ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made as of September 8, 1997, by
and among CYLINK CORPORATION, a California corporation (the "Purchaser"), A.R.
DATA SECURITY LTD., a limited liability company organized and existing under the
laws of the State of Israel ("Seller"), ADV. ZE'EV MAY (the "Seller's
Representative"), and XXXXXXXXX & XXXXX LLC, a Delaware limited liability
company (the "Escrow Agent").
RECITALS
A. Contemporaneously with the execution of this Agreement, the
Purchaser is acquiring from the Seller (i) all of the shares of Algorithmic
Research Ltd., a limited liability company organized and existing under the laws
of the State of Israel (the "Company"), that are owned by the Seller, and (ii)
all of the outstanding shares of Algart Holdings Ltd., a limited liability
company organized and existing under the laws of the State of Israel
("Holdings"), pursuant to that certain Stock Purchase Agreement dated as of
September 7, 1997, among the Purchaser, the Company and the Seller (the
"Purchase Agreement").
B. As part of the purchase price for the shares being acquired by the
Purchaser pursuant to the Purchase Agreement, the Purchaser is issuing a total
of 2,593,169 shares of its common stock, of which 1,272,300 shares (the "Escrow
Shares") are being deposited in escrow in accordance with this Agreement. The
execution of this Agreement is required by Sections 1.4(b), 7.5 and 8.4 of the
Purchase Agreement.
C. Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Purchase Agreement.
AGREEMENT
The parties hereto agree as follows:
1. ESTABLISHMENT OF ESCROW.
The Purchaser has delivered to the Escrow Agent and the Escrow Agent
acknowledges receipt of the Escrow Shares in the form of a single stock
certificate issued in the name of the Escrow Agent. The Escrow Shares shall be
held in escrow in accordance with the provisions of this Agreement. The Seller's
Representative shall be entitled to direct the Escrow Agent through written
instructions as to the exercise of all voting rights with respect to the Escrow
Shares. The Purchaser shall furnish directly to the Seller's Representative all
notices, reports and other documents that it furnishes to its shareholders, at
the same time that it furnishes such notices, reports and documents to such
shareholders. In addition, the Escrow Agent shall furnish
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to the Seller's Representative all notices, reports and other documents received
by the Escrow Agent as record holder of the Escrow Shares promptly after the
Escrow Agent receives such notices, reports and other documents.
2. SALE OF ESCROW SHARES.
Subject to compliance with the applicable provisions of the Seller's
Agreement, the Seller's Representative shall be entitled from time to time in
his sole discretion (and without having to obtain the consent or approval of the
Purchaser or any other Person) to direct the Escrow Agent to sell all or any
number of the Escrow Shares. Upon the Escrow Agent's receipt of written
instructions from the Seller's Representative to sell all or any number of the
Escrow Shares, the Escrow Agent shall take all actions necessary or appropriate
to cause such sale to occur at the earliest practicable date in accordance with
such instructions. The net cash proceeds received by the Escrow Agent upon the
sale of any Escrow Shares shall remain in escrow and shall be invested (in U.S.
dollar-denominated investments) in such manner as may be specified in writing by
the Seller's Representative from time to time. (The Escrow Shares, together with
the net cash proceeds from any sale of any Escrow Shares effected pursuant to
this Section 2 (but excluding any amounts required to be distributed to the
Seller's Representative pursuant to Section 3 hereof), shall be referred to in
this Agreement as the "Escrow Fund.")
3. AMOUNTS EARNED ON ESCROW FUND.
All amounts earned on the Escrow Fund (including all interest received
on any interest-bearing investments) shall be distributed to the Seller's
Representative from time to time (without deductions or set-offs of any nature)
promptly after such amounts are received by the Escrow Agent. All dividends or
other distributions of cash, securities (other than shares of Purchaser Common
Stock issued with respect to the Escrow Shares as a stock split or stock
dividend) or other property in respect of any of the Escrow Shares shall be paid
in full (without deductions or set-offs of any nature) directly to the Seller's
Representative by the Purchaser promptly after the payment dates for any such
dividends or other distributions (and, in the event any such dividends or
distributions are paid or made to the Escrow Agent, the Escrow Agent shall
promptly (and without having to obtain the consent or approval of the Purchaser)
pay such dividends or other distributions (without deductions or set-offs of any
nature) to the Seller's Representative). The parties agree that, to the extent
required by applicable law, the Seller will include all amounts earned on the
Escrow Fund in its gross income for Israeli and other applicable income tax
purposes and pay any income tax resulting therefrom. Any risk of loss arising on
the basis of any investment decision made by the Seller's Representative
pursuant to Section 2 hereof (i.e., the risk of a decline in principal value of
an investment made with the net proceeds from the sale of Escrow Shares in
accordance with Section 2 hereof) shall be borne by the Seller, to the exclusion
of the Purchaser and the Escrow Agent (it being understood, however, that the
Seller shall not be responsible for restoring the amount of any such loss). The
Escrow Agent shall, with reasonable promptness, give notice to the Purchaser
after making any
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distribution pursuant to this Section 3.
4. CLAIMS AGAINST ESCROW FUND.
(a) At any time or time prior to the Expiration Date, the
Purchaser may make indemnification claims against the Escrow Fund for amounts
due to the Purchaser for indemnification under Article V of the Purchase
Agreement. If the Purchaser wishes to make any such indemnification claim, it
shall duly deliver to the Seller's Representative and the Escrow Agent a Claim
Notice in accordance with Section 5.7 of the Purchase Agreement and this Section
4(a). Each such Claim Notice shall set forth:
(i) a representation from the Purchaser to the effect
that the Purchaser has delivered a copy of such Claim Notice to the Seller's
Representative prior to or simultaneously with its delivery to the Escrow Agent;
(ii) the specific representation and warranty in the
Purchase Agreement alleged to have been breached by the Seller;
(iii) a summary of the facts and circumstances giving
rise to the alleged breach of such representation and warranty by the Seller;
and
(iv) a description of, and a reasonable estimate of
the total amount of, the Damages actually incurred or expected to be incurred by
the Purchaser as a result of such alleged breach.
If a Claim Notice shall not have been delivered to the Seller's Representative
and the Escrow Agent on or prior to the Expiration Date, then such Claim Notice
shall not be deemed to have been delivered and shall be of no force or effect.
(b) Within sixty (60) days after the delivery of a Claim
Notice to the Seller's Representative and the Escrow Agent in accordance with
Section 5.7 of the Purchase Agreement and Section 4(a) hereof, the Seller's
Representative may, in its sole discretion, deliver to the Purchaser and the
Escrow Agent a written notice (the "Response Notice") containing (i) a statement
substantially to the effect that the indemnification claim described in such
Claim Notice is not being disputed and a portion of the Escrow Fund equal in
value to the entire dollar amount of Damages set forth in such Claim Notice may
accordingly be distributed from escrow to the Purchaser in accordance with the
terms of this Agreement, (ii) a statement substantially to the effect that a
portion of the Escrow Fund equal in value to a portion of the dollar amount of
Damages (but not the entire dollar amount of Damages) set forth in such Claim
Notice is to be distributed from escrow to the Purchaser in accordance with the
terms of this Agreement, and that the remaining portion of the dollar amount of
Damages set forth in such Claim Notice is being disputed (specifying the dollar
amount of the portion that is not being disputed), or (iii)a
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statement substantially to the effect that the entire dollar amount of Damages
set forth in such Claim Notice is being disputed. (Any portion of the dollar
amount of such Damages that is not being disputed by the Seller's Representative
shall be referred to in this Agreement as the "Undisputed Amount," and the
remaining portion of such Damages shall be referred to in this Agreement as the
"Disputed Amount.") If no Response Notice is delivered within sixty (60) days
after the delivery of a Claim Notice to the Seller's Representative and the
Escrow Agent, then the Seller's Representative shall be deemed not to be
disputing the Damages described in the Claim Notice, and in such event the term
"Undisputed Amount" shall be deemed to refer to the entire dollar amount of the
Damages set forth in the Claim Notice (and, accordingly, in such event the
"Disputed Amount" of the indemnification claim described in such Claim Notice
shall be zero).
(c) If the Seller's Representative is disputing or is deemed
to be disputing all or any portion of the dollar amount of the Damages set forth
in a Claim Notice, then no distribution of any portion of the Escrow Fund shall
be made by the Escrow Agent to the Purchaser with respect to the Disputed Amount
until either (i) a settlement agreement executed by the Purchaser and the
Seller's Representative containing a settlement of the indemnification claim
described in such Claim Notice (and specifying the respective amounts of cash
(if any) and Escrow Shares (if any) to be distributed to the Purchaser from the
escrow) shall have been delivered to the Escrow Agent, or (ii) a final
arbitration award (made pursuant to the arbitration procedures set forth in
Section 4(d) hereof) containing a final binding resolution of the
indemnification claim described in such Claim Notice (and specifying the amount
of the Damages (if any) with respect to which the Purchaser is entitled to
indemnification) (an "Arbitration Award") shall have been delivered to the
Escrow Agent.
(d) If (i) the Seller's Representative is disputing or deemed
to be disputing all or any portion of the dollar amount of the Damages set forth
in a Claim Notice, and (ii) within ninety (90) days after the delivery of such
Claim Notice by the Purchaser to the Seller's Representative and the Escrow
Agent in accordance with Section 5.7 of the Purchase Agreement and Section 4(a)
hereof, the Escrow Agent has not received a settlement agreement satisfying the
requirements of clause "(i)" of Section 4(c) hereof, then the indemnification
claim or claims described in such Claim Notice shall be referred to an
arbitrator chosen jointly by the Seller's Representative and the Purchaser. If
the Seller's Representative and the Purchaser do not agree on the selection of
an arbitrator within ten (10) days after the expiration of the ninety (90) day
period referred to in this Section 4(d), the Purchaser or the Seller's
Representative may submit the matter in dispute for resolution pursuant to a
binding arbitration proceeding under the Rules of Conciliation and Arbitration
of the International Chamber of Commerce. The venue for such arbitration
proceeding shall be in London, England. The arbitrator's fees and other related
expenses of any arbitration under this Agreement (such as expenses for
transcripts of the arbitration proceedings) shall be borne by the Seller and the
Purchaser in such proportions as shall be determined by the arbitrator, or if
there is no such determination, then such fees and other expenses shall be borne
equally by the Seller and the Purchaser; provided, however, that
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subject to Section 4(e) hereof, any such fees and other expenses that are
required to be borne by the Seller (the "Seller's Arbitration Expenses") shall
be paid (without deductions or set-offs of any nature) out of the Escrow Fund
(assuming there are sufficient Escrow Shares and/or cash remaining in the Escrow
Fund after satisfaction of any Arbitration Award) upon receipt by the Escrow
Agent of written instructions executed by the Seller's Representative directing
the Escrow Agent to pay such Seller's Arbitration Expenses. "Seller's
Arbitration Expenses" shall not be deemed to include any costs or expenses that
constitute "Defense Costs" for purposes of Section 8(c) hereof. The arbitrator
shall have the authority to make an award specifying the dollar amount (if any)
representing the portion of the Disputed Amount that is to be distributed by the
Escrow Agent to the Purchaser from the Escrow Fund, but shall have no right to
grant special, punitive or exemplary damages or indirect or consequential
damages or to grant any form of equitable relief. The determination of the
arbitrator as to the dollar amount (if any) representing the portion of the
Disputed Amount that is payable out of the Escrow Fund shall be conclusive and
binding upon the parties hereto and judgment may be entered thereon in any court
having jurisdiction thereof. The determination of the combination of cash and
Escrow Shares to be distributed to the Purchaser to satisfy any Arbitration
Award shall be made by the Seller's Representative (in accordance with Section
5(b) hereof), and not by the arbitrator.
(e) If (i) the Escrow Agent has made distributions from the
Escrow Fund to the Seller's Representative in respect of Seller's Arbitration
Expenses or Seller's Representative Expenses (as defined below) in accordance
with Sections 4(d) and 8(b) hereof, and (ii) the actual indemnifiable Damages
required to be paid under this Agreement to the Purchaser from the Escrow Fund
shall exceed the amount available in the Escrow Fund, then the Seller shall pay
directly to the Purchaser in cash (following the complete exhaustion of the
Escrow Fund) an amount equal to the lesser of: (A) the amount by which the
actual indemnifiable Damages required to be paid under this Agreement to the
Purchaser from the Escrow Fund actually exceeds the amount available in the
Escrow Fund; or (B) the sum of the amount of any Seller's Arbitration Expenses
and Seller's Representative Expenses previously paid by the Escrow Agent to the
Seller's Representative from the Escrow Fund in accordance with Sections 4(d)
and 8(b) hereof. The amount of any payment required to be made to the Purchaser
pursuant to the preceding sentence shall be reduced by the aggregate amount of
any payment(s) previously made pursuant to this Section 4(e).
5. DISTRIBUTION OF ESCROW FUND.
(a) As soon as practicable following the delivery by the
Seller's Representative to the Purchaser and the Escrow Agent of a Response
Notice pursuant to clause "(i)" or clause "(ii)" of the first sentence of
Section 4(b) hereof containing a statement that a portion of the Escrow Fund is
to be distributed from escrow to the Purchaser, the Escrow Agent shall
distribute to the Purchaser, from the Escrow Fund, Escrow Shares and/or cash
having an aggregate combined value equal to the Undisputed Amount set forth in
such Response Notice. As soon as practicable following the delivery to the
Escrow Agent of a settlement agreement
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executed by the Purchaser and the Seller's Representative containing a
settlement of a Disputed Amount, or the delivery to the Escrow Agent of an
Arbitration Award containing a resolution of a Disputed Amount, the Escrow Agent
shall distribute to the Purchaser, from the Escrow Fund, Escrow Shares and/or
cash having an aggregate combined value equal to the dollar amount identified in
such settlement agreement or in such Arbitration Award as being payable to the
Purchaser out of the Escrow Fund. The number of Escrow Shares and/or the amount
of cash to be distributed from the Escrow Fund shall be determined in the manner
described in Sections 5(b) and 5(c) hereof.
(b) With respect to every distribution out of the Escrow Fund
(including every distribution pursuant to Sections 5(a) and 6 hereof and every
distribution in respect of Seller's Arbitration Expenses, Seller's
Representative Expenses and Defense Costs), the Seller's Representative shall
have the exclusive right to determine whether such distribution shall be in the
form of Escrow Shares or cash, or any combination thereof; and, as soon as
reasonably practicable after the Seller's Representative shall have determined
the form of such distribution, the Seller's Representative shall notify the
Escrow Agent of such determination.
(c) To the extent that any Escrow Shares are required to be
distributed to the Purchaser pursuant to the terms of this Agreement, the Escrow
Agent shall effect the distribution of such Escrow Shares to the Purchaser by
surrendering the certificate representing such Escrow Shares to the Purchaser's
transfer agent for cancellation upon receipt by the Escrow Agent from the
Purchaser's transfer agent of a copy of a letter from the Purchaser to the
Purchaser's transfer agent instructing such transfer agent to issue a new
certificate to the Escrow Agent for the number of Escrow Shares remaining after
giving effect to the distribution of those Escrow Shares required to be
distributed to the Purchaser. To the extent that any Escrow Shares are required
to be distributed to the Seller's Representative (or to any Person designated by
the Seller's Representative) pursuant to the terms of this Agreement, the Escrow
Agent shall effect the distribution of such Escrow Shares by surrendering the
certificate representing the Escrow Shares to the Purchaser's transfer agent and
instructing such transfer agent to issue and deliver to the Seller's
Representative (or to such other Person or Persons as the Seller's
Representative may designate in writing) a new certificate or new certificates
representing the number of Escrow Shares that are required to be distributed to
the Seller's Representative (or to any Person designated by the Seller's
Representative) and to reissue in the name of the Escrow Agent, and to deliver
to the Escrow Agent, a certificate representing any Escrow Shares required to be
retained in escrow after giving effect to such distribution. The value per share
of the Escrow Shares for purposes of this Agreement shall be the average of the
closing prices of Purchaser Common Stock as reported on the Nasdaq National
Market for the ninety (90) trading days immediately following the Closing Date
(adjusted, as appropriate, to reflect any stock split, reverse stock split,
stock dividend or similar transaction). The Escrow Agent may rely conclusively
on the per share value calculated as set forth herein for the purpose of
determining the number of Escrow Shares required to be distributed from the
escrow hereunder. All distributions made out of the Escrow Shares shall be
rounded to the nearest whole share. Except
6
as provided in Section 2 hereof, no party hereto shall have any right to
substitute other property for the Escrow Fund or to change the per share value
stated herein.
(d) To the extent that any cash is required to be distributed
to the Purchaser or the Seller's Representative (or to any Person designated by
the Seller's Representative) pursuant to the terms of this Agreement, the Escrow
Agent shall effect such distribution by delivering such cash directly to the
Purchaser or to the Seller's Representative (or to such other Person or Persons
as the Seller's Representative may designate in writing), as the case may be.
6. TERMINATION.
This Agreement shall terminate on the Expiration Date; provided,
however, that (i) if, on the Expiration Date, there are any outstanding
unresolved indemnification claims as to which the Escrow Agent has received
Claim Notices pursuant to Section 5.7 of the Purchase Agreement and Section 4
hereof on or prior to the Expiration Date ("Unresolved Claims"), then this
Agreement shall continue in effect until the resolution of all such Unresolved
Claims; and (ii) any obligation of the Seller (or the Parent Shareholders after
the liquidation of the Seller as provided in Section 14 hereof) pursuant to
Section 4(e) hereof shall survive such termination. On the Expiration Date (or
as soon thereafter as is practicable), the Escrow Agent shall distribute to the
Seller's Representative (in accordance with Section 5(b) hereof) all of the cash
and Escrow Shares comprising the Escrow Fund; provided, however, that a portion
of the Escrow Fund equal in value to the total dollar amount of the Disputed
Amounts of all Unresolved Claims shall remain in escrow. At such time, and from
time to time, after the Expiration Date as the Escrow Agent shall receive a
settlement agreement executed by the Purchaser and the Seller's Representative
containing a settlement of an Unresolved Claim or an Arbitration Award
containing a resolution of an Unresolved Claim, the Escrow Agent shall
distribute to the Purchaser (in accordance with Section 5(b) hereof) a portion
of the Escrow Fund equal in value to the dollar amount identified in the
settlement agreement or Arbitration Award as being payable to the Purchaser out
of the Escrow Fund in respect of such Unresolved Claim. All of the cash and
Escrow Shares remaining in the Escrow Fund after resolution of all Unresolved
Claims shall be promptly distributed to the Seller's Representative (without the
need for any consent or approval on the part of the Purchaser).
7. THE ESCROW AGENT.
(a) All fees and expenses of the Escrow Agent in connection
with its performance of this Agreement shall be borne and paid exclusively by
the Purchaser (within thirty (30) days after receipt of appropriate invoices
from the Escrow Agent). Under no circumstances shall any fees, expenses or other
amounts that may be payable to the Escrow Agent be paid by the Seller or the
Seller's Representative or from the Escrow Fund. The Escrow Agent shall not be
liable for any act or omission to act under this Agreement, except for its own
gross negligence or willful misconduct. The Escrow Agent shall not be liable
for, and the
7
Purchaser agrees to indemnify the Escrow Agent for and save it harmless from,
any claims, demands, losses or damages (including reasonable attorneys' fees and
expenses) arising out of any action taken or omitted in good faith hereunder or
upon the advice of counsel. The Escrow Agent may decline to act and shall not be
liable for any failure to act if in doubt as to its duties under this Agreement.
The Escrow Agent may act upon any instrument or signature believed by it to be
genuine and may assume that the information contained therein is true and
accurate and that any Person purporting to give any notice or instruction
hereunder, reasonably believed by it to be authorized, has been duly authorized
to do so. The Escrow Agent's duties shall be determined only with reference to
this Agreement and applicable laws, and the Escrow Agent is not charged with
knowledge of or any duties or responsibilities in connection with any other
document or agreement. The Escrow Agent is hereby authorized to disregard any
and all warnings by any of the parties hereto or by any other Person, excepting
only orders or process of courts of law, or Arbitration Awards made pursuant to
Section 4(d) hereof, and is hereby expressly authorized to comply with and obey
orders, judgments or decrees of any court or Arbitration Awards. In case the
Escrow Agent obeys or complies with any such order, judgment or decree of any
court or any Arbitration Award, the Escrow Agent will not be liable to any of
the parties hereto or to any other Person by reason of such compliance,
notwithstanding the fact that any such order, judgment, decree or Arbitration
Award may be subsequently reversed, modified, annulled, set aside or vacated or
found to have been entered without jurisdiction. The Escrow Agent shall not be
liable for fluctuations in the value of the Escrow Shares which might affect the
value of distributions from the Escrow Fund. The Escrow Agent shall not be
liable in the event that previous distributions from the Escrow Fund for
Seller's Arbitration Expenses, Seller's Representative Expenses or Defense Costs
result in insufficient funds in the Escrow Fund to fully pay any required
distribution to the Purchaser or the Seller's Representative.
(b) The Escrow Agent shall have the right at any time to
resign hereunder by giving written notice of its resignation to the parties
hereto, at the addresses set forth herein or at such other address as the
parties shall provide, at least thirty (30) days prior to the date specified for
such resignation to take effect. In such event the Purchaser and the Seller's
Representative shall jointly appoint a successor escrow agent within said thirty
(30) days; if the Purchaser and the Seller's Representative do not appoint a
successor escrow agent within such period, the Escrow Agent may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
escrow agent. Upon the effective date of such resignation, the Escrow Fund shall
be delivered by the Escrow Agent to such successor escrow agent or as otherwise
shall be designated in a writing jointly signed by the Purchaser and the
Seller's Representative.
(c) In the event that the Escrow Agent should at any time be
confronted with inconsistent or conflicting claims or demands by the parties
hereto, the Escrow Agent shall have the right to interplead said parties in and
deposit the Escrow Fund with any court of competent jurisdiction and request
that such court determine the respective rights of such parties with respect to
this Agreement and the Escrow Fund and, upon doing so, the Escrow Agent shall be
8
released from any obligations or liability to any other party hereunder as a
consequence of any such claims or demands. The Purchaser shall indemnify the
Escrow Agent for and hold it harmless from any liability to any Person as a
result of such deposit and interpleader action, including any legal fees and
expenses incurred by the Escrow Agent in connection therewith.
(d) The Escrow Agent may execute any of its powers or
responsibilities hereunder, and exercise any rights hereunder, either directly
or by or through its agents or attorneys. The Escrow Agent shall not be
responsible for and shall not be under a duty to examine, inquire into or pass
upon the validity, binding effect, execution or sufficiency of this Agreement or
of any amendment or supplement hereto.
(e) The Seller hereby agrees that it is aware of and consents
to the fact that the Escrow Agent has in the past, is now, and may in the future
represent the Purchaser in other transactions as an underwriter, financial
advisor, placement agent, etc., in connection with the investment banking
activities of the Escrow Agent. The Purchaser hereby agrees that it is aware of
and consents to the fact that, along with representing it in other transactions,
the Escrow Agent has represented the Company in connection with the sale of
shares of the Company under the Purchase Agreement. Both the Purchaser and the
Seller acknowledge these conflicts of interests and potential future conflicts
of interests and, despite this, affirm their request that the Escrow Agent
accept its obligations pursuant to this Agreement.
8. SELLER'S REPRESENTATIVE.
(a) The Seller's Representative may be changed from time to
time upon not less than 5 days' prior written notice from the Seller or, if the
Seller has been liquidated, from any three Parent Shareholders, to the Purchaser
and the Escrow Agent.
(b) The Escrow Agent shall, upon receipt from time to time of
written instructions executed by the Seller's Representative (accompanied by
copies of appropriate invoices), distribute (in accordance with Section 5(b)
hereof and without deductions or set-offs of any nature) to the Seller's
Representative (or to such other Persons specified in such written
instructions), out of the Escrow Fund, Escrow Shares and/or cash equal in value
to all out-of-pocket costs and expenses (including reasonable attorneys' fees
and disbursements and reasonable travel costs of witnesses and other Persons)
incurred by the Seller's Representative, the Seller and/or the Parent
Shareholders in connection with this Agreement, including all costs and expenses
incurred by the Seller's Representative and/or the Parent Shareholders in
connection with the performance of the Seller's Representative's duties
hereunder and/or in connection with any dispute between the Purchaser and the
Seller's Representative with respect to any indemnification claim made under
Article V of the Purchase Agreement (all such out-of-pocket costs and expenses
being referred to in this Agreement as "Seller's Representative Expenses").
"Seller's Representative Expenses" shall not be deemed to include any costs or
expenses that constitute "Defense Costs" under Section 8(c) hereof. No consent
or approval of the Purchaser
9
shall be required with respect to any distribution to be made by the Escrow
Agent pursuant to this Section 8(b).
(c) If the Seller (or any of the Parent Shareholders) or the
Seller's Representative elects to defend any third party claim, action, suit or
proceeding for which indemnification may be sought under Article V of the
Purchase Agreement, the Escrow Agent shall, upon receipt from time to time of
written instructions executed by the Seller's Representative (accompanied by
copies of appropriate invoices), distribute (in accordance with Section 5(b)
hereof and without deductions or set-offs of any nature) to the Seller's
Representative (or to such other Persons specified in such written
instructions), out of the Escrow Fund, Escrow Shares and/or cash equal in value
to all out-of-pocket costs and expenses (including costs of investigation and
attorneys' fees and reasonable travel costs of witnesses and other Persons)
incurred in connection with the defense of any such claim, action, suit or
proceeding (such costs and expenses shall be referred to in this Agreement as
"Defense Costs" and shall specifically exclude any costs and expenses incurred
by the Seller's Representative in connection with the arbitration of any dispute
between the Purchaser and the Seller's Representative with respect to the
Disputed Amount of any indemnification claim made against the Escrow Agent under
Article V of the Purchase Agreement). No consent or approval of the Purchaser
shall be required with respect to any distribution to be made by the Escrow
Agent pursuant to this Section 8(c).
9. GOVERNING LAW.
This Agreement and the legal relations between the parties arising
hereunder shall be governed by and interpreted in accordance with the laws of
the State of California without regard to its conflict of law provisions, and
shall inure to the benefit of and be binding upon the successors and assigns of
the parties hereto. Any dispute arising out of or relating to this Agreement
shall be resolved through binding arbitration in accordance with the provisions
of Section 4(d) hereof.
10. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same document.
11. NOTICES.
Any notice required or permitted hereunder shall be in writing and
shall be deemed given (a) when delivered in person, (b) three business days
after delivery to an "overnight" courier, or (c) 24 hours after delivery by
facsimile transmission (to the extent receipt of such facsimile is evidenced by
a transmission report or other reasonable evidence of the successful and
accurate transmission of such notice), in each case addressed as follows:
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If To The Purchaser: Cylink Corporation
000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
With copies to: Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
X. Xxxxxxx & Co.
0 Xxxxxx Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx
Attn: Xxxx Xxxxxx
Fax: 000-0-000-0000
If To The Seller's Representative: Adv. Ze'ev May
00, Xxxxxxx Xx.
Xxx Xxxx, Xxxxxx
Fax: 000-0-0000000
With copies to: Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxx
Fax: (000) 000-0000
Shinar, Shachor, Weissberger
0 Xxxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx 00000, Israel
Attn: Xxxxx Xxxxxx
Fax: 000-0-000-0000
If To The Escrow Agent: Xxxxxxxxx & Xxxxx LLC
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
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Addresses may be changed by written notice given pursuant to this Section. Any
notice given hereunder may be given on behalf of any party by his or its counsel
or other authorized representative.
12. ENTIRE AGREEMENT.
This Agreement, together with the Purchase Agreement, constitutes the
full and entire understanding and agreement among the parties regarding the
matters set forth herein and therein and supersedes all prior agreements and
understandings, both written and oral, among or between any of the parties with
respect to the subject matter hereof and thereof.
13. AMENDMENTS AND WAIVERS.
This Agreement may not be amended, modified or supplemented, except in
a written amendment signed by all parties hereto. No failure on the part of any
party to exercise any power, right, privilege or remedy under this Agreement,
and no delay on the part of any party in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. No party shall be deemed to have
waived any claim arising out of this Agreement, or any power, right, privilege
or remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
14. LIQUIDATION OF THE SELLER.
The Purchaser acknowledges and agrees that nothing contained in this
Agreement shall be construed or shall operate to prevent the Seller from
dissolving, winding up, liquidating or terminating its existence at any time
after the date hereof. Notwithstanding anything to the contrary contained in
this Agreement, in the event of the dissolution of the Seller, the Parent
Shareholders (and their successors and assigns) shall succeed to, and shall be
entitled to exercise and enforce, all of the rights of the Seller under this
Agreement. The Parent Shareholders will, as a condition to such dissolution and
liquidation, be bound by Section 4(e) of this Agreement as, and only to the
extent, provided in Section 10 of that certain Parent Shareholders Indemnity
Agreement of even date herewith among the Purchaser, the Parent Shareholders and
the Seller.
15. MISCELLANEOUS.
For purposes of this Agreement, "Person" shall mean any individual,
corporation,
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partnership, limited liability company, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental or
regulatory body or other entity.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first stated above.
CYLINK CORPORATION
By: /s/ Xxxx X. Xxxx, Xx.
------------------------------------
Xxxx X. Xxxx, Xx.
Vice President, Strategy and
Business Development
SELLER'S REPRESENTATIVE
/s/ Ze'ev May
-----------------------------------------
Adv. Ze'ev May
XXXXXXXXX & XXXXX LLC
as Escrow Agent
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Xxxx Xxxxxxxxx, Managing Director
A.R. DATA SECURITY LTD.
By /s/ Xxxxx Xxxxxx
---------------------------------
Xxxxx Xxxxxx, Director
By: /s/ Xxxxx Xxxxx
---------------------------------
Xxxxx Xxxxx, Director
By: /s/ Xxxx Fiat
---------------------------------
Xxxx Fiat, Director
By: /s/ Oded Koritshoner
---------------------------------
Oded Koritshoner, Director
By: /s/ Zohar Tal
---------------------------------
Zohar Tal, Director
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