Exhibit 99.3
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement"), dated as of January 18,
2001, (the "Closing Date"), is among SONUS NETWORKS, INC., a Delaware
corporation (the "Parent"), and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, in their
respective capacity as representatives of the holders of shares of Company
Common Stock under Section 8 of this Escrow Agreement and pursuant to the Merger
Agreement (as defined below) (in such capacity, collectively, the "Stockholder
Representatives"), and THE CHASE MANHATTAN BANK, a New York State Bank, as
escrow agent (in such capacity, the "Escrow Agent"). Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the Merger
Agreement. The Escrow Agent (i) has not received a copy of, (ii) has not
reviewed, (iii) is not a party to, and (iv) will not be held responsible under
the terms of the Merger Agreement.
WHEREAS, the Parent, STORM MERGER SUB, INC., a Texas corporation and wholly
owned subsidiary of the Parent ("Merger Sub"), and TELECOM TECHNOLOGIES, INC., a
Texas corporation (the "Company"), have entered into an Agreement and Plan of
Merger and Reorganization, dated as of November 2, 2000 (the "Merger
Agreement"), pursuant to which Merger Sub shall be merged with and into the
Company (the "Merger"), with the Company being the surviving corporation, and
all of the outstanding shares of Class A common stock, no par value, and Class B
common stock, no par value, of the Company (collectively, the "Company Common
Stock"), will be exchanged into the right to receive shares of the common stock
of the Parent, par value $0.001 per share (the "Parent Common Stock");
WHEREAS, pursuant to the Merger Agreement, the Parent shall deposit in
escrow with the Escrow Agent an aggregate of 5,400,000 of the shares of Parent
Common Stock that would be issuable to the Company Stockholders in the Merger,
if shares of Parent Common Stock were not to be issued into escrow pursuant to
the Merger Agreement, to be held and distributed by the Escrow Agent on the
terms and conditions set forth herein; and
WHEREAS, certain of the shares of Parent Common Stock that would be
distributable to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ in their capacities as
stockholders of the Company (together, the "Principal Stockholders") from the
escrow established hereby will be distributed instead into a separate Option
Plan Funding and Escrow Agreement, dated as of the date hereof, among the
Parent, the Principal Stockholders and the Escrow Agent (the "Option Escrow
Agreement"), to fund the exercise of certain options granted by the Company
prior to the Closing.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth in this Escrow Agreement, the parties hereto hereby agree as follows:
1. DEPOSIT OF ESCROWED SHARES. On the Closing Date, the Parent shall
deposit with the Escrow Agent stock certificates representing 5,400,000 shares
of Parent Common Stock, as escrow agent under this Escrow Agreement, that would
otherwise be issuable to the Company Stockholders on the Closing Date if shares
of Parent Common Stock were not to
be issued into escrow pursuant to the Merger Agreement (the "Escrowed Shares"),
together with stock powers duly executed in blank by each Company Stockholder.
An aggregate of 1,200,000 of such shares of Parent Common Stock shall be held as
security for the indemnification obligations of the Company arising under
Section 14 of the Merger Agreement (the "Indemnity Shares"), and an aggregate of
4,200,000 of such shares of Parent Common Stock shall be held for contingent
issuance to all of the Company Stockholders upon satisfaction of certain
conditions set forth herein (the "Earn-Out Shares"), or release to the Parent,
in the event that such conditions are not satisfied. Attached as Exhibit A
hereto (as the same may be amended from time to time, the "Ownership Table") is
a schedule of the respective interests of each Company Stockholder in the
Escrowed Shares, together with the addresses of record of such Company
Stockholders. The Escrow Agent (i) shall establish on its books an account (the
"Escrow Account") in which the Escrow Agent shall note the number of shares of
Parent Common Stock or other property from time to time held by the Escrow Agent
pursuant hereto, and the Company Stockholders to whom such Escrowed Shares and
other property, if any, is attributable and (ii) shall update the Ownership
Table accordingly.
2. RELEASE OF ESCROWED SHARES AND OTHER PROPERTY.
(a) (i) Upon satisfaction of either of the two conditions set forth on
Schedule 2(a)(i) attached hereto, the Stockholder Representatives shall be
entitled to deliver written notice to the Escrow Agent, with a copy to the
Parent (the "First Release Notice"), indicating whether, in the exercise of
their reasonable judgment, they believe such condition has been satisfied, and
setting forth a description in reasonable detail of the facts and circumstances
that evidence such satisfaction. The Escrow Agent shall be entitled to rely on
the facts set forth in the First Release Notice and shall not be responsible for
independently determining or confirming whether such conditions have been met.
The First Release Notice shall also contain a demand for release to the Company
Stockholders in the respective amounts set forth therein of an aggregate of
1,800,000 of the Earn-Out Shares (the "First Release Shares"). If the Escrow
Agent does not receive prior to 5:00 p.m., Houston, Texas time, on the twentieth
(20th) day after receipt by the Escrow Agent of a copy of the First Release
Notice, a notice from the Parent, with a copy to the Stockholder Representatives
(a "First Release Challenge Notice"), challenging whether the conditions set
forth on Schedule 2(a)(i) have been satisfied, on the twenty-first (21st) day
after receipt of the First Release Notice, the Escrow Agent shall release from
escrow such First Release Shares and deliver, subject to the last sentence of
this Section 2(a)(i), to those Company Stockholders (at their respective
addresses of record set forth on the Ownership Table) to whom such First Release
Shares are attributable their respective shares of such First Release Shares as
set forth in the First Release Notice. In the event that the Escrow Agent is in
receipt of a First Release Challenge Notice prior to 5:00 p.m., Houston, Texas
time, the twentieth (20th) day after receipt of a First Release Notice, the
Escrow Agent shall not release from escrow any of the First Release Shares and
shall keep such First Release Shares in escrow until it shall have received
either (i) non-conflicting written instructions from the Stockholder
Representatives and the Parent, or (ii) a final order of an arbitrator or court
having jurisdiction over the matter and directing disposition of such First
Release Shares. If the Escrow Agent is not in receipt of a First Release Notice
prior to 5:00 p.m., Houston, Texas time, on January 15, 2002, then the Escrow
Agent on January 16, 2002 shall distribute all of the First Release Shares to
the Parent. Notwithstanding the foregoing, in the event that on or prior to 5:00
p.m., Houston, Texas time, on the twentieth (20th) day after receipt of the
First Release Notice the Escrow Agent receives
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written notice (a "Deposit Notice") from the Parent that it has determined that
a number of First Release Shares that would otherwise be distributable to the
Principal Stockholders under this Section 2(a)(i) are required to be placed into
the escrow of Parent Common Stock established under the Option Escrow Agreement
(the "Option Escrow") to maintain the "Minimum Escrow Number" therein, then such
number of Escrowed Shares set forth in such Deposit Notice that would otherwise
be distributable to the Principal Stockholders shall not be distributed to the
Principal Stockholders on such twenty-first (21st) day after receipt of the
First Release Notice, but shall instead be released into the Option Escrow to be
held and be released in accordance with the terms thereof.
(ii) The conditions set forth on Schedule 2(a)(i) hereto shall be
subject to amendment upon the mutual agreement of the Stockholder
Representatives and the Parent.
(iii) Upon satisfaction of any of the three conditions set forth on
Schedule 2(a)(iii) attached hereto in whole or in part, the Stockholder
Representatives shall be entitled to deliver notice to the Escrow Agent, with a
copy to the Parent (each a "Second Release Notice"), indicating whether, in the
exercise of their reasonable judgment, they believe that such condition has been
satisfied and, in the event such conditions have been satisfied in a manner such
that less than all of the Second Release Shares referred to below shall be
distributed to the Company Stockholders (as described on such Schedule
2(a)(iii)), a description in reasonable detail setting forth the facts and
circumstances that evidence such partial satisfaction. The Escrow Agent shall be
entitled to rely on the facts set forth in each Second Release Notice and shall
not be responsible for independently determining or confirming whether such
conditions have been met in whole or in part. Each Second Release Notice shall
also contain a demand for release to the Company Stockholders in the respective
amounts set forth therein of some or all of the 300,000 Earn-Out Shares
attributed to each such condition (up to an aggregate of 900,000 shares (such
900,000 shares, the "Second Release Shares")) to which such Second Release
Notice is applicable, in accordance with the terms of such Schedule 2(a)(iii),
which schedule shall specify how such shares shall be distributed upon
satisfaction of any condition set forth thereon in part. If the Escrow Agent
does not receive prior to 5:00 p.m., Houston, Texas time, on the twentieth
(20th) day after receipt by the Escrow Agent of a copy of any Second Release
Notice, a notice from the Parent, with a copy to the Stockholder Representatives
(any such notice, a "Second Release Challenge Notice"), challenging whether the
applicable conditions on Schedule 2(a)(iii) have been satisfied or the amount of
Second Release Shares to be distributed to the Company Stockholders pursuant
thereto, on the twenty-first (21st) day after receipt of such Second Release
Notice the Escrow Agent shall release from escrow such Second Release Shares
referenced in the Second Release Notice and deliver (i) subject to the last
sentence of this Section 2(a)(iii), to those Company Stockholders (at their
respective addresses of record set forth on the Ownership Table) to whom such
Second Release Shares are attributable their respective shares of the Second
Release Shares to be released to the Company Stockholders as set forth in the
Second Release Notice, and (ii) to the Parent, any of the remaining 300,000
Earn-Out Shares related to the condition or conditions to which such Second
Release Notice relates. In the event that the Escrow Agent is in receipt of a
Second Release Challenge Notice prior to 5:00 p.m., Houston, Texas time, on the
twentieth (20th) day after receipt of a Second Release Notice, the Escrow Agent
shall not release from escrow any Second Release Shares claimed to be eligible
for release on such notice and shall keep such Second Release Shares in escrow
until it shall have received either (i) non-conflicting written instructions
from the Stockholder Representatives and the
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Parent, or (ii) a final order of an arbitrator or court having jurisdiction over
the matter and directing disposition of such Second Release Shares. In the event
that, prior to 5:00 p.m., Houston, Texas time, on July 15, 2002, there are any
Second Release Shares that are not the subject of a Second Release Notice and
remain in the Escrow Account, such Second Release Shares shall be distributed to
the Parent on July 16, 2002. Notwithstanding the foregoing, (i) in the event
that on or prior to 5:00 p.m., Houston, Texas time, on the twentieth (20th) day
after receipt of any Second Release Notice, the Escrow Agent receives a Deposit
Notice from the Parent that it has determined that a number of Second Release
Shares that would otherwise be distributable to such Principal Stockholders
under this Section 2(a)(iii) are required to be placed into the Option Escrow to
maintain the "Minimum Escrow Number" thereunder, then such number of Escrowed
Shares set forth in such Deposit Notice that would otherwise be distributable to
the Principal Stockholders shall not be distributed to the Principal
Stockholders on such twenty-first (21st) day after receipt of the Second Release
Notice but shall instead be released into the Option Escrow to be held and
released in accordance with the terms thereof, and (ii) in no event shall more
than 900,000 Earn-Out Shares be distributed to all parties pursuant to this
Section 2(a)(iii).
(iv) If the Stockholder Representatives, acting on behalf of the
Company Stockholders, believe that the Company may have difficulty achieving
timely compliance with the conditions set forth on Schedule 2(a)(iii), or has
failed to achieve such conditions, then, upon the request of the Stockholder
Representatives, the Stockholder Representatives and the Parent shall discuss in
good faith (with no obligation on any party to agree to any modification of the
otherwise stated terms of such Schedule 2(a)(iii)), the possibility of a
mutually agreed upon modification to such conditions where such modification
would benefit all such parties. In the event that, after such discussions, there
is not mutual written agreement on a modification of such conditions, the
conditions set forth on Schedule 2(a)(iii) shall remain in full force and effect
in accordance with their stated terms.
(v) Upon initial satisfaction of any of the three conditions set forth
on Schedule 2(a)(v) attached hereto, and from time to time thereafter upon
satisfaction of any additional portion of such condition as then yet
unsatisfied, but no more frequently than once per fiscal quarter of the Parent,
the Stockholder Representatives shall be entitled to deliver notice to the
Escrow Agent, with a copy to the Parent (each, a "Third Release Notice"),
indicating whether, in the exercise of their reasonable judgment, they believe
that such condition has been satisfied in whole or in part and setting forth a
description in reasonable detail of the facts and circumstances that evidence
such satisfaction. Each Third Release Notice shall also contain a demand for
release to the Company Stockholders in the respective amounts set forth therein
of some or all of the 1,500,000 Earn-Out Shares attributed to such conditions
(the "Third Release Shares") in accordance with the terms of such Schedule
2(a)(v). If the Escrow Agent does not receive prior to 5:00 p.m., Houston, Texas
time, on the twentieth (20th) day after receipt by the Escrow Agent of a copy of
any Third Release Notice, a notice from the Parent, with a copy to the
Stockholder Representatives (any such notice, a "Third Release Challenge
Notice"), challenging whether the applicable conditions on Schedule 2(a)(v) have
been satisfied or the amount of Third Release Shares to be distributed to the
Company Stockholders pursuant thereto, on the twenty-first (21st) day after
receipt of such Third Release Notice the Escrow Agent shall release from escrow
such shares and deliver, subject to the last sentence of this Section 2(a)(v),
to those Company Stockholders (at their respective addresses of record set forth
on the Ownership Table)
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to whom such Third Release Shares are attributable their respective shares of
the Third Release Shares to be released to the Company Stockholders as set forth
in the Third Release Notice and Schedule 2(a)(v). In the event that the Escrow
Agent is in receipt of a Third Release Challenge Notice prior to 5:00 p.m.,
Houston, Texas time, on the twentieth (20th) day after receipt of a Third
Release Notice, the Escrow Agent shall not release from escrow any of the Third
Release Shares described in the Third Release Notice and shall keep such Third
Release Shares in escrow until it shall have received either (i) non-conflicting
written instructions from the Stockholder Representative and the Parent, or (ii)
a final order of an arbitrator or court having jurisdiction over the matter and
directing disposition of such Third Release Shares. In the event that, prior to
5:00 p.m., Houston, Texas time, on January 15, 2003, there are any Third Release
Shares that are not the subject of a Third Release Notice and remain in the
Escrow Account, such Third Release Shares shall be distributed to the Parent on
January 16, 2003. Notwithstanding the foregoing, (i) in the event that, on or
prior to 5:00 p.m., Houston, Texas time, on the twentieth (20th) day after
receipt of any Third Release Notice, the Escrow Agent receives a Deposit Notice
from Parent that it has determined that a number of Earn-Out Shares that would
otherwise be distributable to such Principal Stockholders under this Section
2(a)(v) are required to be placed into the Option Escrow to maintain the
"Minimum Escrow Number" thereunder, then such number of Escrowed Shares set
forth in such Deposit Notice that would otherwise be distributable to the
Principal Stockholders shall not be distributed to the Principal Stockholders on
such twenty-first (21st) day after receipt of the Third Release Notice but shall
instead be released into the Option Escrow to be held and released in accordance
with the terms thereof, and (ii) in no event shall more than 1,500,000 Earn-Out
Shares be distributed to all parties pursuant to this Section 2(a)(v).
(b) From time to time prior to 5:00 p.m., Houston, Texas time, on January
19, 2002, the Parent may deliver to the Escrow Agent and the Stockholder
Representatives a written notice (an "Indemnification Notice") requesting
distribution to the Parent of up to an aggregate of 1,200,000 Indemnity Shares
having an aggregate Average Market Price on the date of release to Parent equal
to the amount of the Losses (as defined in the Merger Agreement) specified in
such notice for which the Parent is seeking indemnification under the Merger
Agreement (the "Indemnification Claim"), along with a delivery receipt or other
appropriate proof of delivery to the Stockholder Representatives of a copy of
such Indemnification Notice. Such Indemnification Notice shall indicate which of
the Company's obligations under the Merger Agreement are the subject of such
Indemnification Claim. If the Escrow Agent does not receive a written objection
from a Stockholder Representative to such Indemnification Claim prior to 5:00
p.m., Houston, Texas time, on the thirtieth (30th) day following the date of the
Escrow Agent's actual receipt of such Indemnification Notice, then on the
thirty-first (31st) day following such actual receipt (or if the thirty-first
(31st) day is not a business day for the Escrow Agent, then on the first
business day thereafter), the Escrow Agent shall deliver to the Parent
certificates representing the number of Indemnity Shares, having a value, based
upon the Average Market Price determined at the time of delivery thereof to the
Parent, equal (as nearly as possible) to the Losses specified in the
Indemnification Notice and shall deduct from the Escrow Account that number of
Indemnity Shares so delivered to the Parent. The Indemnity Shares shall be
deducted from the Escrowed Shares held on behalf of the respective Company
Stockholders pro rata based on their respective interests in all of the Escrowed
Shares then held in the Escrow Account. The Escrow Agent shall be permitted to
request confirmation of the number of Indemnity Shares from the Parent prior to
distribution and shall not be held liable for errors made in good faith. The
Escrow Agent shall send a written confirmation of such release to the
Stockholder Representatives promptly after the
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consummation of such release. In the event that the Indemnity Shares delivered
to the Parent pursuant to this Section 2 have an aggregate Average Market Price
which exceeds the Losses specified in such Indemnification Notice by greater
than $250.00, the Parent shall deliver cash to the Escrow Agent in an amount
equal to such excess and the Escrow Agent shall deposit such cash in the Escrow
Account. Any cash so deposited in the Escrow Account may be distributed to the
Parent in settlement of future Indemnification Claims in accordance with this
Section 2 in lieu of or in addition to Parent Common Stock, and shall otherwise
be distributed pro rata to the Company Stockholders based on their respective
interests in all of the Escrowed Shares in the Escrow Account. Subject to the
last sentence of this Section 2(b) and Section 2(g) below, any Indemnity Shares
not released to Parent on January 19, 2002, and as to which no Indemnification
Notice has been delivered by Parent prior to 5:00 p.m., Houston, Texas time, on
January 19, 2002, shall be released to the Company Stockholders at their
respective addresses of record set forth on the Ownership Table. These remaining
Indemnity Shares shall be distributed to the Company Stockholders pro rata based
on their respective interests in all of the Escrowed Shares then held in the
Escrow Account. For purposes hereof, the tern "Average Market Price" shall mean
the average of the closing prices for shares of the Parent Common Stock on the
Nasdaq Stock Market or other principal exchange or market on which or in which
the Parent Common Stock is traded, for the period of five (5) consecutive
trading days ending one trading day prior to the date of release of shares of
Parent Common Stock to the Parent pursuant to this Section 2. Notwithstanding
the foregoing, in the event that prior to 5:00 p.m., Houston, Texas time, on
January 18, 2002, the Escrow Agent receives a Deposit Notice from the Parent
that it has determined that a number of Indemnity Shares that would otherwise be
distributable to such Principal Stockholders under this Section 2(b) are
required to be placed into the Option Escrow to maintain the "Minimum Escrow
Number" thereunder, then such number of Escrowed Shares set forth in such
Deposit Notice that would otherwise be distributable to the Principal
Stockholders shall not be distributed to the Principal Stockholders but shall
instead be released into the Option Escrow to be held and released in accordance
with the terms thereof.
(c) Notwithstanding anything to the contrary contained herein, the Escrow
Agent shall, upon written instruction from the Parent, retain a number of
Earn-Out Shares (which such shares shall be Earn-Out Shares not yet releasable
to the Company Stockholders, or, if insufficient non-releasable Earn-Out Shares
remain, Earn-Out Shares that would otherwise be released to Company
Stockholders) equal to the number of Indemnity Shares released to Company
Stockholders on January 19, 2002 in accordance with (b) above (such shares, the
"Second Indemnity Shares"). Such Second Indemnity Shares shall serve as security
for the Company's indemnity obligations under Article 14 of the Merger Agreement
solely with respect to alleged breaches of Sections 6.10 and 6.13 of the Merger
Agreement and that portion of the Capitalization Certificate setting forth the
number of outstanding shares of Company Common Stock and other securities of the
Company, including options, warrants and other contingent rights as of the
effective time of the Merger (the "Second Indemnity Obligations") until December
31, 2002. Subject to paragraph (d) below, from time to time prior to 5:00 p.m.,
Houston, Texas time, on December 31, 2002, the Parent may deliver to the Escrow
Agent and the Stockholder Representatives a written notice (a "Second
Indemnification Notice") requesting distribution to the Parent of up to such
number of Second Indemnity Shares having an aggregate Average Market Price on
the date of release to Parent equal to the amount of the Losses (as defined in
the Merger Agreement) specified in such notice for which the Parent is seeking
indemnification under the Merger Agreement (the "Second Indemnification Claim"),
along with
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a delivery receipt or other appropriate proof of delivery to the Stockholder
Representatives of a copy of such Second Indemnification Notice. Such Second
Indemnification Notice shall indicate which of the Company's Second Indemnity
Obligations under the Merger Agreement are the subject of such Second
Indemnification Claim. If the Escrow Agent is not in actual receipt of a written
objection from a Stockholder Representative to such Second Indemnification Claim
prior to 5:00 p.m., Houston, Texas time, on the thirtieth (30th) day following
the date of the Escrow Agent's actual receipt of such Second Indemnification
Notice, then on the thirty-first (31st) day following such actual receipt (or if
the thirty-first (31st) day is not a business day for the Escrow Agent, then on
the first business day thereafter), the Escrow Agent shall deliver to the Parent
certificates representing the number of Second Indemnity Shares, having a value,
based upon the Average Market Price determined at the time of delivery thereof
to the Parent, equal (as nearly as possible) to the Losses specified in the
Second Indemnification Notice and shall deduct from the Escrow Account that
number of Second Indemnity Shares so delivered to the Parent. The Second
Indemnity Shares shall be deducted from the respective Escrowed Shares held on
behalf of the respective Company Stockholders based on their respective
interests in all of the Escrowed Shares then held in the Escrow Account. The
Escrow Agent shall send a written confirmation of such release to the
Stockholder Representatives promptly after the consummation of such release. In
the event that the Second Indemnity Shares delivered to the Parent pursuant to
this Section 2 have an aggregate Average Market Price which exceeds the Losses
specified in such Second Indemnification Notice by greater than $250.00, the
Parent shall deliver cash to the Escrow Agent in an amount equal to such excess
and the Escrow Agent shall deposit such cash in the Escrow Account. Any cash so
deposited in the Escrow Account may be distributed to the Parent in settlement
of future Second Indemnification Claims in accordance with this Section 2 in
lieu of or in addition to Parent Common Stock, and shall otherwise be
distributed pro rata to the Company Stockholders. Subject to the last sentence
of this Section 2(c) and Section 2(g) below, any Second Indemnity Shares not
released to Parent prior to 5:00 p.m., Houston, Texas time, on December 31,
2002, or as to which no Second Indemnification Notice has been delivered by
Parent prior to 5:00 p.m., Houston, Texas time, on December 31, 2002, shall be
released to the Company Stockholders at their respective addresses of record set
forth on the Ownership Table. These remaining Second Indemnity Shares shall be
distributed to the Company Stockholders pro rata based on their respective
interests in all of the Escrowed Shares then held in the Escrow Account. Subject
to the next sentence, any Second Indemnity Shares otherwise releasable to the
Company Stockholders by virtue of such Second Indemnity Shares also constituting
Earn-Out Shares that are determined to be releasable to the Company Stockholders
pursuant to the terms of Sections 2(a)(iii) or (v) shall be released to the
Company Stockholders at their respective addresses of record set forth on the
Ownership Table on January 1, 2003 or the next business day. Notwithstanding the
foregoing, in the event that, prior to 5:00 p.m., Houston, Texas time, on the
date prior to the date on which the Escrow Agent would otherwise distribute
Second Indemnity Shares to the Principal Stockholders pursuant to this Section
2(c), the Escrow Agent receives a Deposit Notice from the Parent that it has
determined that a number of Indemnity Shares that would otherwise be
distributable to such Principal Stockholders are required to be placed into the
Option Escrow to maintain the "Minimum Escrow Number" thereunder, then such
number of Escrowed Shares set forth in such Deposit Notice that would otherwise
be distributable to the Principal Stockholders shall not be distributed to the
Principal Stockholders but shall instead be released into the Option Escrow to
be held and released in accordance with the terms thereof.
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(d) If the Escrow Agent is in actual receipt of a written objection from a
Stockholder Representative to an Indemnification Claim prior to 5:00 p.m.,
Houston, Texas time, on the thirtieth (30th) day following the Escrow Agent's
actual receipt of such Indemnification Claim, the Escrow Agent shall make no
distribution of Indemnity Shares until it shall have received either (i)
non-conflicting written instructions from the Stockholder Representative and the
Parent or (ii) a final order of an arbitrator or court having jurisdiction over
the matter and directing distribution of such Indemnity Shares. Upon receipt of
any such written instructions or order, the Escrow Agent shall release the
number of shares of Parent Common Stock to be delivered to the Parent pursuant
hereto based on the Average Market Price of the Parent Common Stock on the date
on which such release shall occur, and shall distribute the stock certificates
representing such Indemnity Shares in accordance with such written instructions
or order and shall make a notation on the Escrow Account accordingly.
(e) At any time prior to 5:00 p.m., Houston, Texas time, on December 31,
2002, the Stockholder Representatives may deliver to the Escrow Agent a written
notice (a "Stockholder Breach Notice") of any of (i) a material breach of the
covenants of the Parent in Section 10.8 of the Merger Agreement that has
satisfied the conditions for a breach thereof, and has not been cured within the
applicable period thereunder, (ii) at any time during the Earn-Out Period (as
defined in Merger Agreement) that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ is the Manager (as defined in
the Merger Agreement), the termination of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇'▇ employment with the
Company and the Parent by the Parent without "Cause", or by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for
"Good Reason" (each as defined in the Employment Agreement, dated as of the date
hereof, between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Company and the Parent, the "AA
Employment Agreement"), or (iii) at any time during the Earn-Out Period (as
defined in Merger Agreement) that ▇▇▇▇▇ ▇▇▇▇▇▇ is the Manager, the termination
of ▇▇▇▇▇ ▇▇▇▇▇▇'▇ employment with the Company and the Parent by the Parent
without "Cause", or by ▇▇▇▇▇ ▇▇▇▇▇▇ for "Good Reason" (each as defined in the
Employment Agreement, dated as of the date hereof, between ▇▇▇▇▇ ▇▇▇▇▇▇ and the
Company and the Parent, the "HA Employment Agreement"), which Stockholder Breach
Notice shall include a request for distribution to the Company Stockholders in
the respective amounts set forth therein of the then-remaining Earn-Out Shares,
along with a delivery receipt or other appropriate proof of delivery to the
Parent of a copy of such Stockholder Breach Notice. Such Stockholder Breach
Notice shall indicate which of the Parent's obligations under Section 10.8 of
the Merger Agreement are the subject of such breach, or that one of the
Principal Stockholders' employment has been terminated without "Cause" or one of
the Principal Stockholders has terminated employment with the Company and the
Parent for "Good Reason", and a brief description of the facts and circumstances
surrounding such breach or termination, including the procedures followed under
such Section 10.8 or the relevant Employment Agreement, if applicable (a
"Stockholder Breach Claim"). If the Escrow Agent is not in actual receipt of a
written notice from the Parent challenging such Stockholder Breach Claim prior
to 5:00 p.m., Houston, Texas time, on the thirtieth (30th) day following the
date of the Escrow Agent's actual receipt of such Stockholder Breach Notice,
then on the thirty-first (31st) day following such actual receipt (or if the
thirty-first (31st) day is not a business day for the Escrow Agent, then on the
first business day thereafter), subject to the last sentence of this Section
2(e), the Escrow Agent shall deliver to the Company Stockholders at their
respective addresses of record set forth on the Ownership Table the remaining
Earn-Out Shares (other than any Earn-Out Shares that also constitute Second
Indemnity Shares, which shall be held and released in accordance with Section
2(c)). Such Earn-Out Shares shall be distributed to the Company Stockholders pro
rata based on their respective
8
interests in all of the Escrowed Shares then held in the Escrow Account. The
Escrow Agent shall send a written confirmation of such release to the Parent
promptly after the consummation of such release. Notwithstanding the foregoing,
in the event that prior to 5:00 p.m., Houston, Texas time, on the date prior to
the date on which the Escrow Agent would otherwise distribute Earn-Out Shares to
the Principal Stockholders pursuant to this Section 2(e) the Escrow Agent
receives a Deposit Notice from the Parent that it has determined that a number
of Earn-Out Shares that would otherwise be distributable to such Principal
Stockholders are required to be placed into the Option Escrow to maintain the
"Minimum Escrow Number" thereunder, then such number of Escrowed Shares set
forth in such Deposit Notice that would otherwise be distributable to the
Principal Stockholders shall not be distributed to the Principal Stockholders
but shall instead be released into the Option Escrow to be held and released in
accordance with the terms thereof.
(f) If the Escrow Agent is in actual receipt of a written objection from
the Parent to a Stockholder Breach Claim prior to 5:00 p.m., Houston, Texas
time, on the thirtieth (30th) day following the date of the Escrow Agent's
actual receipt of such Stockholder Breach Claim, the Escrow Agent shall make no
distribution of any of the Escrowed Shares in respect of which such Stockholder
Breach Claim has been made (other than pursuant to Sections 2(b)-2(d)) until it
shall have received either (i) non-conflicting written instructions from the
Stockholder Representatives and the Parent or (ii) a final order of an
arbitrator or court having jurisdiction over the matter and directing
distribution of such Escrowed Shares.
(g) Notwithstanding anything to the contrary in this Escrow Agreement, in
the event that, at any time that there are Earn-Out Shares held in escrow
pursuant to this Escrow Agreement, the Parent makes a claim under Article 14 of
the Merger Agreement with respect to Losses arising from an alleged breach of
Section 6.13 in an amount that exceeds the aggregate Average Market Price of any
Indemnity Shares and Second Indemnity Shares then held pursuant to this Escrow
Agreement and not the subject of another claim under such Article 14 (an "Excess
Claim"), the Parent shall be entitled to deliver an Indemnification Notice in
accordance with the provisions of Sections 2(b) and 2(d) against such Earn-Out
Shares in the amount of such Excess Claim and such Earn-Out Shares shall be
treated as though they were Indemnity Shares under Section 2(b) and not released
pursuant to Section 2(a). Any such Earn-Out Shares shall be released to the
Parent in accordance with the terms of Section 2(b) of the Escrow Agreement
unless a timely objection to the Indemnification Notice is delivered in
accordance with Section 2(d), in which case the subject Earn-Out Shares shall be
held and released in accordance with such Section 2(d).
(h) Notwithstanding anything to the contrary set forth herein, or set forth
in the Merger Agreement, the Stockholder Representatives shall be entitled to
deliver written notice to the Escrow Agent, with a copy to the Parent (the
"Change of Control Notice"), indicating whether, in the exercise of their
reasonable judgment, they believe a change of Control of Parent (as defined
below) has occurred, and setting forth a description in reasonable detail of the
facts and circumstances of such occurrence. The Escrow Agent shall be entitled
to rely on the facts set forth in the Change of Control Notice and shall not be
responsible for independently determining or confirming whether such conditions
have been met. The Change of Control Notice shall also contain a demand for
release to the Company Stockholders in the respective amounts set forth therein
of any Escrowed Shares then held in escrow (other than Indemnity Shares) (the
"Change of Control Shares"). If the Escrow Agent does not receive prior to 5:00
9
p.m., Houston, Texas time, on the twentieth (20th) day after receipt by the
Escrow Agent of a copy of the Change of Control Notice, a notice from the
Parent, with a copy to the Stockholder Representatives (a "Change of Control
Challenge Notice"), challenging whether a Change of Control of Parent has
occurred, on the twenty-first (21st) day after receipt of the Change of Control
Notice, the Escrow Agent shall release from escrow such Change of Control Shares
and deliver to those Company Stockholders (at their respective addresses of
record set forth on the Ownership Table) to whom such Change of Control Shares
are attributable their respective shares of such Change of Control Shares as set
forth in the Change of Control Notice. In the event that the Escrow Agent is in
receipt of a Change of Control Challenge Notice prior to 5:00 p.m., Houston,
Texas time, the twentieth (20th) day after receipt of a Change of Control
Notice, the Escrow Agent shall not release from escrow any of the Change of
Control Shares and shall keep such Change of Control Shares in escrow until it
shall have received either (i) non-conflicting written instructions from the
Stockholder Representatives and the Parent, or (ii) a final order of an
arbitrator or court having jurisdiction over the matter and directing
disposition of such Change of Control Shares. For purposes of this Escrow
Agreement, "Change of Control of Parent" shall mean (i) the consummation of any
merger, consolidation, recapitalization or other similar transaction, following
which (a) less than 50.1% of the voting power and 50.1% of the equity of the
entity resulting from such transaction is held or controlled by persons or
entities who, immediately prior to the consummation of such transaction, were
equity holders of the Parent or (b) members of the Parent's Board of Directors
immediately prior to execution of the related agreement do not constitute a
majority of the board of directors of the resulting entity; (ii) the
consummation of any purchase of Parent Common Stock following which any person
or entity owns in excess of 50% of the outstanding common equity or voting power
of the Parent; (iii) the consummation of any sale by the Parent or all or
substantially all of assets of the Parent or the Company; (iv) the consummation
of any sale by the Parent of Company Common Stock in excess of 50% of the common
equity or voting power of the Company.
3. CONCERNING THE PARENT COMMON STOCK.
3.1. Conversions, Dividends, Stock Splits, Mergers, Etc.
(a) So long as any of the Escrowed Shares are held by Escrow Agent
hereunder, (i) all cash dividends and distributions paid or made in respect of
the Escrowed Shares held by Escrow Agent shall be payable to the Company
Stockholders as to whom beneficial ownership of the Escrowed Shares is
attributable in the Escrow Account, and (ii) all other dividends and
distributions paid or made in respect of the Escrowed Shares held by the Escrow
Agent (including without limitation all dividends and distributions made in
connection with any recapitalization, reclassification, split, combination or
exchange or shares) shall be held by the Escrow Agent as Escrowed Shares as
applicable. All stock dividends shall be issued in the name of the applicable
Company Stockholder and shall be endorsed in blank for transfer and deposited
with the Escrow Agent as Escrowed Shares hereunder. All cash dividends paid on
or in respect of the Escrowed Shares held by the Escrow Agent shall be added to
the Escrow Account for the accounts of the Company Stockholders on or with
respect to whose Escrowed Shares such dividends were paid.
(b) If the Parent shall enter into any transaction in which shares of
Parent Common Stock are converted into the right to receive cash, securities or
other property each
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Company Stockholder may, in its sole discretion, take all actions necessary or
advisable in connection with such transactions, including without limitation,
with respect to the execution and delivery of any letters of transmittal or
similar documents relating to such transaction and the exercise of any
dissenter's rights in respect thereof, and Escrow Agent shall cooperate with
such Company Stockholder in connection with effecting such action, including,
without limitation, by releasing directly to the Parent for conversion in
connection with such transaction any Escrowed Shares to be delivered with such
letters of transmittal. Any cash, securities or other property received by any
Company Stockholder in respect of Escrowed Shares in such a transaction shall be
deposited directly into the Escrow Account, and such Company Stockholder shall
provide stock powers, duly endorsed in blank by such Company Stockholder, with
respect thereto. All of such property shall be held and distributed as though it
were Escrowed Shares hereunder, with any such property attributable to First
Release Shares hereunder being held as such Escrowed Shares and any remaining
property being held as Second Release Shares. In addition, in the event that any
tender or exchange offer for shares of Parent Common Stock is commenced at any
time at which there remain Escrowed Shares, each Company Stockholder may, in its
sole discretion, direct the Escrow Agent to cause any Escrowed Shares
attributable to such Company Stockholder to be duly tendered into such tender or
exchange offer. Any cash, securities or other property received in respect of
such tendered Escrowed Shares shall be deposited directly into the Escrow
Account, and such Company Stockholder shall, if applicable, provide stock
powers, duly executed in blank by such Company Stockholder, with respect
thereto.
3.2. Voting Rights. All voting rights of the shares of Parent Common
Stock held by the Escrow Agent shall be vested in the Company Stockholders to
whom such shares are attributed in the Escrow Account unless and until such
shares of Parent Common Stock are released pursuant to Section 2 hereof.
3.3. Adjustment for Corporate Actions. All of the share numbers set
forth in this Escrow Agreement and the Schedules hereto reflect the capital
structure of the Parent as of the date hereof. If subsequent to that date the
outstanding shares of Parent Common Stock are increased, decreased, or exchanged
for a different number or kind of shares or other securities, or if additional
shares or new or different share or other securities are distributed with
respect to shares of Parent Common Stock or other securities through
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other distribution with respect to such share of Common
Stock, or other securities, an appropriate proportionate adjustment will be made
in such share numbers set forth herein.
4. INVESTMENT OF ESCROWED FUNDS. Until the termination of this Escrow
Agreement and the release of the Escrowed Shares and other property held by the
Escrow Agent pursuant hereto, the Escrow Agent shall invest the Escrowed Funds
in Fidelity Treasury Money Market Fund #77, unless otherwise instructed in
writing by the Stockholder Representatives, invest and reinvest any portion of
the escrowed property held by the Escrow Agent hereunder that consists of cash
or cash equivalents (the "Escrowed Funds"). Such written instructions, if any,
referred to in the foregoing sentence shall specify the type and identity of the
investments to be purchased and/or sold and shall also include the name of the
broker-dealer, if any, which the Stockholder Representatives direct the Escrow
Agent to use in respect of such investment, any particular settlement procedures
required, if any (which settlement procedures shall be consistent with industry
standards and practices), and such other information as Escrow Agent may
11
reasonably require. The Escrow Agent shall not be liable for failure to invest
or reinvest funds absent sufficient written direction. Unless the Escrow Agent
is otherwise directed in such written instructions, Escrow Agent may use a
broker-dealer of its own selection, including a broker-dealer owned by or
affiliated with the Escrow Agent or any of its affiliates. The Escrow Agent or
any of its affiliates may receive compensation with respect to any investment
directed hereunder. It is expressly agreed and understood by the parties hereto
that Escrow Agent shall not in any way whatsoever be liable for losses on any
investments including, but not limited to, losses from market risks due to
premature liquidation or resulting from other actions taken pursuant to this
Escrow Agreement. Any interest or other income earned from the investment of the
Escrowed Funds shall be immediately payable to the Company Stockholder to whom
such Escrowed Funds are attributable.
5. TAX RELATED TERMS.
5.1. Tax Reporting. 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 Escrow Agreement during
such tax year, be allocated to such person or entity, and (ii) otherwise shall
be allocated to such person or entity that receives income based on the Escrow
Funds or Escrowed Shares.
5.2. Certification of Tax Identification Number. Each of the Stockholder
Representatives and the Parent hereto agree to provide the Escrow Agent with a
certified tax identification number by signing and returning a Form W-9 (or Form
W-8, in case of non-U.S. persons) to the Escrow Agent prior to the date on which
any income earned on the investment of the Escrow Funds is credited to the
Escrow Funds. Each of the Stockholder Representatives and the Parent understand
that, in the event their tax identification numbers are not certified 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 Funds.
6. RESPONSIBILITY OF ESCROW AGENT; DISPUTES.
(a) The Escrow Agent shall not be responsible for the genuineness of
any signature or document presented to it pursuant to this Escrow Agreement and
may rely conclusively upon and shall be protected in acting upon any judicial
order or decree, certificate, notice, request, consent, statement, instruction
or other instrument believed by it in good faith to be genuine or to be signed
or presented by the proper person hereunder, or duly authorized by such person
or properly made. Notwithstanding anything to the contrary in this Escrow
Agreement, prior to taking any action hereunder, the Escrow Agent may, if in
doubt regarding its duties and obligations, seek instructions from the Parent
and the Stockholder Representatives, and if such instructions are in conflict,
the Escrow Agent may seek instructions or other relief (including but not
limited to interpleader) from a court of competent jurisdiction, and further may
request such evidence, documents, certificates or opinions as it may deem
appropriate. The Escrow Agent shall be entitled to retain counsel both to advise
it and in connection with any court action, and such counsel's reasonable
attorneys' fees shall be borne equally by the Stockholders as a group on the one
hand and the Parent on the other. The Escrow Agent shall be
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entitled to act in reliance upon the advice of counsel in all matters pertaining
to this Escrow Agreement, and shall not be liable for any action taken or
omitted by it in good faith in accordance with such advice. The Escrow Agent
shall not be responsible for any of the agreements contained herein except the
performance of its duties as expressly set forth herein. The duties and
obligations of the Escrow Agent hereunder shall be governed solely by the
provisions of this Escrow Agreement, and the Escrow Agent shall have no duties
other than the duties expressly imposed herein and shall not be required to take
any action other than in accordance with the terms hereof. The Escrow Agent
shall not be bound by any notice of, or demand with respect to, any waiver,
modification, amendment, termination, cancellation, rescission or supersession
of this Escrow Agreement, unless in writing and signed by the Parent, the
Stockholder Representatives and the Escrow Agent. In the event of any
controversy or dispute hereunder or with respect to any question as to the
construction of this Escrow Agreement, or any action to be taken by the Escrow
Agent hereunder, the Escrow Agent shall incur no liability for any action taken
or suffered ill good faith, its liability hereunder to be limited solely to
gross negligence or willful misconduct on its part. The Parent and the
Stockholder Representatives jointly and severally agree to indemnify and hold
the Escrow Agent harmless, and further to protect and defend the Escrow Agent
(with counsel selected by the Escrow Agent) against any losses, liabilities and
damages incurred by the Escrow Agent as a consequence of any action taken or
omitted to be taken by it in the performance of its obligations hereunder
(including, without limitation, the reasonable fees and disbursements of
counsel), with the exception of any losses, liabilities and damages arising from
the Escrow Agent's gross negligence or willful misconduct. The representations
and obligations of the Stockholder Representatives and the Parent to the Escrow
Agent in this Escrow Agreement shall survive the termination of this Escrow
Agreement and shall be applicable whether or not The Chase Manhattan Bank is
serving as Escrow Agent.
(b) In the event that any of the Escrowed Shares are required to be
maintained in escrow pending receipt of a final order of an arbitrator or court
having jurisdiction over a matter and directing distribution of any of the
Escrowed Shares, it is the intention of the parties hereto that the arbitrator
or court will be charged with determining whether the conditions for release of
such Escrowed Shares to the Parent or the Company Stockholders as set forth in
this Escrow Agreement or any other agreement relevant thereto, including the
Merger Agreement, the AA Employment Agreement and the HA Employment Agreement,
have been met.
7. FEES OF ESCROW AGENT. Parent hereby agrees with the Stockholder
Representatives and the Escrow Agent to pay Escrow Agent for its services
hereunder in accordance with Escrow Agent's fee schedule as attached as Schedule
7 hereto and to pay all out-of-pocket expenses reasonably incurred by Escrow
Agent in connection with the performance of its duties and enforcement of its
rights hereunder and otherwise in connection with the preparation, operation,
administration and enforcement of this Escrow Agreement, including, without
limitation, attorney's fees, brokerage costs and related expenses incurred by
Escrow Agent but specifically excluding taxes payable by the Escrow Agent with
respect to the receipt of its fees hereunder. The foregoing notwithstanding, the
Parent and the Company Stockholders shall be jointly and severally liable to
Escrow Agent for the payment of all such fees and expenses. In the event the
Parent and Stockholders for any reason fail to pay any such fees and expenses as
and when the same are due, such unpaid fees and expenses shall be charged
13
to and set-off and paid from the Escrow Account by the Escrow Agent without any
further notice.
8. NOTICES AND COMMUNICATIONS. All notices or other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or mailed by prepaid registered or certified mail (return receipt requested) or
by telecopy, cable, telegram or telex addressed as follows:
(a) If to the Stockholder Representatives, to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
telecom technologies, inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
MSD Capital, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(b) If to Parent, to:
Sonus Networks, Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
Copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
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(c) If to Escrow Agent, to:
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
-------------------------
-------------------------
-------------------------
Attention:
---------------
and if to any of the Company Stockholders, to the address set forth next to
his/her name on the Ownership Table hereto, with a copy to counsel as set forth
above.
9. TERM; AMENDMENTS; SUCCESSORS. Except as otherwise provided herein, this
Escrow Agreement shall continue until the later of June 30, 2003, or if there
are any unresolved or unpaid Indemnification Claims outstanding on such date,
the date on which such Indemnification Claims are finally determined, settled or
resolved, and the date on which all of the Escrowed Shares have been distributed
as provided in Section 2 hereof, provided that the Parent and the Stockholder
Representatives may earlier terminate this Escrow Agreement upon their mutual
written consent. This Escrow Agreement may be amended only as provided in
Section 6 hereof and shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
10. COUNTERPARTS. This Escrow Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument. In making proof of this Escrow
Agreement it shall be necessary to produce or account for only one such
counterpart signed by or on behalf of the party sought to be charged herewith.
11. SUCCESSOR ESCROW AGENT. The Escrow Agent may resign upon thirty (30)
days' prior written notice to the Parent and the Stockholder Representatives.
Upon the resignation of the Escrow Agent, the Parent and the Stockholder
Representatives shall appoint a successor escrow agent or otherwise provide for
the disposition of shares or other property held by the Escrow Agent by notice
in writing to the Escrow Agent. Escrow Agent's sole responsibility after such
30-day notice period expires shall be to hold the Escrowed Shares and Escrow
Funds (without any obligation to reinvest the same) and to deliver the same to a
designated substitute escrow agent, if any, or in accordance with the directions
of a final order or judgment of a court of competent jurisdiction, at which time
of delivery Escrow Agent's obligations hereunder shall cease and terminate. The
incumbent Escrow Agent shall deliver to the successor Escrow Agent the stock
certificates representing the Escrowed Shares and any other property held by it
in escrow hereunder, less any property sold or liquidated by it to pay its
unpaid fees and expenses, as provided in said notice.
15
12. ENTIRE AGREEMENT. This Escrow Agreement, except with respect to the
Parent and the Stockholder Representatives, contains the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby. No prior agreement, either written or oral, shall be construed to
change, amend, alter, repeal or invalidate this Escrow Agreement.
13. REPRESENTATIONS OF THE PARENT AND STOCKHOLDER REPRESENTATIVES. Each of
the Parent and each Stockholder Representative represents and warrants to the
Escrow Agent that it/he has the power and authority to enter into this Escrow
Agreement and to carry out its/his obligations hereunder, that it/he has duly
authorized, executed and delivered this Escrow Agreement, and this Escrow
Agreement is its/his valid and binding obligation.
14. GOVERNING LAW. The validity, enforceability and construction of this
Escrow Agreement shall be governed by the laws of the State of Delaware.
15. SCOPE OF UNDERTAKING. The Escrow Agent's duties and responsibilities in
connection with this Escrow Agreement shall be purely ministerial and shall be
limited to those expressly set forth in this Escrow Agreement. The Escrow Agent
is not a principal, participant or beneficiary in any transaction underlying
this Escrow Agreement and shall have no duty to inquire beyond the terms and
provisions hereof. The Escrow Agent shall have no responsibility or obligation
of any kind in connection with this Escrow Agreement or the Escrowed Shares and
Escrow Funds other than as expressly set forth herein and shall not be required
to deliver the Escrowed Shares and Escrow Funds or any part thereof or take any
action with respect to any matters that might anise in connection therewith,
other than to receive, hold, invest, reinvest and deliver the Escrowed Shares
and Escrow Funds as herein provided. Without limiting the generality of the
foregoing, it is hereby expressly agreed and stipulated by the parties hereto
that Escrow Agent shall not be required to exercise any discretion hereunder and
shall have o investment or management responsibility and, accordingly, shall
have no duty to, or liability for its failure to, provide investment
recommendations or investment advice to the Parent or Stockholders
Representative or any of them. The Escrow Agent shall not be liable for any
error in judgment, any act or omission, any mistake of law or fact, or for
anything it may do or refrain from doing in connection herewith, except for,
subject to Section 6(a) hereinabove, its own willful misconduct or gross
negligence. It is the intention of the parties hereto that the Escrow Agent
shall never be required to use, advance or risk its own funds or otherwise incur
financial liability in the performance of any of its duties or the exercise of
any of its rights and powers hereunder.
16. TERMINATION. This Escrow Agreement shall terminate upon the
disbursement, in accordance hereto, of the Escrowed Shares and Escrowed Funds in
full; provided, however, that in the event all fees, expenses, costs and other
amounts require to be paid to the Escrow Agent hereunder are not fully and
finally paid prior to termination, the provisions of Section 6(a) and 7 hereof
shall survive the termination hereof.
16
17. FUNDS TRANSFER.
(a) In the event funds transfer instructions are given (other than in
writing at the time of execution of the Escrow Agreement), whether in writing,
by telefax, or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the Parent or the Stockholder
Representatives, as applicable, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in writing
actually received and acknowledged by the Escrow Agent. The parties to this
Escrow Agreement acknowledge that such security procedure is commercially
reasonable.
(b) It is understood that the Escrow Agent and the beneficiary's bank
in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank.
The Escrow Agent may apply any of the escrowed funds for any payment order it
executes using any such identifying number, even where its use may result in a
person other than the beneficiary being paid, or the transfer of funds to a bank
other than the beneficiary's bank or an intermediary bank, designated.
18. CONFIDENTIALITY. The Escrow Agent acknowledges that the existence,
status or terms of this Agreement and the transactions contemplated hereby,
(hereinafter called "Confidential Information") are valuable, special, and
unique assets of the Parent. During the term of this Agreement and thereafter,
except as agreed to in writing by the Parent, the Escrow Agent shall not
disclose any or any part of the Confidential Information to any person, firm,
corporation, association, or any other entity for any reason or purpose
whatsoever, directly or indirectly, except as required by law or (to the extent
the Parent has received prior notice thereof and has been given an opportunity
to obtain a protective order concerning such Confidential Information) as
required in connection with litigation among the parties hereto unless and until
such Confidential Information becomes publicly known or available other than as
a consequence of a breach of the confidentiality obligations hereunder. The
Escrow Agent agrees that any breach or threatened breach of this Section 18 by
the Escrow Agent would cause not only financial harm, but irreparable harm to
the Parent; that money damages will not provide an adequate remedy. Except with
respect to willful misconduct on the part of the Escrow Agent, the sole remedy
of the Parent for breach of this Section 18 shall be to pursue an injunction
(without the necessity of posting any bond or surety) restraining the Escrow
Agent from disclosing or using, in whole or in part, any Confidential
Information.
[The remainder of this page is intentionally left blank.]
17
IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as
an instrument under seal as of the day and year first written above.
SONUS NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, President
[Signatures continue on following page(s).]
THE CHASE MANHATTAN BANK,
as Escrow Agent
Attest:
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------ ------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Assistant Vice President
& Trust Officer
[Signatures continue on following page(s).]
STOCKHOLDER REPRESENTATIVES
Attest:
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------ ----------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attest:
By:
------------------------------------ ---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
STOCKHOLDER REPRESENTATIVES
Attest:
By:
------------------------------------ ---------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attest:
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------ --------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇