from and against any loss, liability or expense reasonably incurred, without gross negligence, willful misconduct or bad faith on its part, arising out of or in connection with the Escrow Agreement, including the expense of defending itself against any claim or liability arising therefrom. Any payment required to be made pursuant to this Section 10.9 shall be paid from the Escrow Fund. The Escrow Agent shall not be required to give any bond or surety or report to any court despite any statute, custom or rule to the contrary. Notwithstanding the foregoing, Tekelec and the Representatives (jointly and severally) agree that any payment required to be made pursuant to this Section 10.9 shall be paid 50% by Tekelec and 50% by the Representatives. The Escrow Agent may deduct any unpaid amounts from the Escrow Funds. In the event Escrow Agent deducts any unpaid amounts for which Tekelec is responsible under this Section 10.9 from the Escrow Funds, Tekelec shall promptly deposit into the Escrow Account Tekelec's portion of such unpaid amounts and in the event Escrow Agent deducts any unpaid amounts for which any of the Representatives are responsible hereunder from the Escrow Funds, the Representatives shall promptly deposit into the Escrow Account the Representatives' portion of such unpaid amounts or if the Representatives fail to do so, the Escrow Agent shall deduct such amounts from the Disbursement Funds. 10.10. Tekelec and the Representatives together may terminate the appointment of the Escrow Agent hereunder upon written notice specifying the date upon which such termination shall take effect. In the event of such termination, Tekelec and the Representatives shall before the date of such termination jointly appoint a successor Escrow Agent, and the Escrow Agent shall deliver the remaining Escrow Funds to such successor Escrow Agent. 11. PROVISIONS CONCERNING THE REPRESENTATIVES. 11.1. Until the later of the Release Date or the date on which no Escrow Funds remain held in escrow hereunder, the Representatives shall, and shall have full power and authority to, exclusively act on behalf of each Holder in connection with all matters relating to this Escrow Agreement and the Merger Agreement. The Representatives shall also have full power and authority to give and receive notices by or on behalf of each Holder. 11.2. The Representatives shall be entitled to reimbursement from the Holders of all reasonable expenses incurred in the performance of its duties as Representatives under this Escrow Agreement and the Merger Agreement. To the extent that expenses of the Representatives remain unreimbursed by the Holders and Escrow Funds remain in the Escrow 7 Account on the Release Date, the reimbursement obligations contained in this Section 11.2 shall be satisfied by the Holders from the Escrow Funds (less, in either case, any Disputed Amounts), as appropriate to the expenses being reimbursed, pro rata from each such Holder based on the Holder's Pro Rata Portion. 11.3. By giving notice to the Representatives in the manner provided by Section 12, a party shall be deemed to have given notice to all of the Holders and any action taken by the Representatives may be considered by any other party to be the action of each such Holder for all purposes, including for all purposes of this Escrow Agreement and the Merger Agreement. In addition, the parties hereto acknowledge and agree that (i) none of the Holders shall be entitled to individually take any action which the Representatives are authorized hereunder to take on behalf of such Holders and (ii) the failure of the Representatives to take any action they are permitted or authorized to take hereunder on behalf of the Holders during the applicable time period in which such action is permitted to have been taken by the Representatives, including, without limitation, providing any Dispute Notice hereunder or under the Merger Agreement, shall be deemed for all purposes to constitute a complete waiver and release by each Holder of the right to individually take any such action. Notwithstanding the foregoing, nothing in this Escrow Agreement shall be construed in any way to create any obligation of the Representatives with respect to the indemnification obligations of the Holders under Section 9.1(b) of the Merger Agreement. 11.4. In the event that a Representative is unable or refuses to serve, the other Representative shall serve alone. In the event that both Representatives are unable or refuse to serve, the Stockholders will promptly notify Tekelec and the Escrow Agent in writing of the designation by the Supermajority Recipients of successors to act as Representatives hereunder. 12. NOTICES AND WRITTEN DIRECTIONS. All notices, requests, demands, and other communications required or permitted under this Escrow Agreement shall be in writing and shall be deemed to have been duly given and made upon being delivered either by courier or fax delivery to the party for whom it is intended and by depositing such notice, postage prepaid, certified or registered mail, return receipt requested, in the United States mail, bearing the address shown in this Section 12 for, or such other address as may be designated in writing hereafter by, such party: If to Tekelec or the Company: 26580 West Agoura Road Calabasas, California 91302 Attention: President Facsimile No.: (818) 880-0176 and Ronald W. Buckly Tekelec 8 26850 West Agoura Road Calabasas, California 91302 Facsimile: (818) 880-0176 with a copy to: J. Mark Klamer and Katherine F. Ashton Bryan Cave LLP One Metropolitan Square, Suite 3600 211 North Broadway St. Louis, Missouri 63102 Facsimile: (314) 259-2020 If to the Representatives: Bessemer Venture Partners V L.P. 1865 Palmer Avenue Suite 104 Larchmont, NY 10538 Attention: Robert P. Goodman and Edmund Colloton Fax: 914 833-9200 and Columbia Capital, L.L.C. 201 North Union Street, Suite 300 Alexandria, VA 22314 Attention: Donald A. Doering Facsimile: 703-519-5870 with a copy to: Nixon Peabody LLP 101 Federal Street Boston, MA 02110 Attention: Jonathan R. Karis Facsimile: 866-375-3459 If to the Escrow Agent: U.S. Bank National Association Attn: Brian J. Kabbes One U.S. Bank Plaza Mail Code: SL-MO-T6CT St. Louis, MO 63101 9 Telephone: (314) 418-3943 Fax: (314) 418-1225 13. TRANSFER OF INTERESTS. The interests of the Holders or the Representatives in the Escrow Funds or the Disbursement Funds and the rights and obligations of the parties hereunder may not be transferred except by operation of law, and will not be represented by any certificate or instrument. Neither the Representatives nor the Holders shall be entitled to withdraw the Escrow Funds or the Disbursement Funds except as provided hereunder or to substitute any other property therefore. 14. LIABILITIES OF TEKELEC, REPRESENTATIVES AND STOCKHOLDERS. Neither the depositing hereunder of the Escrow Deposit nor any of the other provisions of this Escrow Agreement shall directly or indirectly limit or expand any of the liabilities or obligations of any of Tekelec, Taqua, the Representatives or the Holders to any other party under the Merger Agreement. 15. COUNTERPARTS. Counterpart copies of this Escrow Agreement may be signed by all parties and signature pages exchanged by fax or otherwise. The parties intend that counterpart copies signed and exchanged as provided in the preceding sentence shall be fully binding. Counterpart originals of this Escrow Agreement shall be exchanged by U.S. mail or express service at the earliest reasonable date following the exchange of signature pages fax. 16. AMENDMENT; WAIVER. No modification, amendment or waiver of any provision of this Escrow Agreement will be effective unless such modification, amendment or waiver is approved in writing by Taqua, Tekelec, the Representatives, and the Escrow Agent. The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 17. BINDING EFFECT; ASSIGNMENT. This Escrow Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto. 18. HEADINGS. The headings of the various sections of this Escrow Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Escrow Agreement. 19. SEVERABILITY. If any provision of this Escrow Agreement shall be determined to be illegal or unenforceable, the remaining provisions of this Escrow Agreement shall remain in full force and effect, and this Escrow Agreement shall be construed as if the illegal or unenforceable provision were not a part hereof, so long as the remaining provisions of this Escrow Agreement shall be sufficient to carry out the overall intent of the parties as expressed herein. 10 20. GOVERNING LAW. This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law doctrine. 21. FURTHER ASSURANCES. Each party hereto shall perform all other acts and execute and deliver all other documents as may be necessary or appropriate to carry out the purposes and intent of this Escrow Agreement. 22. THIRD PARTY BENEFICIARY.23. Nothing set forth in this Escrow Agreement shall be construed to confer any benefit to any third party who is not a party to this Escrow Agreement. 24. VENUE AND JURISDICTION. Any disputes arising out of, in connection with or with respect to this Escrow Agreement, the subject matter hereof, the performance or non-performance of any obligation hereunder, or any of the transactions contemplated hereby shall be adjudicated as set forth in Section 11.10 of the Merger Agreement. 11 IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first set forth above. TEKELEC By: /s/ PAUL J. PUCINO ---------------------------------- Name: Paul J. Pucino Title: Chief Financial Officer By: /s/ FREDERICK M. LAX ---------------------------------- Name: Frederick M. Lax Title: Chief Executive Officer TAQUA, INC. By: /s/ DONALD W. PRATT, JR. ---------------------------------- Name: Donald W. Pratt, Jr. Title: Chief Financial Officer and Treasurer REPRESENTATIVES COLUMBIA CAPITAL, L.L.C., as a Representative By: /s/ DONALD A. DOERING ---------------------------------- Name: Donald A. Doering Title: Chief Financial Officer BESSEMER VENTURE PARTNERS V L.P., as a Representative By: Deer V & Co. LLC, General Partner/ Managing Member By: J. EDMUND COLLOTON ---------------------------------- Name: J. Edmund Colloton Title: Manager 12 U.S. Bank National Association By: /s/ BRIAN J. KAPPAS ---------------------------------- Name: Brian J. Kappas Title: Vice President 13 EX-99.1 5 v97932exv99w1.txt EXHIBIT 99.1 Exhibit 99.1 TEKELEC COMPLETES ACQUISITION OF TAQUA CALABASAS, CA (APRIL 8, 2004)... TEKELEC (NASDAQ:TKLC) TODAY ANNOUNCED THAT IT HAS COMPLETED ITS ACQUISITION OF TAQUA. Fred Lax, President and CEO of Tekelec, commented, "We have been very pleased by customer reaction to the Taqua announcement. The acquisition brings to Tekelec a market-leading Class 5 packet switching solution optimized for the small switch service provider market. In terms of the RBOC opportunity in the U.S, over 50% of their Class 5 switches support less than 5,000 customer lines. On a global basis, approximately 90% of wireline switching systems are Class 5 or end-office, and of these Class 5 switches, more than 70% serve less than 5,000 lines, so this is a significant global market opportunity. "The Taqua platform superbly complements our existing SanteraOne platform and allows us to offer our customers a next-generation switching portfolio that includes Class 4, Class 5, line access, wireless gateways and applications, and business voice solutions. "Lastly, we have made significant progress on transition and integration planning activities, which will allow us to complete the Taqua integration very quickly. This will allow us to begin working effectively as an integrated team to rapidly serve our customers' needs." EMPLOYMENT INDUCEMENT STOCK OPTIONS In connection with the acquisition, nine Taqua officers and key employees were granted employment inducement stock options to purchase a total of 515,000 shares of Tekelec common stock, pursuant to NASDAQ Marketplace Rule 4350 (i) (1) (A) (iv). Of this amount, options to purchase 100,000 shares were granted to Charles Vogt, President and CEO of Taqua. The number of shares involved in these grants amounts to less than 1% of the outstanding common shares of Tekelec. All option grants have an exercise price equal to Tekelec's closing price on April 8, 2004, and will vest over a four-year period. ABOUT TEKELEC Tekelec is a leading developer of telecommunications signaling solutions, packet-telephony infrastructure, network monitoring technology, and value-added applications. Tekelec's innovative solutions are widely deployed in traditional and next-generation wireline and wireless networks and contact centers worldwide. Corporate headquarters are located in Calabasas, California, with research and development facilities and sales offices throughout the world. For more information, please visit www.tekelec.com. FORWARD-LOOKING STATEMENTS Certain statements made in this news release are forward looking, reflect Tekelec's current intent, belief or expectations and involve certain risks and uncertainties. There can be no assurance that Tekelec's actual future performance will meet Tekelec's expectations. As discussed in Tekelec's 2003 Annual Report on Form 10-K and other filings with the SEC, Tekelec's future operating results are difficult to predict and subject to significant fluctuations. Factors that may cause future results to differ materially from Tekelec's current expectations include, among others: overall telecommunications spending, changes in general economic conditions, the timing of significant orders and shipments, the lengthy sales cycle for Tekelec's products, the timing of the convergence of voice and data networks, the ability of carriers to utilize excess capacity of signaling infrastructure and related products in the network, the capital spending patterns of customers, the dependence on wireless customers for a significant percentage and growth of Tekelec's revenues, the success or failure of strategic alliances or -2- acquisitions, the timely development and introduction of new products and services, product mix, the geographic mix of Tekelec's revenues and the associated impact on gross margins, market acceptance of new products and technologies, carrier deployment of intelligent network services, the ability of our customers to obtain financing, the level and timing of research and development expenditures, regulatory changes, and the expansion of Tekelec's marketing and support organizations, both domestically and internationally. Tekelec undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. -3- -----END PRIVACY-ENHANCED MESSAGE-----