JOINT PROSECUTION AND DEFENSE AGREEMENT
Exhibit
10.7
This
Joint Prosecution and Defense Agreement (the "Agreement") is made effective
as
of April 1, 2004, by and between ClearOne Communications, Inc. (“ClearOne”),
Xxxxxxx Xxxxx & Xxxxxxx (“PB&L”), Xxxxxx Xxxxxx Xxxxxx (“Xxxxxx”) and
Burbidge & Xxxxxxxx (“B&M”). Each of the foregoing are individually
referred to as a "Party" and sometimes collectively referred to as the "Parties"
throughout this Agreement.
RECITALS
X.
Xxxxxx
is
a director and shareholder of ClearOne.
B.
On
or
about February 6, 2004, Lumbermens Mutual Casualty Company (“Lumbermens”) filed
a Complaint for Declaratory Judgment in the United States District Court for
the
District of Utah against ClearOne, Xxxxxx and certain other current and former
directors of ClearOne entitled Lumbermens
Mutual Casualty Company v. ClearOne Communications, Inc.,
Case
No. 2:04CV0119TC (the “Insurance Litigation”).
C.
On
or
about February 9, 2004, ClearOne and Xxxxxx filed a complaint against National
Union Fire Insurance Company of Pittsburgh, Pennsylvania (“National Union”) and
Lumbermens in the United States District Court for the District of Utah entitled
ClearOne
Communications, Inc., et al. v. National Union Fire Insurance Company, et
al.,
Case
No. 2:04CV0145TS (the “Second Insurance Lawsuit”).
D.
PB&L
has entered an appearance for, and is representing, all defendants in the
Insurance Litigation other than Xxxxxx and Xxxxxxx X. Xxxxxx. PB&L is
representing ClearOne in the Second Insurance Lawsuit. B&M has entered an
appearance for and is representing Xxxxxx in the Insurance Litigation and the
Second Insurance Lawsuit.
E.
In
the
Insurance Litigation, ClearOne and Xxxxxx have asserted counterclaims against
National Union and Lumbermens. In addition, the Second Insurance Lawsuit has
been consolidated with the Insurance Litigation for all purposes. (For further
reference in this Agreement, the “Insurance Litigation” refers to all claims and
defenses therein, together with the Second Insurance Lawsuit unless otherwise
stated.)
F.
In
the
Insurance Litigation (with the consolidated claims from the Second Insurance
Lawsuit), ClearOne is pursuing claims, inter
alia,
to
recover the policy limits of ceratin policies for directors and officers
insurance issued by National Union and Lumbermens (the “Insurance Policies”) and
Xxxxxx is pursuing related claims, inter
alia,
to
recover losses which he incurred due to National Union’s and Lumbermens’s
refusal to pay the policy limits under the Insurance Policies to ClearOne which
refusals caused ClearOne to enter into a settlement agreement which diluted
his
shareholdings in ClearOne. On the other hand, National Union and
1
Lumbermens
allege in the Insurance Litigation, inter
alia,
that
they have properly rescinded the Insurance Policies due to alleged fraud in
procuring the Insurance Policies.
G.
The
joint
prosecution of the Company’s claims and Xxxxxx’x claims in the Insurance
Litigation, and defense of National Union’s and Lumbermens’ claims in the
Insurance Litigation, is in the best interests of ClearOne and Xxxxxx and will
likely lead to an economy of litigation expenses in the Insurance
Litigation.
H.
Due
to
their prior and current representation of ClearOne and Xxxxxx in litigation
concerning matters which are also the subject of the Insurance Litigation,
PB&L and B&M are familiar with the underlying facts in the Insurance
Litigation and are able to work as co-counsel in the Insurance Litigation.
I.
Through
March 30, 2004, Xxxxxx has paid the attorney’s fees and costs of B&M in
connection with Insurance Litigation. On the other hand, ClearOne has paid
the
attorney’s fees and costs of PB&L in connection with the Insurance
Litigation.
J.
ClearOne,
Xxxxxx, PB&L and B&M now wish (1) to reach certain agreements concerning
the joint prosecution of ClearOne’s and Xxxxxx’x claims in the Insurance
Litigation and joint defense of claims made by National Union and Lumbermens
in
the Insurance Litigation, (2) to allocate certain responsibilities in the
Insurance Litigation, (3) to make certain agreements in order to protect all
applicable privileges, including the attorney/client privilege and work product
doctrine, and (4) to reach certain agreements concerning the payment of
litigation expenses, including attorney’s fees, in the Insurance Litigation.
THEREFORE,
upon the foregoing premises, which are incorporated herein by reference, and
in
consideration of the mutual covenants herein, the Parties agree as
follows:
1. Joint
Prosecution and Representation.
For
purposes of the Insurance Litigation, PB&L and B&M shall jointly
prosecute ClearOne’s and Xxxxxx’x claims in the Insurance Litigation and shall
jointly defend ClearOne and Xxxxxx with respect to claims made by National
Union
and Lumbermens in such litigation. PB&L and B&M shall divide and
allocate duties and responsibilities for pre-trial activities (including
discovery), as well as for trial in a cost efficient manner (but in a manner
which will not impede the effective representation of ClearOne and Xxxxxx).
In
connection with such joint representation, B&M may make formal appearances
for ClearOne and PB&L may make formal appearances for Xxxxxx.
2. Conflicts
of Interest.
There
is a potential for a conflict of interest arising from PB&L’s and B&M’s
joint and concurrent representation of ClearOne and Xxxxxx. In particular,
and
among various potential conflicts, ClearOne and Xxxxxx may have or may develop
adverse positions with respect to the division of any proceeds received by
settlement, or otherwise, from the Insurance Litigation. When any conflicts
of
interests arise between ClearOne and Xxxxxx in connection with the Insurance
Litigation, PB&L and B&M shall undertake to notify ClearOne
2
and
Xxxxxx of the existence of such conflict(s) of interest. In the event of any
such conflicts, PB&L shall represent ClearOne solely with respect to any
conflict and B&M shall represent Xxxxxx solely with respect to such
conflict. Accordingly, ClearOne and Xxxxxx waive any actual or potential
conflict of interest by virtue of the joint representation set forth in Section
1, above.
3. Payment
of Litigation Expenses.
Unless
and until this Agreement is terminated by any of the Parties hereto in
accordance with Section 9, below, ClearOne shall pay all litigation expenses,
including attorney’s fees, of PB&L and B&M in the Insurance
Litigation.
4. Cooperation.
ClearOne and Xxxxxx agree to cooperate with PB&L and B&M in connection
with the Insurance Litigation by (i) making themselves and persons in their
employ and control available to PB&L and B&M for interviews, for
deposition testimony and for trial in the Insurance Litigation and (ii) making
documents within their possession or control available to PB&L and B&M
for purposes of the Insurance Litigation. It is expressly anticipated that
Xxxxxx will have confidential communications with PB&L and that ClearOne and
its officers, directors and employees will have confidential communications
with
B&M; it is the express intent of the Parties that such communications will
be protected by the attorney/client privilege.
5. Joint
Litigation Materials.
The
Parties agree to share Joint Litigation Materials (as defined below) protected
by the attorney-client privilege, the work product doctrine, and all other
applicable privileges, protections, doctrines, or any other immunity otherwise
available, in order to assert mutually common and/or joint claims and defenses
that are or may be asserted in the Insurance Litigation. To further their common
interests, the Parties intend to exchange privileged and work product
information, orally, electronically, and in documents. The Parties intend to
share draft pleadings and memoranda, and other information that may or may
not
include factual analyses, mental impressions, reports of witness interviews,
and
other similar information (collectively, “Joint Litigation Materials”). The
Parties would not exchange any of the other Parties such Joint Litigation
Materials but for their mutual and common interests in the Insurance Litigation,
but for the undertakings in this Agreement and but for the understanding that
by
doing so they do not waive any attorney/client privilege, work product privilege
or any other applicable privilege. The Parties agree that in the exchange of
Joint Litigation Materials among the Parties to this Agreement they shall
continue to protect the confidentiality of the Joint Insurance Materials or
will
not waive any applicable privilege, protection or immunity.
6. Privilege.
The
Joint Litigation Materials which the Parties intend to exchange between and
among the Parties to this Agreement are privileged from disclosure to adverse
or
other third parties as a result of the attorney-client privilege, the
joint-defense privilege, the work product doctrine, and other applicable
privileges or protections. By this Agreement, the Parties state that in the
pursuit of their common interests in of the Insurance Litigation they do not
intend to waive any applicable privileges and they intend to preserve to the
maximum extent permitted by applicable law the attorney-client privilege, the
work-product doctrine and all other privileges or protections which they may
have. The disclosure of Joint Litigation Materials by a receiving
3
Party
does not constitute a waiver of any attorney/client privilege, work product
privilege or any other applicable privilege held by the producing Party.
7. Waiver.
Neither
ClearOne nor Xxxxxx shall have authority to waive any applicable privilege
or
doctrine for conversations, matters or materials exchanged or developed during
the pendency of this Agreement on behalf of the other without the other’s
consent; nor shall any waiver of an applicable privilege or doctrine by the
conduct of any Party be construed to apply to any other Party.
8. Non-Disclosure.
The
Parties shall not disclose any Joint Litigation Materials, and any other
conversations, matters of materials otherwise protected by any applicable
privileges or doctrines, to any third persons (other than those working with
or
on behalf of the Parties for purposes of the Insurance Litigation) without
the
consent of both ClearOne and Xxxxxx. This obligation survives any termination
of
this Agreement pursuant to Section 9, below.
9. Termination.
Any
Party to this Agreement may terminate this Agreement by giving written notice
to
all other Parties. In the event of termination of this Agreement, Xxxxxx hereby
waives any right to preclude PB&L from representing ClearOne in the
Insurance Litigation or in any other matter or dispute (even if adverse to
Xxxxxx) on the grounds of PB&L’s representation of Xxxxxx pursuant to this
Agreement; likewise, ClearOne hereby waives any right to preclude B&M from
representing Xxxxxx in the Insurance Litigation or in any other matter or
dispute (even if adverse to ClearOne) on the grounds of B&M’s representation
of ClearOne pursuant to this Agreement. Notwithstanding any termination of
this
Agreement, all parties shall continue to be bound by this Agreement with regard
to any Joint Litigation Materials and matters protected by the attorney/client
privilege disclosed to the Parties.
10. Severability.
If any
provision of this Agreement is invalidated, the remainder of this Agreement
shall be fully enforceable.
11. Enforcement.
The
Parties agree that a breach of the provisions of this Agreement by a Party
will
cause irreparable harm to the other Parties and therefore agree that injunctive
relief is an appropriate means to enforce this Agreement. The Parties further
agree that this paragraph is not intended to limit the rights or remedies of
the
Parties in the event of a breach of the Agreement.
12. Modification.
This
Agreement may be modified, amended, or supplemented only by a writing signed
by
all Parties to this Agreement.
13. No
Admission.
In the
event of any adversarial action, proceeding or litigation between any of the
Parties, no Joint Litigation Materials, as defined here, that have been
disclosed pursuant to this Agreement, shall be used or construed to constitute
an admission against interest by any Party or to alter or adversely affect
any
rights, claims, defenses or other relations as among any of the Parties. In
any
such adversarial action, proceeding or litigation
4
between
any of the Parties, the Joint Litigation Materials may only be used if such
are
part of the public record of any proceeding or are otherwise discoverable.
14. Substitution
of Counsel.
If
ClearOne or Xxxxxx retains new counsel for the Insurance Litigation other than
PB&L and B&M, the Joint Litigation Materials shall be provided to such
new counsel when and only when new counsel provides written assurance to
ClearOne and Xxxxxx , in a form acceptable to ClearOne and Xxxxxx, that such
new
counsel will protect the confidentiality of the Joint Litigation Materials
and
matters protected by the attorney/client privilege and work product doctrine
in
accordance with the provisions of this Agreement.
15. Headings.
The
headings in this Agreement are intended solely as a convenience and shall not
control or in any way affect the meaning or interpretation of any provision
of
this Agreement.
16. Governing
Law.
This
Agreement shall be governed by the laws of the State of Utah.
|
/s/
Xxxxxx Xxxxxx Xxxxxx
_____________________________________
XXXXXX
XXXXXX XXXXXX
|
CLEARONE
COMMUNICATIONS, INC., a Utah corporation
By:
/s/ Xxxxxxx X.
Call
Xxxxxxx
X. Call, VP, Human Resources
|
|
BURBIDGE
& XXXXXXXX
By:
/s/ Xxxxxxxxx X.
Xxxxx
Xxxxxxxxx
X. Xxxxx
|
XXXXXXX
XXXXX & XXXXXXX
By:
/s/ Xxxxxxx
Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxx
|
FIRST
AMENDMENT TO JOINT PROSECUTION AND
DEFENSE
AGREEMENT
This
First Amendment to the Joint Prosecution and Defense Agreement (the "Amendment")
is made effective retroactively to April 1, 2004, by and between ClearOne
Communications, Inc. (“ClearOne”), Xxxxxxx Xxxxx & Xxxxxxx (“PB&L”),
Xxxxxx Xxxxxx Xxxxxx (“Xxxxxx”) and Burbidge & Xxxxxxxx (“B&M”). Each of
the foregoing are individually referred to as a "Party" and sometimes
collectively referred to as the "Parties" throughout this
Agreement.
RECITALS
A.
Effective
April 1, 2004, ClearOne, Xxxxxx, PB&L and Burbidge & Xxxxxxxx entered
into a Joint Prosecution and Defense Agreement (the “JPDA”).
B.
In
order
to resolve an ambiguity in the JPDA, the parties have agreed to enter into
this
Amendment.
1. Amendment.
Section
3 of the JPDA is hereby amended to read in its entirety as follows:
Payment
of Litigation Expenses.
Unless
and until this Agreement is terminated by any of the Parties hereto in
accordance with Section 9, below, ClearOne shall pay all litigation expenses,
including attorney’s fees, of PB&L and B&M in the Insurance Litigation
except for litigation expenses which are solely related to Xxxxxx’x claims in
the Insurance Litigation.
2. Except
as
expressly amended herein, the parties re-affirm the JPDA.
|
/s/
Xxxxxx Xxxxxx Xxxxxx
_____________________________________
XXXXXX
XXXXXX XXXXXX
|
CLEARONE
COMMUNICATIONS, INC., a Utah corporation
By:
/s/ Zee Hakimoglu___________________
Zee
Hakimoglu, Chief Executive Officer
|
|
BURBIDGE
& XXXXXXXX
By:
/s/ Xxxxxxxxx X.
Xxxxx
Xxxxxxxxx
X. Xxxxx
|
XXXXXXX
XXXXX & XXXXXXX
By:
/s/ Xxxxxxx
Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxx
|
