EXHIBIT 2.2
ESCROW AGREEMENT
This Escrow Agreement (this "Escrow Agreement") is made and entered into as
of January 18, 2001 (the "Effective Time") by and among TranSwitch Corporation,
a Delaware corporation ("Parent"); the undersigned security holders
(collectively the "Holders") of ADV Engineering, a corporation organized under
the laws of France ("ADV"); Xxxxxx Xxxxxxxx, as the representative of the
Holders (the "Indemnification Representative"); and State Street Bank and Trust
Company, as escrow agent of the Escrow Shares (as defined below) (the "Escrow
Agent").
A. TranSwitch III, Inc., a Delaware corporation and wholly owned
subsidiary of Parent ("Merger Sub"), Parent, ADV and certain stockholders of ADV
have entered into a Share Purchase Agreement dated as of January 18, 2001 (the
"Share Purchase Agreement") setting forth certain terms and conditions pursuant
to which TranSwitch III, Inc. shall acquire all of the outstanding stock of ADV
and ADV shall become a wholly-owned subsidiary of TranSwitch III, Inc. (the
"Merger").
B. Pursuant to Clause 3 of the Share Purchase Agreement, Parent Common
Stock (as defined therein) is to be issued to the Holders.
C. The Share Purchase Agreement provides that, on the date that is one (1)
year and thirty (30) days from the Effective time (the "Deposit Date"), an
amount equal to the lesser of (i) the aggregate amount of claims made under the
Warranty Agreement (a) which occurred prior the date that is one (1) year from
the Effective Time (the "Closing Date Anniversary"); and, (b) for which a claim
was made prior to the Deposit Date (a "Claim" or "Claims"); or (ii)
USD$1,000,000 represented either by Parent Common Stock or cash (as defined
below) pursuant to the Merger will be placed in an escrow account to secure
certain indemnification obligations of the Holders to Parent under the Share
Purchase Agreement and the Warranty Agreement on the terms and conditions set
forth therein and herein.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
covenants and agreements contained in the Share Purchase Agreement and in this
Escrow Agreement, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW ACCOUNT
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1.1 Deposit of Shares.
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(a) Pursuant to the Share Purchase Agreement, if any Claims have
been made prior to the Deposit Date, Parent shall deposit on the Holders' behalf
with the Escrow Agent in either cash or shares of Parent Common Stock an amount
equal to the lesser of (i) the aggregate amount of such Claims; or (ii)
USD$1,000,000 (collectively the "Initial Escrow Funds"). If such deposit is made
in cash (in whole or in part) such cash shall be paid to the Escrow Agent in
immediately available funds; and if such deposit is made in Parent Common Stock
such Parent Common Stock shall be valued (for purposes of determining the amount
of shares to be deposited, any fractional share being rounded) according to the
Share Value as defined in Section 1.1(b) below, and shall be deposited by
delivery to the Escrow Agent of a single stock certificate registered in the
name of "Embassy & Co."
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as nominee for the Escrow Agent; and, in either case, such deposit shall be
accompanied by written notice to the Escrow Agent from the Parent identifying
such deposit as the Initial Escrow Funds being delivered for deposit under this
Agreement and confirming that the amount thereof is in accordance with this
Agreement and the applicable provisions of the Share Purchase Agreement. If such
deposit is made in shares of Parent Common Stock, any shares of Parent Common
Stock that result from any share dividend, reclassification, stock split,
subdivision or combination of shares, recapitalization, merger or other events
made with respect to any Escrow Funds held in escrow under this Escrow Agreement
("Additional Escrow Shares") shall be issued in the name of the Escrow Agent or
its nominee, delivered to the Escrow Agent and shall become part of the Escrow
Funds and be held by the Escrow Agent in accordance with this Escrow Agreement;
and if such Initial Escrow Funds deposit is made in cash, any investment
earnings from the investment of such cash (or the reinvestment of any investment
earnings thereon) pursuant to Section 1.1(c) hereof (collectively the
"Additional Escrow Interest") and together with any Additional Escrow Shares
(collectively, "Additional Escrow Funds"), shall be paid to the Escrow Agent and
shall become part of the Escrow Funds and be held by the Escrow Agent in
accordance with this Agreement. Unless otherwise indicated, as used in this
Escrow Agreement, the term "Escrow Funds" includes the Initial Escrow Funds and
any Additional Escrow Funds. The Escrow Agent agrees to accept delivery of the
Escrow Funds and to hold such Escrow Funds in escrow in accordance with this
Escrow Agreement and to release the Escrow Funds out of escrow as provided in
this Escrow Agreement.
In no event shall the Escrow Agent be under any duty or obligation to
monitor, determine or compel compliance by the Parent with the terms hereof, or
to determine whether the requisite amount has been deposited hereunder, or to
give any notice to any person with respect to such deposit (or lack thereof).
The Escrow Agent shall have no responsibility for the genuineness or validity,
of any share certificate delivered to it hereunder.
(b) For all purposes under this Agreement (including, without
limitation, for determining the amount of Parent Common Stock to be deposited
pursuant to Section 1.1(a), if the Parent elects to make such deposit in Parent
Common Stock, or for purposes of determining the number of shares of Parent
Common Stock to be distributed in any instance pursuant to the terms of this
Agreement), the Parent Common Stock shall be assumed by the Escrow Agent to have
a per share value equal to the value provided to the Escrow Agent by the Parent
pursuant to the terms of Section 2.1.(b) hereof (sometimes referred to herein
as, "Value").
(c) If the Escrow Agent shall have received specific written
investment instruction from Parent (which shall include instruction as to term
to maturity, if applicable), on a timely basis, the Escrow Agent shall invest
the Escrow Funds in the form of available cash held in escrow in Eligible
Investments (as hereinafter defined), pursuant to and as directed in such
instruction. For purposes hereof, "Eligible Investments" shall mean (i)
obligations issued or guaranteed by the United States of America or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof); (ii) obligations (including
certificates of deposit and banker's acceptances) of any domestic commercial
bank having capital and surplus in excess of $500,000,000; (iii) repurchase
obligations for underlying securities of the type described in clause (i); and
(iv) investment in the Escrow Agent's "Insured Money Market Fund" ("IMMA"). If
otherwise qualified, as described above, obligations of the Escrow Agent or any
of its affiliates shall qualify as Eligible Investments. Absent its timely
receipt of such specific written investment instruction from Parent, the Escrow
Agent shall have no obligation or duty to invest (or otherwise pay
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interest on) the Escrow Funds; provided, however, that in the event the Escrow
Agent shall not have received such written investment instruction the Escrow
Agent shall be authorized to invest any of the Escrow Funds in the form of
available cash in the Escrow Agent's IMMA until such cash investment and
Additional Escrow Interest, if any, shall be credited to, and shall become a
part of, the Escrow Funds (and any losses on such investments shall be debited
to the Escrow Funds). The Escrow Agent shall have no liability for any
investment losses, including without limitation any market loss on any
investment liquidated prior to maturity in order to make a payment required
hereunder.
(d) The Parent, the Holders, ADV and the Indemnification
Representative (sometimes collectively referred to herein as the "Interested
Parties") agree that, for tax reporting purposes, all interest or other income
earned from the investment of the Escrow Funds in any tax year shall (i) to the
extent such interest or other income is distributed by the Escrow Agent to any
person or entity pursuant to the terms of this Agreement during such tax year,
be reported as allocated to such person or entity, and (ii) otherwise shall be
reported as allocated to each Holder in proportion to their respective interests
in the Escrow Funds.
(e) Certification of Taxpayer Identification Number. The
Interested Parties hereby agree to provide the Escrow Agent with a certified tax
identification number as of the Effective Time by signing and returning a Form
W-9 (or Form W-8 BEN, in case of non-U.S. persons) to the Escrow Agent upon the
execution and delivery of this Agreement. The Interested Parties understand
that, in the event that (i) the Form W-9 (or W-8 BEN, if applicable) is not
provided to the Escrow Agent and (ii) their tax identification numbers are not
otherwise certified to the Escrow Agent in a form acceptable to the Escrow
Agent, the Internal Revenue Code, as amended from time to time, may require
withholding of a portion of any interest or other income earned on the
investment of the Escrow Property.
(f) Holders. A schedule showing the names of the Holders with the
address of each such Holder and the percentage shareholding of each Holder in
ADV set forth opposite said Holder's name is attached hereto as Exhibit A.
If no Claims have been made prior to the Deposit Date, there will be no
funds deposited with the Escrow Agent and this Agreement shall terminate in
accordance with Section 10 herein.
1.2 Dividends; Voting and Rights of Ownership. If such deposit of
the Escrow Funds is made in Parent Common Stock, any cash dividends, dividends
payable in property or other distributions of any kind (except for Additional
Escrow Funds) made in respect of the Escrow Funds shall be distributed by Parent
to the Holders on a pro rata basis. The Holders shall have the right to direct
the Escrow Agent in writing as to the exercise of any voting rights pertaining
to any shares of Parent Common Stock representing the Escrow Funds. Such
direction shall be received by the Escrow Agent at least three (3) Business Days
prior to the date on which the Escrow Agent is directed therein to take such
action, and the Escrow Agent shall comply with or cause its nominee to execute
any such written voting instructions. In the absence of such instructions, the
Escrow Agent shall not vote any of shares held in the Escrow Funds. The Escrow
Agent shall be under no obligation to preserve, protect or exercise voting or
other rights in the Escrow Funds, and shall be responsible only for reasonable
measures to maintain the physical safekeeping thereof, and otherwise to perform
and observe such duties on its part as are expressly set forth in this
Agreement, except that it shall, at the written request of the Indemnification
Representative given to the Escrow Agent at least three (3) business days prior
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to the date on which the Escrow Agent is requested therein to take any action,
deliver to the Holders a proxy or other instrument in the form supplied to it by
the Holders for voting or otherwise exercising any right of consent with respect
to any of the Escrow Funds held by it hereunder, to authorize therein the
Holders to exercise such voting or consent authority in respect of the Escrow
Funds. The Escrow Agent shall not be responsible for forwarding to any party,
notifying any party with respect to, or taking any action with respect to, any
notice, solicitation or other document or information, written or otherwise,
received from any issuer or other person with respect to the Escrow Funds,
including but not limited to, proxy material, tenders, options, the pendency of
calls and maturities and expiration of rights. While the Escrow Funds remain in
the Escrow Agent's possession pursuant to this Escrow Agreement, the Holders
shall retain and shall be able to exercise all other incidents of ownership of
the Escrow Funds that are not inconsistent with the terms and conditions hereof.
1.3 No Encumbrance. None of the Escrow Funds or any beneficial
interest therein may be pledged, sold, assigned or transferred, other than by
operation of law. Written notice of any assignment or transfer shall be given to
the Escrow Agent and Parent in writing, and no such assignment or transfer shall
be valid until such notice is received by the Escrow Agent.
2. RESOLUTION OF CLAIMS
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2.1 Indemnification Obligations; Share Value.
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(a) The Escrow Funds shall serve as a source (but not the only
source) of payment for the indemnity obligations of the Holders which arise
prior to the Closing Date Anniversary under Clause 4 of the Share Purchase
Agreement and Clause 3 of the Warranty Agreement, except as otherwise provided
in said Share Purchase Agreement or Warranty Agreement. Payment for any amount
determined as provided below to be owing to Parent under such indemnity
obligations under the Share Purchase Agreement or the Warranty Agreement
("Damages") and any award of attorneys' fees and charges owing to Parent
pursuant to Section 2.3(c)(iv) or 12.2 of this Agreement (a "Prevailing Party
Award") shall be made by the release of Escrow Funds to Parent (each such
payment, an "Escrow Adjustment"), by the Escrow Agent upon receipt by the Escrow
Agent of a request in writing from Parent. Such request shall be received by the
Escrow Agent no less than three (3) business days prior to the date on which the
Escrow Agent is required to take any action. The Escrow Agent shall be entitled
to rely conclusively on the request without any duty to verify the same and the
Escrow Agent shall not be liable for any action or omission in connection with
such request. By the execution of this Escrow Agreement, each of the Holders
agrees to be bound by the indemnification provisions set forth in Clause 4 of
the Share Purchase Agreement and in the Warranty Agreement and confirms that the
issuance of the Escrow Funds pursuant to the Share Purchase Agreement is subject
to this Escrow Agreement. Notwithstanding anything to the contrary herein,
Parent shall not be entitled to receive payment of any portion of a Prevailing
Party Award which is already a part of Damages (i.e., there shall be no double
payment of legal fees). Upon joint written instructions from the Parent and
Indemnification Representative to the Escrow Agent to make any Escrow Adjustment
pursuant to Sections 2.3(a),(b),(c)(iv), 3.2 or 12.2, in writing, the Parent and
Indemnification Representative shall determine and certify to the Escrow Agent
the amount of any Escrow Adjustment, and to identify that portion of the Escrow
Adjustment which constitutes Damages and that portion of the Escrow Adjustment
which constitutes a Prevailing Party Award, to the extent applicable. Any Escrow
Adjustments and corresponding release to Parent of Escrow Funds shall be made in
proportion to each
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of the Holders' interest in the Escrow Funds as of the date or dates specified
and the manner provided for in this Escrow Agreement, which percentage interests
shall be certified in writing to the Escrow Agent. Each Escrow Adjustment to the
Escrow Funds shall be made by the release by the Escrow Agent to Parent of
Escrow Funds having an aggregate value equal to the Damages and any Prevailing
Party Award, and if the Escrow Funds is funded with shares of Parent Common
Stock, with the per share value of such shares being based, for all purposes
under this Escrow Agreement, on the Average Price as defined in the Share
Purchase Agreement (adjusted for any share dividend, reclassification, stock
split, subdivision or combination of shares, recapitalization, merger or other
events) notwithstanding any changes in market value of Parent Common Stock after
the Closing Date, as certified to the Escrow Agent by Parent.
(b) In any circumstance in which the Escrow Agent is required to
make a determination of per share value of the Escrow Shares in order to perform
under or administer this Agreement, the Escrow Agent shall be entitled to
request Parent to determine and certify to the Escrow Agent the per share value
of any such Escrow Funds, and Parent shall promptly provide such written
certification to the Escrow Agent, with a copy to the Indemnification
Representative; provided, however, that in the case of any Contested Claim
pursuant to Section 2.3(b) which is settled, the Parent agrees that it shall
value such shares in accordance with the terms of the proviso appearing in the
sixth sentence of Section 2.3(b) hereof. In no instance shall the Escrow Agent
be obligated to determine Parent's compliance with the foregoing or otherwise
recalculate or investigate its determination of the value of the Parent Common
Stock. The Escrow Agent shall be entitled to rely conclusively upon any such
certification of per share value without any duty to verify or recalculate the
same, and the Escrow Agent shall not be liable for any action or omission of, or
delay on the part of, Parent in such connection. Notwithstanding any term hereof
to the contrary, in any such instance, the Escrow Agent shall be entitled to
refrain from taking any action otherwise required hereunder (and which requires
a determination of per share value), without liability on its part, until it is
provided with notice in accordance with this Agreement. In lieu of releasing any
fractional shares from the Escrow Funds, any fraction of a released share of
Escrow Funds that would otherwise be released shall be rounded to the nearest
whole share of Parent Common Stock in the Escrow Funds.
2.2 Notice of Claims. Promptly after the receipt by Parent of notice
or discovery of any claim, damage, or legal action or proceeding giving rise to
indemnification rights under the Share Purchase Agreement or the Warranty
Agreement, after giving effect to the aggregate minimum claims of USD$30,000, as
provided in Clause 3 of the Warranty Agreement (a "Claim"), Parent shall give
the Indemnification Representative written notice of such Claim and shall
provide a copy of such notice to the Escrow Agent. Each notice of a Claim by
Parent (a "Notice of Claim") shall be in writing and shall be delivered on or
before the Deposit Date . If such Notice of Claim is made prior to the Deposit
Date, the Escrow Agent shall hold such Notice of Claim pending the deposit of
the Escrow Funds into the Escrow on the Deposit Date and such Claim shall
thereafter be governed by this Escrow Agreement.
2.3 Resolution of Claims. In the event that Claims exist as of the
Deposit Date and the Escrow Funds are therefore deposited with the Escrow Agent,
any Notice of Claim received by the Indemnification Representative and the
Escrow Agent pursuant to Section 2.2 above shall be resolved as follows:
(a) Uncontested Claims. In the event that the Indemnification
Representative does not contest a Notice of Claim (an "Uncontested Claim") in
writing within thirty (30) calendar days after receipt by the Escrow Agent of
such Notice of Claim, as provided below in Section 2.3(b),
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Parent may deliver to the Escrow Agent at the expiration of the thirty (30)
calendar days, with a copy to the Indemnification Representative, a written
demand by Parent (a "Parent Demand") stating that a Notice of Claim has been
given as required in this Escrow Agreement and that no notice of contest has
been received by the Escrow Agent from the Indemnification Representative during
the period specified in this Escrow Agreement, and further setting forth the
proposed Escrow Adjustments to be made in accordance with this Section 2.3(a).
Within thirty (30) calendar days after receipt by the Escrow Agent of the Parent
Demand, the Indemnification Representative may object by a written notice
delivered to Parent and the Escrow Agent to the computations or other
administrative matters relating to the proposed Escrow Adjustments (but may not
object to the validity or amount of the Claim previously disclosed in the Notice
of Claim and not previously timely objected to under paragraph (b)), whereupon
the Escrow Agent shall not make any of the Escrow Adjustments until the later
of: (i) the date that is the Deposit Date; (ii) Receipt by the Escrow Agent of
written notice from Parent and the Indemnification Representative setting forth
agreed Escrow Adjustments, or (iii) resolution of the matter as provided in
Sections 2.3(b) and 2.3(c). Upon satisfaction of the foregoing, the Escrow
Agent, as directed in writing by Parent, and Parent shall promptly take all
steps to release the final Escrow Adjustments.
(b) Contested Claims. In the event that the Indemnification
Representative gives written notice to Parent and the Escrow Agent contesting
all or a portion of a Notice of Claim (a "Contested Claim") within the 30-day
period provided above, (i) matters that are subject to third party claims
against Parent or ADV in a litigation or arbitration shall await the final
decision, award or settlement of such litigation or arbitration, and (ii)
matters that arise between Parent on the one hand, and ADV and/or the Holders on
the other hand regarding performance, non-performance and/or breach under and/or
of the Share Purchase Agreement or the Warranty Agreement shall be settled in
accordance with Clause 9.1 of the Share Purchase Agreement, Clause 5 of the
Warranty Agreement, and Section 2.3(c) below ("Arbitrable Claims"). If a
Contested Claim exists, Parent and ADV shall meet together between the fifth and
the fifteenth Business Day following the date of the notice of the Contested
Claim. If such meeting fails to produce an agreement within 30 days following
such meeting, or if ADV fails to either (i) propose a date for such meeting, or
(ii) fails to attend the meeting, then the Notice of Claim shall be deemed to
have been accepted, unless ADV or the Indemnification Representative have
provided a notice of request for Arbitration within such 30 day period from the
date of the Notice of Claim. Parent and Indemnification Representative shall
certify in writing to the Escrow Agent whether a Contested Claim is an
Arbitrable Claim, and is thus subject to such provisions governing Arbitrable
Claims. The Parent and Indemnification Representative agree that any Arbitrable
Claim is between the Parent and Indemnification Representative and that the
Escrow Agent is not a party to any Arbitrable Claim and shall have no duty or
obligation to monitor or enforce the provisions of Clause 9.1 of the Share
Purchase Agreement, Clause 5 of the Warranty Agreement, and Section 2.3(c) of
this Agreement, including without limitation any payment of costs pursuant to
Section 2.3(c)(iv), or to determine whether a Contested Claim is an Arbitrable
Claim or claim pursuant to Clause 9.1 of the Share Purchase Agreement. Any
portion of a Notice of Claim that is not contested or is subsequently settled by
Parent and the Indemnification Representative shall be resolved as set forth
above in Section 2.3(a), provided that in the case of a settlement, if the
escrow is funded with shares of Parent Common Stock, the value of such Parent
Common Stock shall be based upon the Average Price as defined in the Share
Purchase Agreement notwithstanding any change in the market value of Parent
Common Shares. If written notice is received by the Escrow Agent that a Notice
of Claim is contested in whole or in part by the Indemnification Representative,
then the Escrow Agent shall hold such Notice of Claim until the Escrow Funds are
deposited on Deposit Date and shall then further hold
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hereunder after what would otherwise be the Release Date (as defined in Section
3.1 below) the amount of Escrow Funds specified in the Release Notice or as
otherwise provided in Section 3.1, until the earlier of: (i) receipt of a
settlement agreement executed by Parent and the Indemnification Representative
setting forth a resolution of the Notice of Claim and the Escrow Adjustments;
(ii) receipt of a written notice from Parent (a "Parent Distribution Notice")
attaching a copy of the final award or decision of an arbitrator under paragraph
(c) below or Section 7.10 of the Share Purchase Agreement and setting forth the
Escrow Adjustments (Parent shall at the same time provide a copy of the Parent
Distribution Notice to the Indemnification Representative); or (iii) receipt of
a written notice from the Indemnification Representative (a "Representative
Distribution Notice") attaching a copy of the final award or decision of an
arbitrator under paragraph (c) below, Clause 9.1 of the Share Purchase
Agreement, or Clause 5 of the Warranty Agreement that no Escrow Adjustments are
to be made as a result of such award (the Indemnification Representative shall
at the same time provide a copy of the Representative Distribution Notice to
Parent). Upon any of the three events described in the preceding sentence, the
Escrow Agent shall, within twenty (20) calendar days after receipt of the
settlement agreement or the Parent Distribution Notice, as applicable, (a)
release to Parent the amount of Escrow Funds specified in the Escrow Adjustments
and (b) if there are no remaining unresolved Contested Claims, release to the
Holders the balance of the Escrow Funds in accordance with their percentage
interests which shall be certified in writing to the Escrow Agent by the
Indemnification Representative. If the award or decision of the arbitrator
concludes that Escrow Shares are to be released to Parent either in satisfaction
of Damages or as Prevailing Party Awards, the arbitrator shall specify the
amount of Escrow Funds to be so released to Parent either in the arbitrator's
final award or decision or a supplementary report or finding. In the event that
the Escrow Agent institutes an action for interpleader in accordance with
Section 4.6 of this Escrow Agreement as a result of a dispute between the
parties, the parties hereby agree to jointly seek to stay such interpleader
action pending the resolution of any arbitration commenced by the parties or any
dispute pursuant to this Section 2.3(b) and Section 2.3(c).
(c) Arbitration.
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(i) Arbitration Rules. Any Arbitrable Claim, and any dispute
between the Holders and Parent under this Escrow Agreement, shall be submitted
to final and binding arbitration in Belgium before a single arbitrator who is a
citizen of Belgium, with such arbitration being conducted in English in
accordance with rules of the United Nations Commission of International Trade
Law ("UNCITRAL"). The appointing authority for the purposes of the UNCITRAL
rules shall be the International Chamber of Commerce ("ICC") acting in
accordance with the rules adopted by the ICC for that purpose. The arbitrator is
authorized to carry out an investigation of any Arbitrable Claim.
(ii) Binding Effect. The final decision of the arbitrator shall
be furnished in writing within six (6) months of the arbitrator's appointment to
the Escrow Agent, the Indemnification Representative, the Holders and Parent and
will constitute a conclusive determination of the issue in question, binding
upon the Holders, the Indemnification Representative and Parent. The arbitrator
shall have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve an Arbitrable Claim.
The parties formally waive their rights to appeal the decision of the
arbitrator. Any judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction over the subject matter thereof.
(iii) Compensation of Arbitrator. The arbitrator will be
compensated
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for his or her services, as provided below in Section 2.3(c)(iv), in accordance
with the commercial arbitration rules of the American Arbitration Association.
(iv) Payment of Costs. Subject to the limitations in Article 7 of
the Share Purchase Agreement, the substantially prevailing party in any
arbitration shall be entitled to an award of attorneys' fees and costs, and all
costs of arbitration, including those provided for above, will be paid by the
losing party, subject in each case to a determination by the arbitrator as to
which party is the substantially prevailing party and the amount of such fees
and costs to be allocated to such party and subject to the terms of Section
2.3(c)(iii). Any amounts payable to Parent by or on account of the Holders under
this subsection will be reimbursed as if the amount of such awarded fees and
expenses were an Uncontested Claim.
(v) Terms of Arbitration. The arbitrator chosen in accordance
with these provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Escrow Agreement, the Share Purchase Agreement or any other documents that are
executed in connection therewith.
(vi) Exclusive Remedy. Arbitration or mediation under this
Section 2.3(c) shall be the sole and exclusive remedy of the parties for any
Arbitrable Claim arising out of this Escrow Agreement.
3. RELEASE FROM ESCROW
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3.1 Release of Escrow Funds. If any Claims exist as of the Deposit
Date and the Escrow Funds are therefore deposited with the Escrow Agent, the
Escrow Funds shall be released by the Escrow Agent and Parent as soon as
practicable, taking into account the notices to be delivered under this Section
3.1, provided that all Claims are fully and finally settled (the "Release Date")
less any Escrow Funds delivered to or deliverable to Parent in satisfaction of
Uncontested Claims or Contested Claims which have been settled by the parties
hereto. Within ten (10) of the Escrow Agent's business days ("Business Days")
after the Release Date, Parent and the Indemnification Representative shall
deliver to the Escrow Agent a written notice (the "Release Notice") setting
forth the number of Escrow Funds to be released (the "Released Escrow"),
including the amount of Escrow Funds to be released to each Holder. The Escrow
Agent shall be authorized to act in accordance with any Release Notice. The
Released Escrow shall be released to the Holders in proportion to their
respective interests in the Initial Escrow Funds as certified in writing to the
Escrow Agent. If the Escrow Funds contain shares of Parent Common Stock, then in
lieu of releasing any fractional shares of Parent Common Stock from the Escrow
Funds, any fraction of a released share of Parent Common Stock from the Escrow
Funds that would otherwise be released shall be rounded to the nearest whole
share. The Escrow Agent shall effect any release of Escrow Funds in the manner
provided in Section 12.16 herein. The Escrow Agent shall not be required to take
such action until the Escrow Agent has received the Release Notice executed by
Parent and the Indemnification Representative or, in the event Parent and the
Indemnification Representative fail to execute and deliver a jointly approved
Release Notice, a final award or decision which specifies the distribution of
the Escrow Funds.
3.2 Expenses of Indemnification Representative. The Indemnification
Representative shall be entitled to be reimbursed his reasonable out-of-pocket
expenses and the reasonable fees and disbursements of counsel retained by him.
Such reimbursements shall be treated as
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an Uncontested Claim on a pro rata basis among the contributors to the Escrow
Funds, for all services performed pursuant to the Share Purchase Agreement and
this Escrow Agreement; provided, however, that payment of any Escrow Adjustment
shall take priority over payments to the Indemnification Representative, as
provided herein. The Escrow Agent shall follow the joint written instructions of
the Indemnification Representative and Parent concerning the release or sale of
Escrow Funds relating to the reimbursement of the Indemnification
Representative. If upon termination of this Agreement the Indemnification
Representative shall not have received the reimbursements to which he is
entitled hereunder, then the Indemnification Representative shall be entitled to
reimbursement from the Holders on a joint and several basis.
(a) In connection with any sale of shares held in the Escrow Funds
pursuant to Section 3.2 of this Agreement, the Escrow Agent shall be entitled to
receive and rely upon, prior to taking action in that regard, written direction
from the Indemnification Representative and Parent as to the manner and method
to be undertaken in carrying out such sale, including without limitation written
direction (i) identifying the number of shares to be sold, (ii) identifying the
brokerage firm the Indemnification Representative and Parent request to be used
or instructing the Escrow Agent to use its affiliated brokerage service, and
(iii) setting forth any necessary or special instructions with respect to the
sale (including any stop loss or minimum price per share instruction); and the
Indemnification Representative and Parent shall execute and deliver any
instruments reasonably required by the Escrow Agent in order to carry out such
sale or liquidation.
(b) The Escrow Agent shall have no responsibility in connection with such
sale other than to make delivery of the shares held in the Escrow Funds to the
selected brokerage firm, with instruction (including any special instruction
provided by the Indemnification Representative and Parent, and to receive and
deposit into the escrow account (to be administered and distributed in
accordance with this Agreement) any net sale proceeds received therefrom. The
Escrow Agent shall have no duty or obligation to determine or accomplish
compliance with any applicable transfer restrictions; and it shall be the sole
obligation of the party directing such sale to take any remaining actions, and
to provide or deliver any necessary instruments or opinions (at its expense)
necessary to comply with applicable transfer restrictions or applicable
securities laws. The Escrow Agent shall have no liability for any actions or
omissions of any such brokerage firm, and shall have no liability for the price
or execution achieved. Without limiting the generality of the foregoing, the
Indemnification Representative and Parent expressly acknowledge that (a) such
shares may need to be sent to a transfer agent to be reissued in saleable form,
(b) the shares may contain or be subject to transfer restrictions that may limit
their marketability and impose restrictions upon the number or types of
purchasers to whom they can be offered or sold, and (c) the Escrow Agent shall
have no liability for any failure or delay (or any price change during any such
delay) on the part of the Indemnification Representative and Parent or any
transfer agent, or caused by any necessary registration or delivery procedures,
or compliance with any applicable transfer restrictions involved in the transfer
of such shares.
(c) The Escrow Agent shall be entitled to contract with any brokerage firm
(which may be selected by the Escrow Agent without liability on its part, taking
into consideration any brokerage firm requested by the Indemnification
Representative and Parent, as provided above), which may be affiliated with the
Escrow Agent, and may enter into any such contract on a basis which provides
that such brokerage firm shall use its "best efforts" to effect such sale. The
Escrow Agent shall be indemnified hereunder for any costs, expenses and risks
associated therewith or arising thereunder (other than resulting from its own
gross negligence or willful misconduct), and the proceeds of sale to which the
Indemnification Representative shall be entitled shall be net of all brokerage
commissions and charges.
9
(d) The net sale proceeds of any such sale of such shares received by the
Escrow Agent, or such amount of cash required to reimburse the Indemnification
Representative, shall be distributed to the Indemnification Representative in
accordance with the joint written instructions of Indemnification Representative
and Parent less (if such reimbursement is made pursuant to a sale of shares held
in the Escrow Funds) a $5.00 per Holder fee for the proration of the net sales
price and for the preparation of individual 1099-B (the "Sales Administration
Fee"). The Sales Administration fee shall be assessed each day a sale is
effected until the total number of shares specified in such written direction
from the Indemnification Representative and Parent are sold; provided that the
minimum Sales Administration Fee per sale transaction shall be $500.00.
4. ESCROW AGENT
------------
4.1 Duties. The duties and responsibilities of the Escrow Agent
hereunder shall be entirely ministerial and administrative and not fiduciary or
discretionary and shall be determined solely by the express provisions of this
Escrow Agreement and no duties shall be implied. The Escrow Agent shall not be
responsible for any of the agreements referred to or described herein (including
without limitation the Share Purchase Agreement), or for determining or
compelling compliance therewith, and shall not otherwise be bound thereby. The
Escrow Agent shall be obligated to act only in accordance with written
instructions received by it as provided in this Escrow Agreement and is
authorized hereby to comply with any orders, judgments, or decrees of any court
with or without jurisdiction and shall not be liable as a result of its
compliance with the same.
4.2 Legal Opinions. As to any questions arising in connection with the
administration of this Escrow Agreement, the Escrow Agent may rely absolutely
upon the joint instruction of Parent and the Indemnification Representative or
the opinions given to the Escrow Agent by its outside counsel or in-house
counsel and shall be free of liability for acting or refraining from acting in
reliance on such opinions.
4.3 Signatures. The Escrow Agent may rely absolutely upon the
genuineness and authorization of the signature and purported signature of any
party upon any instruction, notice, release, receipt or other document delivered
to it pursuant to this Escrow Agreement.
4.4 Receipts and Releases. The Escrow Agent may, as a condition to the
disbursement of monies or disposition of securities as provided herein, require
from the payee or recipient a receipt therefor and, upon final payment or
disposition, a release of the Escrow Agent from any liability arising out of its
execution or performance of this Escrow Agreement, such release to be in a form
reasonably satisfactory to the Escrow Agent.
4.5 Refrain from Action. The Escrow Agent shall be entitled to refrain
from taking any action contemplated by this Escrow Agreement in the event it
becomes aware of any dispute between ADV, the Holders and Parent as to any
material facts or as to the happening of any event precedent to such action.
4.6 Interpleader. If any controversy arises between the parties
hereto or with any
10
third person, the Escrow Agent shall not be required to determine the same or to
take any action, but the Escrow Agent in its discretion may institute such
interpleader or other proceedings in connection therewith as the Escrow Agent
may deem proper, and in following either course, the Escrow Agent shall not be
liable.
4.7 Other Provisions. The Escrow Agent may rely and shall be protected
in acting or refraining from acting upon any written notice, instruction or
request furnished to it hereunder and believed by it to be genuine and to have
been signed or presented by the proper party or parties. The Escrow Agent shall
be under no duty to inquire into or investigate the validity, accuracy or
content of any such document. The Escrow Agent shall be not be liable for any
action taken or omitted by it unless a court of competent jurisdiction
determines that the primary cause of a loss to the Parent, the Indemnification
Representative, or the Holders was the Escrow Agent's gross negligence, willful
neglect, or bad faith. In the administration of this Escrow Agreement, the
Escrow Agent may execute any of its powers and perform its duties hereunder
directly or through agents or attorneys and may, consult with counsel, including
in-house counsel, accountants and other skilled persons to be selected and
retained by it. The Escrow Agent shall not be liable for anything done, suffered
or omitted in good faith by it in accordance with the advice or opinion of any
such counsel, accountants or other skilled persons. The Escrow Agent shall not
be obligated to take any legal or other action hereunder which might in its
judgment involve or cause it to incur any expense or liability unless it shall
have been furnished with acceptable indemnification.
5. INDEMNIFICATION
---------------
5.1 Waiver and Indemnification. Parent, ADV, the Indemnification
Representative and the Holders agree to and hereby do waive any suit, claim,
demand or cause of action of any kind which they may have or may assert against
the Escrow Agent arising out of or relating to the execution or performance by
the Escrow Agent of this Escrow Agreement, unless such suit, claim, demand or
cause of action is based upon the willful neglect or gross negligence or bad
faith of the Escrow Agent. Parent, ADV and the Holders further agree, jointly
and severally, to indemnify and hold Escrow Agent and its directors, officers,
agents and employees (collectively, the "Indemnitees") harmless from and against
any and all claims, liabilities, losses, damages, fines, penalties, and
expenses, including but not limited to out-of-pocket, incidental expenses,
reasonable legal fees and expenses, and the allocated costs and expenses of in-
house counsel and legal staff ("Losses") that may be imposed on, incurred by, or
asserted against, the Indemnitees or any of them for following any instructions
or other directions upon which the Escrow Agent is authorized to rely pursuant
to the terms of this Escrow Agreement, provided the Escrow Agent has not acted
with gross negligence, willful neglect or bad faith. In addition to and not in
limitation of the immediately preceding sentence, Parent, ADV and the Holders
also agree, jointly and severally, to indemnify and hold the Indemnitees and
each of them harmless from and against any and all Losses that may be imposed
on, incurred by, or asserted against the Indemnitees or any of them in
connection with or arising out of the Escrow Agent's performance under this
Escrow Agreement, provided the Escrow Agent has not acted with gross negligence,
willful neglect or bad faith. The provisions of this Section 5.1 shall survive
the termination of this Escrow Agreement and the resignation or removal of the
Escrow Agent for any reason. Anything in this Escrow Agreement to the contrary
notwithstanding, 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.
11
5.2 Actions by Others. The Escrow Agent shall have no more or less
responsibility or liability on account of any action or omission of any book-
entry depository, securities intermediary or other sub-escrow agent employed by
the Escrow Agent than any such book-entry depository, securities intermediary or
other sub-escrow agent has to the Escrow Agent, except to the extent that such
action or omission of any book-entry depository, securities intermediary or
other sub-escrow agent was caused by the Escrow Agent's own gross negligence,
bad faith or willful misconduct in breach of this Agreement.
6. ACKNOWLEDGMENT BY THE ESCROW AGENT
----------------------------------
By execution and delivery of this Escrow Agreement, the Escrow Agent
acknowledges that the terms and provisions of this Escrow Agreement are
acceptable and it agrees to carry out the provisions of this Escrow Agreement on
its part.
7. RESIGNATION OR REMOVAL OF ESCROW AGENT; SUCCESSOR
-------------------------------------------------
7.1 Resignation and Removal.
-----------------------
7.1.1 Notice. The Escrow Agent may resign as such following the
giving of thirty (30) days' prior written notice to the other parties hereto.
Similarly, the Escrow Agent may be removed and replaced following the receipt of
thirty (30) days' prior written notice to be given to the Escrow Agent jointly
by the Indemnification Representative and Parent. In either event, the duties of
the Escrow Agent shall terminate as of such earlier date as may be mutually
agreeable. The Escrow Agent shall then deliver the balance of the Escrow Shares
then in its possession to a successor Escrow Agent as shall be appointed by the
other parties hereto as evidenced by a written notice filed with the Escrow
Agent.
7.1.2 Court Appointment. If the parties hereto are unable to
agree upon a successor or shall have failed to appoint a successor within twenty
(20) days following the date of the notice of resignation or removal, then the
Escrow Agent, at the expense of the Holders and Parent, may petition any court
of competent jurisdiction for the appointment of a successor Escrow Agent or
other appropriate relief, and any such resulting appointment shall be binding
upon all of the parties hereto.
7.2 Successors. Every successor appointed hereunder shall execute,
acknowledge and deliver to its predecessor, and also to the Indemnification
Representative and Parent, an instrument in writing accepting such appointment
hereunder, and thereupon such successor, without any further act, shall become
fully vested with all the duties, responsibilities and obligations of its
predecessor; but such predecessor shall, nevertheless, on the written request of
its successor or any of the parties hereto, execute and deliver an instrument or
instruments transferring to such successor all the rights of such predecessor
hereunder, and shall duly assign, transfer and deliver all property, securities
and monies held by it pursuant to this Escrow Agreement to its successor. Should
any instrument be required by any successor for more fully vesting in such
successor the duties, responsibilities, and obligations hereby vested or
intended to be vested in the predecessor, any and all such instruments in
writing shall, on the request of any of the other parties hereto, be executed,
acknowledged, and delivered by the predecessor.
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7.3 New Escrow Agent. In the event of an appointment of a successor,
the predecessor shall cease to be Escrow Agent of any funds, securities or other
assets and records it may hold pursuant to this Escrow Agreement, and the
successor shall become such Escrow Agent.
7.4 Release. Upon acknowledgment by any successor Escrow Agent of the
receipt of the then remaining balance of the Escrow Shares, the predecessor
Escrow Agent shall be fully released and relieved of all duties,
responsibilities and obligations under this Escrow Agreement that may arise and
accrue thereafter.
7.5 Successors. Any corporation or association into which the Escrow
Agent in its individual capacity may be merged or converted or with which it may
be consolidated, or any corporation or association resulting from any merger,
conversion or consolidation to which the Escrow Agent in its individual capacity
shall be a party, or any corporation or association to which all or
substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be sold or otherwise transferred, shall be the Escrow
Agent hereunder without further act.
8. FEES AND EXPENSES
-----------------
(a) Parent agrees (i) to pay or reimburse the Escrow Agent for its
attorney's fees and expenses incurred in connection with the preparation of this
Agreement and (ii) to pay the Escrow Agent's compensation for its normal
services hereunder in accordance with the fee schedule attached hereto as
Exhibit B, which may be subject to change hereafter on an annual basis.
(b) Parent agrees to reimburse the Escrow Agent on demand for all costs
and expenses incurred in connection with the administration of this Agreement or
the escrow created hereby or the performance or observance of its duties
hereunder which are in excess of its compensation for normal services hereunder,
including without limitation, payment of any legal fees and expenses incurred by
the Escrow Agent in connection with the resolution of any claim by any party
hereunder.
9. INDEMNIFICATION REPRESENTATIVE
------------------------------
9.1 Appointment and Authority. For purposes of this Escrow Agreement,
the Holders have, by the execution of this Escrow Agreement, irrevocably
consented to the appointment of the Indemnification Representative as
representative of the Holders and as the attorney-in-fact for and on behalf of
each Holder, and, subject to the express limitations set forth below, the taking
by the Indemnification Representative of any and all actions and the making of
any decisions required or permitted to be taken by him under this Escrow
Agreement, including but not limited to the exercise of the power to: (i)
authorize delivery to Parent of the Escrow Funds, or any portion thereof, in
satisfaction of Claims otherwise in connection with an Escrow Adjustment, (ii)
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such Claims, (iii) resolve any Claims, and (iv) take all actions
necessary in the judgment of the Indemnification Representative for the
accomplishment of the foregoing and all of the other terms, conditions, and
limitations of this Escrow Agreement. Any notice given to the Indemnification
Representative will constitute notice to each and all of the Holders at the
13
time notice is given to the Indemnification Representative. Any action taken by,
or notice or instruction received from, the Indemnification Representative will
be deemed to be an action by, or notice or instruction from, each and all of the
Holders. Parent and the Escrow Agent will disregard any notice or instruction
received from any Holder other than the Indemnification Representative with
regard to this Escrow Agreement. The Indemnification Representative shall have
unlimited authority and power to act on behalf of each Holder with respect to
this Escrow Agreement and the disposition, settlement, or other handling of all
Claims, notices, rights, or obligations arising under this Escrow Agreement so
long as all Holders are treated in the same manner (in respect of their
proportional interests in the Escrow Funds).
9.2 Indemnification. As among the Parent, ADV, the Holders and the
Indemnification Representative, the Indemnification Representative shall not
suffer any liability or loss for any act performed or omitted to be performed by
him under this Escrow Agreement in the absence of adjudicated gross negligence,
willful neglect or bad faith. The Indemnification Representative may consult
with counsel and other experts as may be reasonably necessary to advise him with
respect to his rights and obligations hereunder and shall be fully protected by
any act taken, suffered, permitted, or omitted in good faith in accordance with
the advice of such counsel and experts. The Indemnification Representative shall
not be responsible for the sufficiency or accuracy of the form, execution,
validity, or genuineness of documents or securities now or hereafter deposited
hereunder, or of any endorsement thereof or for any lack of endorsement thereon,
or for any description therein, nor shall he be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement, and the Indemnification Representative shall be fully protected in
relying upon any written notice, demand, certificate or document which he in
good faith believes to be genuine.
9.3 Death or Disability; Successors. In the event of the death or
permanent disability of the Indemnification Representative, or his resignation
as the Indemnification Representative, a successor Indemnification
Representative shall be elected by a majority vote of the Holders, with each
Holder to be given a vote equal to his proportionate share of the Escrow Funds.
The Holders shall cause to be delivered to Parent and the Escrow Agent prompt
written notice of such election of a successor Indemnification Representative.
Each successor Indemnification Representative shall have all of the power,
authority, rights, and privileges conferred by this Agreement upon the original
Indemnification Representative, and the term, "Indemnification Representative"
as used herein shall be deemed to include any successor Indemnification
Representative. Until notified in writing by the Indemnification Representative
that he has resigned, the Escrow Agent may act upon the directions, instructions
and notices of the Indemnification Representative named above and, thereafter,
upon the directions, instructions and notices of any successor named in a
writing executed by a majority-in-interest of the Holders filed with the Escrow
Agent.
10. TERMINATION; DEFICIENCY CLAIMS
------------------------------
This Escrow Agreement and the escrow created hereby shall terminate on
the date that is the later of (i) three (3) days after the Deposit Date,
provided that no Claims have been made concerning events that occurred prior to
the Closing Date Anniversary; or (ii) following the Escrow Agent's delivery of
all remaining Escrow Funds to the Holders and/or Parent pursuant to Section 2 or
3.
14
11. TAX MATTERS
-----------
The Interested Parties hereto acknowledge that the Escrow Funds are
held in the escrow account on behalf of the Holders and that for tax reporting
purposes all interest or other income earned from the investment of the Escrow
Funds, if any, shall be allocable and taxed to the Holders in each taxable year
in which earned on a pro rata basis according to their respective interests in
the Escrow Funds.
12. MISCELLANEOUS PROVISIONS
------------------------
12.1 Parties in Interest. This Escrow Agreement is not intended, nor
shall it be construed, to confer any enforceable rights on any person not a
party hereto. All of the terms and provisions of this Escrow Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, affiliates, successors and assigns of the parties hereto.
12.2 Attorneys' Fees. In the event of any action to enforce any
provision of this Escrow Agreement, or on account of any default under or breach
of this Escrow Agreement, the substantially prevailing party in such action
shall be entitled to recover, in addition to all other relief, from the other
party all attorneys' fees incurred by the substantially prevailing party in
connection with such action (including, but not limited to, any appeal thereof).
Notwithstanding the foregoing, the Parent shall reimburse the Escrow Agent for
any fees, including any legal fees and expenses, incurred by the Escrow Agent
pursuant to Section 8 of this Agreement. The Escrow Agent shall be under no duty
or obligation to monitor or enforce any action between the Parent and
Indemnification Representative pursuant to this Section 12.2; provided, however,
that the Escrow Agent shall pay any Prevailing Party Awards from the Escrow
Funds in accordance with this Agreement.
12.3 Entire Agreement. This Escrow Agreement constitutes the final and
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior arrangements or understandings.
12.4 Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given: (i) on the date of
delivery if personally delivered by hand, (ii) upon the date scheduled for
delivery after such notice is sent by an internationally recognized overnight or
second day express courier or (iii) by fax upon written confirmation (including
the automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice:
If to Parent: TranSwitch Corporation
-------------
Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Telephone No.: (000) 000-0000 x0000
Fax No.: (000) 000-0000
15
With copies to:
---------------
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000 x0000
Fax No.: (000) 000-0000
If to Parent's
--------------
Transfer Agent:
--------------
Boston EquiServe, L.P.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to the Indemnification
-------------------------
Representative:
---------------
Xxxxxx Xxxxxxxx
00 xxxxx xx Xxxx x'Xxxxx
00 000 Xxxxxxxx Xxxxx
Xxxxxx
Telephone No.: 000 00 0 00 00 00 79
Fax No.: 000 00 0 00 00 00 78
If to the Escrow Agent: If by mail:
----------------------- ----------
State Street Bank and Trust Company
Global Investor Services Group
Corporate Trust Department X.X. Xxx 000
Xxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If by courier:
--------------
State Street Bank and Trust Company
Global Investor Services Group
Corporate Trust Department
0 Xxxxxx xx Xxxxxxxxx, 0xx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 12.4 such notice to be provided to
all the parties to this Agreement.
16
12.5 Changes. The terms of this Escrow Agreement may not be modified
or amended, or any provisions hereof waived, temporarily or permanently, except
pursuant to the written agreement of Parent, the Indemnification Representative
and the Escrow Agent.
12.6 Severability. If any term or provision of this Escrow Agreement
or the application thereof as to any person or circumstance shall to any extent
be invalid or unenforceable, the remaining terms and provisions of this Escrow
Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby and each term and provision of this Escrow
Agreement shall be valid and enforceable to the fullest extent permitted by law.
12.7 Counterparts. This Escrow Agreement may be executed in two or
more partially or fully executed counterparts, each of which shall be deemed an
original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument. The execution and delivery of a
Signature Page to Escrow Agreement in the form annexed to this Escrow Agreement
by any party hereto who shall have been furnished the final form of this Escrow
Agreement shall constitute the execution and delivery of this Escrow Agreement
by such party.
12.8 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.
12.9 Governing Law. This Escrow Agreement shall be construed and
controlled by the laws of The Commonwealth of Massachusetts without regard to
the principles of conflicts of laws.
12.10 Release of Escrow Shares. Under no circumstances should the
terms of the escrow agreement require the Escrow Agent to release or distribute
Escrow Funds or property (or take similar action, such as making a draw on an
underlying letter of credit) sooner than two (2) business days after the Escrow
Agent has received the requisite notices or paperwork in good form, or passage
of the applicable claims period or release date, as the case may be.
12.11 Tax Indemnification. Each of the Interested Parties agree,
jointly and severally, (i) to assume any and all obligations imposed now or
hereafter by any applicable tax law with respect to any payment or distribution
of the Escrow Funds or performance of other activities under this Agreement,
(ii) to instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments or other
governmental charges, and to instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Agreement, and (iii) to indemnify and hold the Escrow Agent harmless
from any liability or obligation on account of taxes, assessments, additions for
late payment, interest, penalties, expenses and other governmental charges that
may be assessed or asserted against the Escrow Agent in connection with or
relating to any payment made or other activities performed under the terms of
this Agreement, including without limitation any liability for the withholding
or deduction of (or the failure to withhold or deduct) the same, and any
liability for failure to obtain proper certifications or to report properly to
governmental authorities in connection with this Agreement, including costs and
expenses
17
(including reasonable legal fees and expenses), interest and penalties. The
foregoing indemnification and agreement to hold harmless shall survive the
termination of this Agreement.
12.12 Dispute Resolution. It is understood and agreed that should any
dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Escrow Funds, or should any claim be made upon the
Escrow Agent or the Escrow Funds by a third party, the Escrow Agent upon receipt
of notice of such dispute or claim is authorized and shall be entitled (at its
sole option and election) to retain in its possession without liability to
anyone, all or any of said Shares until such dispute shall have been settled
either by the mutual written agreement of the parties involved or by a final
order, decree or judgment of a court in the United States of America, the time
for perfection of an appeal of such order, decree or judgment having expired.
The Escrow Agent may, but shall be under no duty whatsoever to, institute or
defend any legal proceedings which relate to the Escrow Funds.
12.13 Consent to Jurisdiction and Service. Each of the Interested
Parties hereby absolutely and irrevocably consents and submits to the
jurisdiction of the courts in The Commonwealth of Massachusetts and of any
Federal court located in said Commonwealth in connection with any actions or
proceedings brought against any of the Interested Parties (or each of them) by
the Escrow Agent arising out of or relating to this Escrow Agreement. In any
such action or proceeding, each of the Interested Parties hereby absolutely and
irrevocably (i) waives any objection to jurisdiction or venue, (ii) waives
personal service of any summons, complaint, declaration or other process, and
(iii) agrees that the service thereof may be made by an internationally
recognized second day courier service directed to such party, as the case may
be, at their respective addresses in accordance with Section 12.4 hereof.
12.14 Force Majeure. The Escrow Agent shall not be responsible for
delays or failures in performance resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
12.15 Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
12.16 Delivery of Escrow Funds. The Escrow Agent is not the transfer
agent of any shares held in the Escrow Funds. When any such shares are required
to be delivered by the Escrow Agent to Parent or the Indemnification
Representative pursuant to this Agreement, delivery shall be made by the Escrow
Agent's instructing such stock transfer agent to deliver certificates to Parent
or Indemnification Representative at their addresses set forth in 12.4.
18
Signature Page to Escrow Agreement
IN WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as of
the day and year first above written.
TRANSWITCH CORPORATION
By: /s/ Xxxxxx Xxxx
---------------
Title: Attorney-in-fact
ADV ENGINEERING
By: /s/ Xxxxxx Xxxxxxxx
-------------------
Title: Attorney-in-fact
INDEMNIFICATION REPRESENTATIVE:
/s/ Xxxxxx Xxxxxxxx
-------------------
Name: Xxxxxx Xxxxxxxx
ESCROW AGENT
STATE STREET BANK AND TRUST COMPANY,
AS ESCROW AGENT
By: /s/ Xxx Xx
----------
Authorized Signatory
19
