Common use of Distributions and Claims Clause in Contracts

Distributions and Claims. (a) Upon obtaining knowledge of any state of facts, claim or demand which has given rise to a claim for indemnification hereunder (referred to herein as an "Indemnification Claim"), the party seeking indemnification (the "Indemnified Party") shall give written notice of such state of facts, claim or demand, specifying, if applicable, the section of the Merger Agreement containing the representation and warranty giving rise to the claim or demand and in reasonable detail all other relevant facts pertaining to the Indemnification Claim ("Notice of Claim") to the party from whom indemnification is sought (the "Indemnifying Party") and to the Indemnification Escrow Agent. In the event that a Notice of Claim is given by Acquiror after the date all Indemnification Escrow Shares have been delivered to Acquiror in satisfaction of other Indemnification Claims, such Notice of Claim shall be delivered only to the Shareholders. No party shall be entitled to give a Notice of Claim after the Indemnification Termination Date or the Audit Date, as the case may be, except with respect to (i) any matter which was the subject of a Notice of Claim given prior to such date or (ii) a claim by Acquiror pursuant to Section 3(d), and then only within the time period specified in such Section 3(d). The Notice of Claim shall set forth the amount of the Adverse Consequences suffered, or the Indemnified Party's good faith, non-binding estimate of the Adverse Consequences which may be suffered, by the Indemnified Party and in the case of a Notice of Claim delivered by the Acquiror after the date all Indemnification Escrow Shares have been delivered to the Acquiror in satisfaction of other Indemnification Claims, the amount to be paid by the Shareholders. Subject to the applicable survival periods set forth in Section 2 hereof, no failure or delay by the Indemnified Party in the giving of a Notice of Claim shall reduce or otherwise affect the Indemnified Party's right to indemnification hereunder except to the extent that the Indemnifying Party has been prejudiced thereby. The date of a Notice of Claim shall be deemed to be: (x) the fourth business day after the date of the postmark on the registered or certified mail (postage prepaid, return receipt requested) containing the Notice of Claim; (y) if the Notice of Claim is personally delivered, the date of such personal delivery; (z) if the Notice of Claim is sent by overnight courier, the first business day following the deposit of such Notice of Claim with such courier.

Distributions and Claims. (ai) Upon obtaining knowledge PairGain shall provide to the Escrow Agent a copy of any state each Notice of facts, claim or demand which has given rise Action and Claim Notice delivered to a claim for indemnification hereunder (referred the Stockholder Representative pursuant to herein as an "Indemnification Claim"), the party seeking indemnification (the "Indemnified Party") shall give written notice of such state of facts, claim or demand, specifying, if applicable, the section Section 6.6 81 of the Merger Agreement containing no later than the representation and warranty giving rise date on which such Notice of Action or Claim Notice is sent to the claim or demand Stockholder Representative. Each Notice of Action and in reasonable detail all other relevant facts pertaining Claim Notice delivered to the Indemnification Claim ("Escrow Agent shall include a certification that PairGain has mailed a copy of such Notice of Claim") Action or Claim Notice to the party from whom indemnification is sought (Stockholder Representative as provided in Section 6.6 of the "Indemnifying Party") Merger Agreement. No claim shall be considered to be an indemnifiable claim pursuant to Section 6 of the Merger Agreement or this Escrow Agreement unless the amount of such claim exceeds $7,500, and to the Indemnification Escrow Agent. In the event that a no Notice of Claim is or Claim Notice shall be given by Acquiror after with respect to a claim of less than $7,500. A Notice of Claim or Claim Notice shall be given whether or not the date all Indemnification basket of $200,000 has been reached under Section 6.4 of the Merger Agreement (hereinafter referred to as the "Basket"). PairGain shall also give the Escrow Agent and the Stockholder Representative notice of when the Basket has been reached and when the Escrow Shares have been delivered exhausted, according in each case to Acquiror the Notices of Action and Claim Notices submitted by PairGain without regard to the existence of any Challenged Claim (as defined below), which notice may be contained in satisfaction of other Indemnification Claims, such a Notice of Action or Claim Notice. PairGain shall be delivered only to the Shareholders. No party shall not be entitled to give a Notice of Action or Claim Notice after the Indemnification Termination Date or the Audit Date; provided, as the case may be, except any dispute with respect to (i) any whether a matter which was the subject of a prior Notice of Action or Claim given prior Notice shall be submitted to such date or (ii) a claim by Acquiror pursuant to arbitration in accordance with Section 3(d), and then only within 6.8 of the time period specified in such Section 3(d)Merger Agreement. The Notice of Action or Claim Notice shall set forth the identity of the Indemnifying Party or Parties and of the Indemnified Party or Parties, a brief description of the nature of the claim, the maximum amount of the Adverse Consequences loss, expense, liability or other damage suffered, or the Indemnified Party's good faith, non-binding estimate of the Adverse Consequences which may be suffered, by the Indemnified Party, and the number of Escrow Shares with a value equal to such amount, rounded up to the next number of whole shares and shall indicate the applicable sections of the Merger Agreement under which the claim for indemnity arises. (ii) The Stockholder Representative shall provide to the Escrow Agent a copy of each Contest Notice delivered to an Indemnified Party and pursuant to Section 6.6(c) of the Merger Agreement no later than the date on which such Contest Notice is sent to the Indemnified Party. Each Contest Notice delivered to the Escrow Agent shall include a certification that the Stockholder Representative has mailed a copy of such Contest Notice to the Indemnified Party as provided in Section 6.6(c) of the case Merger Agreement. A Claim or Action (or that portion of a Claim or Action) which the Stockholder Representative agrees is the responsibility of the Avidia Stockholders pursuant to a Notice of Contest is referred to as an "Accepted Claim." A Claim delivered by or Action (or that portion of a Claim or Action) (A) to which the Acquiror after Stockholder Representative objects pursuant to a Notice of Contest, or (B) as to which the date all Stockholder Representative assumes the defense and reserves its rights pursuant to Section 6.6(c) of the Merger Agreement is referred to as a "Challenged Claim." (iii) Subject to Section 4(a)(iv) below, the Stockholder Representative and PairGain shall submit the matter of a Challenged Claim to arbitration in accordance with Section 6.8 of the Merger Agreement. PairGain shall provide to the Escrow Agent written notice of a Resolution (a "Notice of Resolution"), setting forth the amount of Indemnification Escrow Shares have been Damages, if any, awarded to PairGain. Each Notice of Resolution delivered to the Acquiror in satisfaction Escrow Agent shall include a certification that PairGain has mailed a copy of other Indemnification Claims, the amount to be paid by the Shareholders. Subject such Notice of Resolution to the applicable survival periods set forth in Section 2 hereof, no failure or delay by the Indemnified Party in the giving of a Notice of Claim shall reduce or otherwise affect the Indemnified Party's right to indemnification hereunder except to the extent that the Indemnifying Party has been prejudiced therebyStockholder Representative. The Stockholder Representative shall have fifteen (15) days from the date of a Notice of Resolution in which to object thereto. Any 82 objection shall be delivered to PairGain and the Escrow Agent and shall contain a certification that a copy of such objection has been given to both such parties. (iv) In the event that a Notice of Contest provides that the Stockholder Representative elects to assume the defense of an Action subject to a reservation of rights as to responsibility for any Indemnification Damages, then upon resolution of the underlying action, the Stockholder Representative shall either acknowledge responsibility for any resulting Indemnification Damages, and such amount shall be paid as provided in Section 4(b)(i) below, or object to responsibility for Indemnification Damages and thereupon the parties shall submit the matter to arbitration in accordance with Section 6.8 of the Merger Agreement (and the underlying indemnity claim shall be deemed a Challenged Claim). (i) Upon receipt of a Notice of Action or Claim Notice from PairGain at any time after the Basket has been satisfied and prior to the Indemnification Termination Date, and if the Escrow Agent receives (A) a Notice of Contest in response thereto stating that the Stockholder Representative agrees that the Avidia Stockholders are responsible for the Action or Claim covered by the Notice of Action or Claim Notice, or (B) a Notice of Contest objecting to the Notice of Action or Claim Notice, followed by a Notice of Resolution as to which the Stockholder Representative does not object as provided in Section 4(b)(iii) below, the Escrow Agent shall deliver to PairGain, as promptly as practicable, Escrow Shares having a value (as certified to the Escrow Agent and the Stockholder Representative by PairGain) equal to the amount of Indemnification Damages set forth in the Notice of Action or Claim Notice and agreed to in the Notice of Contest or specified in the Notice of Resolution, as applicable. (ii) Pursuant to Section 6.9 of the Merger Agreement, PairGain may instruct the Escrow Agent in writing to deliver to PairGain, or to liquidate on PairGain's behalf and deliver to PairGain, at any time after April 9, 1997, up to [Reimbursable Amount] Escrow Shares. PairGain agrees to provide a copy of such instruction to the Stockholder Representative. (iii) Escrow Shares to be delivered by the Escrow Agent on behalf of each Avidia Stockholder shall be determined based on such Avidia Stockholder's Proportionate Percentage. Within 10 business days after any payment of an indemnification claim hereunder, or the delivery or liquidation of Escrow Shares pursuant to Section 4(b)(ii), and as and when required by Section 4(b)(v), PairGain will deliver to the Escrow Agent and the Stockholder Representative a revised Exhibit B, which will be attached in lieu of the then existing Exhibit B. The Escrow Agent may rely upon such revised Exhibit B unless and until the Stockholder Representative delivers an objection in writing, which objection shall be made within 30 days of receipt of the revised Exhibit B. Any disputes regarding Exhibit B will be resolved in the manner provided in Section 6.8 of the Merger Agreement. (iv) The Escrow Agent shall retain in escrow after the Indemnification Termination Date the number of Escrow Shares (rounded up to the nearest whole share) having a value (determined as provided in Section 3(a)) equal to the dollar amount set forth in the applicable Notices of Action or Claim Notices for all Challenged Claims ("Pending 83 Indemnification Claims"). The "dollar amount" of any Pending Indemnification Claim shall be deemed to be: (x) calculated assuming the fourth business day after the date of the postmark on the registered or certified mail (postage prepaid, return receipt requested) containing maximum possible exposure set forth in the Notice of Claim;Action or Claim Notice. Each Notice of Action or Claim Notice shall state on its face the maximum possible exposure claimed thereunder, on which statement the Escrow Agent may conclusively rely. (yv) As promptly as practicable after the Indemnification Termination Date, the Escrow Agent shall deliver the stock certificate evidencing the Escrow Shares to PairGain's stock transfer agent (the "Transfer Agent") in exchange for: (a) stock certificates for and in the name of each Avidia Stockholder with respect to which Escrow Shares are then attributable in accordance with Exhibit B (as revised, if applicable); provided, however, that the Escrow Agent shall exclude from such number of Escrow Shares the number of Escrow Shares to be retained by the Escrow Agent pursuant to Section 4(b)(iv) above, and (b) if applicable, a new stock certificate in the Notice name of Claim is personally deliveredthe Escrow Agent representing the aggregate number of Escrow Shares to be retained by the Escrow Agent pursuant to Section 4(b)(iv) above. Upon receipt of such stock certificates from the Transfer Agent, the Escrow Agent will promptly deliver such stock certificates to the Avidia Stockholders at such addresses as the Stockholder Representative shall direct, and the Escrow Agent will retain the new stock certificate in its name pending resolution of the Pending Indemnification Claims. Notwithstanding the foregoing, PairGain may provide written notice to the Escrow Agent, with a copy to the Stockholder Representative, prior to the Indemnification Termination Date if any Assumed Warrants have not been exercised and shall specify the number of Escrow Shares attributable to such unexercised Assumed Warrants (the "Unexercised Warrant Shares"). PairGain shall attach to such notice a revised Exhibit B, reducing the number of Escrow Shares held for the applicable Avidia Stockholder to reflect the elimination of the Unexercised Warrant Shares. If at any time after such notice and prior to the Indemnification Termination Date any such unexercised Assumed Warrants are exercised, PairGain shall amend such notice in a writing provided to the Escrow Agent and the Stockholder Representative, stating the revised number of Unexercised Warrant Shares and attaching a further revised Exhibit B. The Escrow Agent shall obtain from the stock transfer agent and deliver to PairGain a separate certificate for the Unexercised Warrant Shares. (c) Escrow Shares that are not distributed to Avidia Stockholders on the Indemnification Termination Date because they have been retained pursuant to Section 4(b)(iv) shall be distributed (as appropriate) as promptly as practicable after disposition of each Pending Indemnification Claim. Upon the date after which the last of all Pending Indemnification Claims has been finally determined and the final distribution has been made to PairGain, the balance of all Escrow Shares shall be delivered to Avidia Stockholders in accordance with Section 4(b)(v). (d) Notwithstanding any provision of this Agreement or the Merger Agreement to the contrary, no Escrow Shares may be liquidated, sold, assigned, transferred, conveyed, encumbered or disposed of, or released from escrow until such time as PairGain has publicly announced financial results covering at least thirty (30) days of post-closing combined operations of Avidia and PairGain. PairGain shall give prompt written notice of the announcement of such personal delivery; (z) if financial results to the Notice of Claim is sent by overnight courier, Escrow Agent and the first business day following the deposit of such Notice of Claim with such courier.Stockholder Representative. 84

Distributions and Claims. (a) Upon obtaining knowledge of any state of facts, claim or demand which has given rise to to, or could reasonably give rise to, a claim for indemnification hereunder (referred to herein as an "Indemnification Claim"), Parent or the party seeking indemnification Surviving Corporation, as applicable (the "Indemnified Party") ), shall promptly give written notice of such state of facts, claim or demand, specifying, if applicable, the section of the Merger Agreement containing the representation and warranty giving rise to the claim or demand and in reasonable detail all other relevant facts pertaining to the Indemnification Claim ("Notice of Claim") to the party from whom indemnification is sought (the "Indemnifying Party") as described below. The Indemnified Party shall give the Notice of Claim to either (i) the Indemnification Representative and to the Indemnification Escrow Agent. In Agent if the event that a Notice of Claim is given by Acquiror prior to the earlier of (x) one (1) year from the Effective Time and (y) publication of Parent's audited financial results for the year ended December 31, 1999 (the "Escrow Termination Date") or (ii) the Company Shareholder(s) against whom the Parent is asserting the Indemnification Claim if the Notice of Claim is given after the date all Indemnification Escrow Shares have been delivered to Acquiror Parent or the Surviving Corporation in satisfaction of other Indemnification Claims, such Notice of Claim . Parent shall be delivered only give written notice to the ShareholdersIndemnification Escrow Agent and the Indemnification Representative of the publication of Parent's audited financial results for the year ended December 31, 1999. No party Such notice shall also set forth the Escrow Termination Date. Parent or the Surviving Corporation, as applicable, shall not be entitled to give a Notice of Claim after the Indemnification Termination Date or the Audit Date, as the case may be, except with respect to (i) any matter which was the subject of a Notice of Claim given prior to such date or (ii) a claim by Acquiror pursuant to Section 3(d), and then only within the time period specified in such Section 3(d)date. The Notice of Claim shall set forth the amount of the Adverse Consequences loss, expense, liability or other damage suffered, or the Indemnified Party's good faith, non-binding estimate of the Adverse Consequences which may be suffered, by the Indemnified Party and Party, and, in the case of a Notice of Claim delivered by the Acquiror after the date all Indemnification Escrow Shares have been delivered pursuant to the Acquiror in satisfaction of other Indemnification Claimsclause (ii) above, the amount to be paid by the ShareholdersCompany Shareholder(s). Subject So long as the Notice of Claim is given by the Indemnified Party prior to the applicable survival periods set forth in Section 2 hereofIndemnification Termination Date, no failure or delay by the Indemnified Party in the giving of a Notice of Claim shall reduce or otherwise affect the Indemnified Party's right to indemnification hereunder except to the extent that the Indemnifying Party has been prejudiced thereby. The date of a Notice of Claim shall be deemed to be: (x) the fourth business day after the date of the postmark on the registered or certified mail (postage prepaid, return receipt requested) containing the Notice of Claim; (y) if the Notice of Claim is personally delivered, the date of such personal delivery; (z) if the Notice of Claim is sent by overnight courier, the first business day following the deposit of such Notice of Claim with such courier.