SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 31, 2000
ePhone Telecom, Inc.
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(Exact name of registrant as specified in its charter)
Florida
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(State or other jurisdiction of incorporation)
98-0204749
000-27699 Not Applicable
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(Commission File Number) (IRS Employer Identification Number)
Suite 1000, 355 Burrard Street, Vancouver B.C., Canada V6C 2G8
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(Address of Principal Executive Offices)
(604) 482-6166
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(Telephone Number, Including Area Code)
(Not Applicable)
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
(1) Strategic Alliance.
ePhone Telecom, Inc. (the "Company") made a public announcement on
April 5, 2000 of its strategic alliance with Comdial Corporation ("Comdial") and
Array Telecom Corporation ("Array Telecom"), a wholly owned subsidiary of
Comdial. The public announcement was made by means of a news release, the text
of which is set forth in Exhibit 99.1 hereto.
The terms of the strategic alliance are embodied in a strategic
alliance agreement (the "Agreement"), set forth as Exhibit 10.1 hereto, and a
related licensing agreement (the "License"), set forth as Exhibit 10.2 hereto.
In connection with the Agreement and the License, the Company made
an initial payment to Comdial of $2.65 million. As part of the Agreement, the
Company received the fixed assets of Array Telecom and will assume the lease for
Array Telecom's Herndon, Virginia facilities. The License grants the Company an
exclusive license for all Voice over Internet Protocol (VoIP) technology that
has been developed by Array Telecom for a period of five years.
(2) Special Warrants Offering.
On March 7, 2000, the Company finalized an Agency Agreement with Groome
Capital.com Inc. of Canada ("Groome"). Groome agreed to act as the Company's
agent to offer in a private placement, primarily in Canada, but also globally --
excluding the United States -- up to 16,363,635 Special Warrants at and for a
price of $1.10 per Special Warrant. Each Special Warrant entitles the holder to
receive at no cost, one Unit ("Unit"). Each Unit is comprised of one share of
common stock of the Company and one warrant ("Warrant"). The Warrant entitles
the holder to purchase an additional share of the Company during a term of 24
months at and for a price of $1.60 per share. The offering has no minimum
subscription. The Company will pay Groome commissions of 8% of the gross
proceeds received by the Company from the sale of the Special Warrants. Groome
will also receive as compensation:
(a) Units equal to 8% of the number of Units sold pursuant to the private
placement offering; and
(b) A 24 month option to purchase up to a further 250,000 shares of common
stock of the Company exercisable at a price of $0.60 per share.
On March 31, 2000 the Company received $8,636,363 from the sale of the
first tranche Special Warrants by Groome.
(3) Cautionary Factors.
The attached press release contains forward-looking statements which
involve a number of risks and uncertainties. The Company cautions readers that
any forward-looking information is not a guarantee of future performance and
that actual results could differ materially from those contained in the
forward-looking information as a result of various factors including, but not
limited to, the following: the effect of changing economic conditions, trends in
the development of the Internet as a commercial medium and carrier of telephony
traffic, market acceptance risks, technological development risks, seasonality
and other risk factors.
Item 7. Financial Statements and Exhibits.
The following exhibits are filed as a part of this report:
Exhibit No.
10.1 Strategic Alliance Agreement. Filed herewith.
10.2 License Agreement. Filed herewith.
99.1 News release. Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed on their behalf
by the undersigned hereunto duly authorized.
ePHONE TELECOM, INC.
By /s/ Robert Clarke
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Robert Clarke
Date: April 17, 2000
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EXHIBIT INDEX
Exhibit No. Description
10.1 Strategic Alliance Agreement. Filed herewith.
10.2 License Agreement. Filed herewith.
99.1 News release. Filed herewith.
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STRATEGIC ALLIANCE AGREEMENT
AMONG
ARRAY TELECOM CORPORATION,
EPHONE TELECOM, INC.
AND
COMDIAL CORPORATION
This Strategic Alliance Agreement (the "Agreement") is made as of March
31, 2000, between ARRAY TELECOM Corporation, a corporation incorporated under
the laws of the State of Delaware and having its principal office at 1145
Herndon Parkway, Herndon, Virginia 20170 ("Array"), ePHONE TELECOM, INC., a
corporation incorporated under the laws of the State of Florida and having its
principal office at 355 Burrard Street, Suite 1000, Vancouver, British Columbia,
Canada V6C 2G8 ("ePHONE"), and COMDIAL CORPORATION, a corporation incorporated
under the laws of the State of Delaware and having its principal office at 1180
Seminole Trail, Charlottesville, Virginia 22906 ("Comdial").
RECITALS
WHEREAS, ePHONE is in the business of providing certain
telecommunications services, including international long distance services that
allow users to perform phone-to-phone one step dialing via Voice over Internet
Protocol;
WHEREAS, Array has developed certain software products, including
VoipGate, Array Version 2 and the Array 3000 family of products, and owns
certain related assets;
WHEREAS, Comdial owns all of the outstanding capital stock of Array;
and
WHEREAS, Array has agreed to sell, and ePHONE has agreed to purchase,
all of Array's physical assets, and Array has agreed to grant to ePHONE a
license in the form of Exhibit B to this Agreement to, among other things,
VoipGate, Array Version 2 and the Array 3000 family of products.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, agreements and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE 1.
SALE AND PURCHASE OF ASSETS
Section 1.1 Sale and Purchase of Assets. Subject to the terms and conditions of
this Agreement, on the Closing Date (hereinafter defined) Array shall sell,
transfer, convey and deliver to ePHONE, and on the Closing Date ePHONE shall
purchase and acquire from Array, the fixed assets of Array used in its business
and listed in Schedule 1 (the "Purchased Assets"). The transfer and conveyance
of the Purchased Assets shall be made by a bill of sale (the "Bill of Sale") in
substantially the form attached hereto as Exhibit A.
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Section 1.2 Excluded Assets. The Purchased Assets to be sold and purchased
hereunder do not include cash, accounts receivable, intangible assets, patents
or patent applications, know-how, trade secrets or any other asset of Array that
is not listed in Schedule 1.
Section 1.3 No Assumption of Liabilities. ePHONE shall not assume or be
otherwise liable for any liabilities or obligations of Array related to the
Purchased Assets or otherwise, except for obligations arising after the Closing
Date under the Lease (as defined in Section 7.7).
ARTICLE 2.
LICENSE OF TECHNOLOGY
Section 2.1 License. Array shall grant to ePHONE a license to the Intellectual
Property (as such term is defined in the License Agreement) (the "Licensed
Assets") pursuant to the License Agreement in substantially the form attached
hereto as Exhibit B.
ARTICLE 3.
CONSIDERATION FOR AGREEMENT
Section 3.1 Consideration for Agreement. In partial consideration for this
Agreement and the transactions contemplated hereby, ePHONE shall pay to Array at
the Closing in cash the amount of $2,650,000.
Section 3.2 Royalty Payments. ePHONE shall make royalty payments to Comdial
pursuant to the terms of the License Agreement.
ARTICLE 4.
REPRESENTATIONS BY ARRAY
Section 4.1 Organization; Qualification. Array is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all necessary corporate power and authority to own its assets and carry
on its business as it is presently being conducted. Array is duly qualified and
in good standing to do business in each jurisdiction in which its business makes
such qualification necessary, except in those jurisdictions where failure to be
duly qualified and in good standing does not and cannot reasonably be expected
to have, in the aggregate, a material adverse effect on the Purchased Assets,
the Licensed Assets or its business. Array has heretofore delivered to ePHONE
complete and correct copies of its Certificate of Incorporation and Bylaws
currently in effect.
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Section 4.2 Authority Relative to this Agreement. Array has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
Array of this Agreement, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by the Board of Directors of
Array and no other corporate proceedings on the part of Array are necessary with
respect thereto. This Agreement has been duly executed and delivered by Array
and constitutes, and the other agreements referred to herein to which Array is a
party (collectively, the "Array Related Agreements"), when executed and
delivered by Array, will constitute, valid and binding obligations of Array
enforceable against Array in accordance with their terms, except as their terms
may be limited by (i) bankruptcy, insolvency or similar laws affecting
creditors' rights generally or (ii) general principles of equity, whether
considered in a proceeding in equity or at law.
Section 4.3 No Violation. The execution and delivery by Array of this Agreement
and the Array Related Agreements does not, and the consummation of the
transactions contemplated hereby and thereby, will not (i) violate or result in
a breach of any provision of the Certificate of Incorporation or bylaws of
Array, (ii) result in a default, or give rise to any right of termination,
modification or acceleration, or the imposition of a mortgage, lien, pledge,
security interest, charge, claim, restriction or other encumbrance or other
defects in title (each an "Encumbrance") on any of the Purchased Assets or the
Licensed Assets, under the terms or provisions of any agreement or other
instrument or obligation to which Array is a party or by which Array, any of the
Purchased Assets, the Licensed Assets or its business may be bound, or (iii)
violate any law or regulation, or any judgment, order or decree of any court,
governmental body, commission, agency or arbitrator applicable to Array, any of
the Purchased Assets, the Licensed Assets or its business (other than applicable
"bulk sales" laws), excluding from the foregoing clauses (ii) and (iii) such
defaults and violations which do not and cannot reasonably be expected to have a
material adverse effect on the Purchased Assets or the Licensed Assets, or Array
or its other properties or its business.
Section 4.4 Litigation. There are no actions, suits, claims, investigations or
proceedings pending or, to the knowledge of Array, threatened against Array,
before any court, governmental body, commission, agency or arbitrator, which
have or can reasonably be expected to have a material adverse effect on the
Purchased Assets or the Licensed Assets or Array or its business, or which seek
to limit, in any manner, the right of ePHONE to control and use the Purchased
Assets and the Licensed Assets after the consummation of the transactions
contemplated in this Agreement. Furthermore, there are no judgments, orders or
decrees of any such court, governmental body, commission, agency or arbitrator
which have or can reasonably be expected to have any such effect.
Section 4.5 Titles to Assets; Leases. Array holds good and marketable title to
all of the Purchased Assets and the Licensed Assets, free and clear of any
Encumbrances, and has the right to sell, transfer and assign the Purchased
Assets to ePHONE and license the Licensed Assets to ePHONE. All properties held
under lease by Array are held under valid, enforceable and assignable leases.
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Section 4.6 Consents and Approvals. Except to the extent that failure to obtain
such consent or approval would not have material adverse effect on the Purchased
Assets or the Licensed Assets or Array's business, and except for the consent of
Bank of America under the Credit Agreement between Bank of America and Comdial
dated as of October 22, 1998, which consent has been obtained, there is no
requirement applicable to Array to make any filing with, or to obtain the
consent or approval of, any individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
any government or political subdivision, agency or instrumentality thereof (each
a "Person") as a condition to the consummation of the transactions contemplated
by this Agreement (other than as may be required by applicable "bulk sales"
laws).
ARTICLE 5.
REPRESENTATIONS BY COMDIAL
Section 5.1 Organization and Qualification. Comdial is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all necessary corporate power and authority to own its assets
and carry on its business as it is presently being conducted. Comdial is duly
qualified and in good standing to do business in each jurisdiction in which its
business makes such qualification necessary, except in those jurisdictions where
failure to be duly qualified and in good standing does not and cannot reasonably
be expected to have, in the aggregate, a material adverse effect on its
business.
Section 5.2 Authority Relative to Agreement. Comdial has all necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Comdial of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by the Board of Directors of Comdial and no other
corporate proceedings on the part of Comdial are necessary with respect thereto.
This Agreement has been duly executed and delivered by Comdial, and constitutes
the valid and binding obligation of Comdial enforceable against Comdial in
accordance with its terms except as its terms may be limited by (i) bankruptcy,
insolvency or similar laws affecting creditors' rights generally or (ii) general
principles of equity, whether considered in a proceeding in equity or at law.
Section 5.3 No Violation. The execution and delivery by Comdial of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not, (i) violate or result in a breach of any provision of the Certificate
of Incorporation or bylaws of Comdial, or (ii) violate any law or regulation, or
any judgment, order or decree of any court, governmental body, commission,
agency or arbitrator applicable to Comdial or its business excluding such
defaults and violations which do not and cannot reasonably be expected to have a
material adverse effect on its properties or its business.
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ARTICLE 6.
REPRESENTATIONS BY EPHONE
Section 6.1 Organization and Qualification. ePHONE is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all necessary corporate power and authority to own its assets
and carry on its business as it is presently being conducted. ePHONE is duly
qualified and in good standing to do business in each jurisdiction in which its
business makes such qualification necessary, except in those jurisdictions where
failure to be duly qualified and in good standing does not and cannot reasonably
be expected to have, in the aggregate, a material adverse effect on its
properties or its business. ePHONE has heretofore delivered to Comdial complete
and correct copies of its Articles of Incorporation and Bylaws currently in
effect.
Section 6.2 Authority Relative to Agreement. ePHONE has all necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by ePHONE of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly authorized by the Board of Directors of ePHONE and no other
corporate proceedings on the part of ePHONE are necessary with respect thereto.
This Agreement has been duly executed and delivered by ePHONE and constitutes,
and the Related Agreements to which ePHONE is a party, when executed and
delivered by ePHONE, will constitute, valid and binding obligations of ePHONE
enforceable against ePHONE in accordance with their terms except as their terms
may be limited by (i) bankruptcy, insolvency or similar laws affecting
creditors' rights generally or (ii) general principles of equity, whether
considered in a proceeding in equity or at law.
Section 6.3 No Violation. The execution and delivery by ePHONE of this Agreement
does not, and the consummation of the transactions contemplated hereby will not,
(i) violate or result in a breach of any provision of the Articles of
Incorporation or bylaws of ePHONE, or (ii) violate any law or regulation, or any
judgment, order or decree of any court, governmental body, commission, agency or
arbitrator applicable to ePHONE or its business as presently conducted or as
contemplated to be conducted in the Business Plan of ePHONE, excluding such
defaults and violations which do not and cannot reasonably be expected to have a
material adverse effect on its properties or its business.
Section 6.4 Consents and Approvals. Except to the extent that failure to obtain
such consent or approval would not have material adverse effect on its
properties or its business, there is no requirement applicable to ePHONE to make
any filing with, or to obtain the consent or approval of, any Person as a
condition to the consummation of the transactions contemplated by this
Agreement.
Section 6.5 Financial Statements. ePHONE has previously furnished Comdial with
true and complete copies of (i) the audited financial statements of ePHONE for
the periods ending June 30, 1999 and December 31, 1998 and 1997, including the
notes thereto (the "Annual Financial Statements"), together with the reports on
such statements of ePHONE's independent auditors, and (ii) unaudited interim
financial statements for the eleven month period ending November 30, 1999 (the
"Interim Financial Statements"). Such financial statements present fairly the
financial position of ePHONE as of such dates and the results of its operations
and changes in its financial position for such periods and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis.
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Section 6.6 No Undisclosed Liabilities. Since November 30, 1999, and except as
previously disclosed in writing to Comdial, there has not been any change, or
development involving a prospective change, including, without limitation, any
damage, destruction or loss (whether or not covered by insurance), which affects
or can reasonably be expected to affect, the properties or business of ePHONE,
and ePHONE has not entered into any contract which can reasonably be expected to
have any such effect.
Section 6.7 Absence of Certain Changes. Except as previously disclosed in
writing to Comdial, ePHONE has not incurred any liabilities which are not
reflected in the Interim Financial Statements other than those which were
incurred subsequent to such date in the ordinary course of business and which
have not and cannot reasonably be expected to have a material adverse effect on
the properties or business of ePHONE.
Section 6.8 Absence of Litigation. There are no actions, suits, claims,
investigations or proceedings pending or, to the knowledge of ePHONE, threatened
against ePHONE, before any court, governmental body, commission, agency or
arbitrator, which have or can reasonably be expected to have a material adverse
effect or its business or which seek to limit, in any manner, the right of
ePHONE to control the Purchased Assets and the Licensed Assets after the
consummation of the transactions contemplated in this Agreement. Furthermore,
there are no judgments, orders or decrees of any such court, governmental body,
commission, agency or arbitrator which have or can reasonably be expected to
have any such effect.
Section 6.9 Business Plan. Attached hereto as Exhibit C is the current Business
Plan of ePHONE with respect to the Purchased Assets and the Licensed Assets.
ARTICLE 7.
OTHER AGREEMENTS
Section 7.1 Support for Imbedded Base. The parties hereto acknowledge that
Array's imbedded base of customers will be supported and serviced by ePHONE
following the Closing. ePHONE agrees that it will use commercially reasonable
efforts to support such imbedded base from and after the Closing Date.
Section 7.2 Investigation of Business. From the date hereof until the Closing,
each of the parties hereto will afford the other parties hereto and their
respective representatives, including attorneys and accountants, full access at
all reasonable times to its officers, employees, properties, contracts and books
and records to enable such other party to make a full investigation of its
business. Each party will also furnish each other party with such financial,
operating and other information as such party may reasonably request in making
such investigation.
Section 7.3 Confidentiality. The information which any party acquires about any
other party prior to consummation of the transactions contemplated by this
Agreement as a result of the investigations permitted hereby is termed
"Evaluation Material." Each party agrees that neither it, nor any of its
representatives, will (i) use any such material for any purpose not related to
the transactions contemplated by this Agreement nor (ii) disclose any such
material to anyone except its representatives who may need such information to
perform their respective duties and have been informed of its confidential
nature. If the transactions contemplated by this Agreement are not consummated,
each party agrees that it will return any written Evaluation Material in its
possession, or will destroy and will not retain any such material, any copies
thereof or any notes or memoranda made using such material.
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Section 7.4 Public Announcements. Prior to the Closing Date, the parties will
consult with each other before issuing any press releases or making any public
statements with respect to this Agreement or the transactions contemplated
hereby and will not issue any such press release or make any such public
statement without the prior consent of the other, except to the extent required
by law.
Section 7.5 Employee Matters; Customer Solicitation. Comdial and Array will not
object to or interfere with any efforts by ePHONE to employ the current
employees of Array. During the term of the License Agreement, neither Array nor
Comdial shall directly or indirectly induce or attempt to persuade any employee
of ePHONE to terminate his or her employment with ePHONE. During the term of the
License Agreement, neither Array nor Comdial nor any Person affiliated with
either shall directly or indirectly sell or attempt to sell (by means of
solicitation or otherwise) to any customer to which ePHONE is providing or has
provided Products and Services (as such terms are defined in the License
Agreement) any product or service which is competitive with the Products and
Services.
Section 7.6 Access to Comdial Dealer Network and Direct Sales Organization.
During the term of the License Agreement, Comdial (i) shall use commercially
reasonable efforts to assist ePHONE in distributing products and services
provided by ePHONE through its direct sales organization and (ii) shall use
commercially reasonable efforts to enable ePHONE to distribute products and
services through its network of independent telecommunications equipment
dealers.
Section 7.7 Assignment of Lease. As soon as practicable following the Closing
Date, Array shall assign to ePHONE its interests as lessee under the lease to
Array's business facility located at 1145 Herndon Parkway, Herndon, Virginia,
from W9/LWS Real Estate Limited Partnership, as lessor, dated February 23, 1999
("Lease"), and ePHONE shall, from and after the Closing Date, assume and
discharge the obligations of Array arising after the Closing Date under the
Lease. Such assignment of lease shall be made by an assignment (the "Lease
Assignment") in substantially the form of Lease Assignment attached hereto as
Exhibit D. ePHONE shall use commercially reasonable efforts to have Comdial
released from its obligations under the lease as soon as practicable following
the Closing Date.
ARTICLE 8.
CLOSING OF TRANSACTIONS
Section 8.1 Time and Place of Closing. The closing ("Closing") shall take place
at Arnold & Porter at 4:00 p.m. local time on (i) March 31, 2000, (ii) such
other date as may be agreed upon by the parties (either of which dates is
referred to in this Agreement as the "Closing Date"). If the Closing takes
place, the Closing and all of the transactions contemplated by this Agreement
shall be deemed to have occurred simultaneously and become effective at the same
time on the Closing Date.
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Section 8.2 Deliveries by Array. At the Closing, Array shall deliver to ePHONE
the following:
(a) Bill of Sale substantially in the form of Exhibit A attached hereto, duly
executed, transferring to ePHONE title to the Purchased Assets;
(b) License Agreement substantially in the form of Exhibit B attached hereto;
(c) Certified copies of the resolutions duly adopted by Array constituting all
necessary corporate authorization for the consummation by Array of the
transactions contemplated by this Agreement;
(d) A certificate dated as of a recent date from the Delaware Secretary of
State as to the good standing of Array; and
(e) Such other documents, instruments, certificates and writings as reasonably
may be requested by ePHONE at least three business days prior to Closing.
Section 8.3 Deliveries by ePHONE. At the Closing, ePHONE shall deliver to Array
or Comdial the following:
(a) Immediately available funds in the amount of $2,650,000, by wire transfer
to an account designated by Array;
(b) License Agreement substantially in the form of Exhibit B hereto;
(c) Certified copies of the resolutions duly adopted by ePHONE constituting all
necessary corporate authorization for the consummation by ePHONE of the
transactions contemplated by this Agreement;
(d) A certificate dated as of a recent date from the Florida Secretary of State
as to the good standing of ePHONE; and
(e) Such other documents, instruments, certificates and writings as reasonably
may be requested by Array at least three business days prior to Closing.
Section 8.4 Deliveries by Comdial. At the Closing, Comdial shall deliver to
ePHONE the following:
(a) License Agreement substantially in the form of Exhibit B attached hereto;
(b) Certified copies of the resolutions duly adopted by Comdial constituting
all necessary corporate authorization for the consummation by Comdial of
the transactions contemplated by this Agreement;
(c) A certificate dated as of a recent date from the Delaware Secretary of
State as to the good standing of Comdial; and
(d) Such other documents, instruments, certificates and writings as reasonably
may be requested by ePHONE at least three business days prior to Closing.
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ARTICLE 9.
MISCELLANEOUS PROVISIONS
Section 9.1 Obligations of Comdial. Comdial hereby guarantees the complete and
timely performance of the obligations of Array under this Agreement. Comdial
agrees that if Array defaults in any of its obligations under this Agreement,
ePHONE may exercise any remedies available to it to require Comdial to satisfy
such Array obligations without first being required to seek performance of such
obligations from Array.
Section 9.2 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) upon
confirmation of receipt of facsimile; (ii) one (1) business day following the
date sent when sent by overnight delivery; or (iii) five (5) business days
following the date mailed when mailed by registered or certified mail return
receipt requested and postage prepaid to the following address:
If to Array or Comdial:
Comdial Corporation
Attention: William G. Mustain
1180 Seminole Trail
Charlottesville, Virginia 22906
Phone: (804) 978-2518
Fax: (804) 978-2512
Email: [email protected]
Copy to:
McGuire, Woods, Battle & Boothe LLP
Attention: Robert E. Stroud, Esquire
Court Square Building
310 Fourth Street NE, Suite 300
Post Office Box 1288
Charlottesville, Virginia 22902-1288
Phone: (804) 977-2511
Fax: (804) 980-2272
Email: [email protected]
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If to ePHONE:
ePHONE Telecom, Inc.
Attention: Robert G. Clarke
355 Burrard Street, Suite 1000
Vancouver, British Columbia
Canada V6C 2G8
Facsimile No.: (202) 942-5999
Phone: (604) 482-6116
Fax: (604) 482-1116
Email: [email protected]
Copy to:
Arnold & Porter
Attention: Paul D. Freshour
555 Twelfth Street, N.W.
Washington, D.C. 20004-1202
Phone: (202) 942-5872
Fax: (804) 942-5999
Email: [email protected]
Section 9.3 Arbitration
(a) Any dispute, controversy or claim arising under, out of or
relating to the Agreement or the License Agreement (any "Dispute"),
shall be solely, finally and conclusively settled by arbitration in
accordance with the Commercial Arbitration Rules (the "Rules") of the
American Arbitration Association (the "AAA") in force when such
arbitration is commenced. The arbitration shall take place in
Washington, D.C. The Dispute shall be decided in accordance with the
laws of the Commonwealth of Virginia. In the event that more than one
Dispute is pending at the same time, such Disputes shall be
consolidated in a single arbitral proceeding.
(b) In any dispute between the parties hereto, the number of
arbitrators shall be three. If the parties are unable to agree on the
arbitrators, the arbitrators shall be selected in accordance with the
Rules.
(c) The parties hereto intend that the provisions to arbitrate
set forth herein be valid, enforceable and irrevocable. The
arbitrator's award shall be final and binding upon the parties. The
parties shall carry out the final order on the award without delay and
waive their right to assert any form of recourse against, or objection
or defense to such order or its enforcement insofar as such waiver can
validly be made. Judgment upon the award may be entered by any court
having jurisdiction thereof or having jurisdiction over the parties or
their assets or application may be made for judicial acceptance of the
award and an order of enforcement, as the case may be.
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(d) Each party to the arbitration proceeding shall pay the
fees and expenses of such party's attorney's and witnesses. The fees
and expenses of the arbitrator and all other expenses shall be borne by
the party that loses the arbitration. The parties agree that if it
becomes necessary for any party to enforce an arbitral award by a legal
action or additional arbitration or judicial methods, the party against
whom enforcement is sought shall pay all reasonable costs and
attorneys' fees incurred by the party seeking to enforce the award.
Section 9.4 Governing Law. This Agreement shall be governed in all respects, and
it and the transactions contemplated hereby shall be construed and interpreted,
by the laws of the Commonwealth of Virginia without regard to its choice of law
rules.
Section 9.5 Entire Agreement. This Agreement, including the Schedules, the
Business Plan of ePHONE and the Array Related Agreements attached hereto,
constitutes the entire agreement between the parties with respect to the subject
matter hereof, and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
Section 9.6 Counterpart Copies. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 9.7 No Third Party Beneficiaries This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties and their
respective successors and permitted assigns.
Section 9.8 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Any of the parties hereto shall be permitted to assign this
Agreement to a successor in interest of all or substantially all of its assets,
or to an affiliated entity.
Section 9.9 Amendments. No amendment of any provision of this Agreement shall be
valid unless the amendment shall be in writing and signed by all parties hereto.
Section 9.10 Waivers. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, regardless of whether intentional,
shall be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
Section 9.11 Severability. Any term or condition of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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Section 9.12 Construction. The parties have participated mutually in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted mutually by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
Section 9.13 Headings. The Article and Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ARE ON THE NEXT PAGE]
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IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement by its duly authorized officer as of the date first set forth
above.
ARRAY TELECOM CORPORATION
By:_______________________
Name:_____________________
Title:____________________
ePHONE TELECOM, INC.
By:_______________________
Name:_____________________
Title:____________________
COMDIAL CORPORATION
By:_______________________
Name:_____________________
Title:____________________
13
LICENSE AGREEMENT
AMONG
ARRAY TELECOM CORPORATION,
ePHONE TELECOM, INC.
AND
COMDIAL CORPORATION
This License Agreement (this "Agreement") is made as of March 31, 2000,
by and among ARRAY TELECOM CORPORATION, a corporation incorporated under the
laws of the State of Delaware and having its principal office at 1145 Herndon
Parkway, Herndon, Virginia 20170 ("Array"), ePHONE TELECOM, INC., a corporation
incorporated under the laws of the State of Florida and having its principal
office at 355 Burrard Street, Suite 1000, Vancouver, British Columbia, Canada
V6C 2G8 ("ePHONE"), and COMDIAL CORPORATION, a corporation incorporated under
the laws of the State of Delaware and having its principal office at 1180
Seminole Trail, Charlottesville, Virginia 22906 ("Comdial").
RECITALS
A. This Agreement is executed in conjunction with the Strategic Alliance
Agreement dated March 31, 2000, by and among Array, ePHONE, and Comdial (the
"Strategic Alliance Agreement"), pursuant to which, among other things, ePHONE
purchased certain of the assets of Array, excluding intellectual property
assets.
B. Array is willing to grant ePHONE a license to Array's Intellectual Property,
as hereinafter defined, on the terms and conditions set forth herein.
C. Array is a wholly owned subsidiary of Comdial. Comdial is willing to assist
ePHONE with marketing the Products and Services, as hereinafter defined, through
Comdial's existing distribution channels, which include over 2000 independent
telecommunications equipment dealers.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, agreements, and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
For purposes of this Agreement:
Section 1.1 "Copyrights" means any work containing copyrightable subject matter
that Array owns or has the right to license to others relating to Products and
Services, including without limitation works registered with the United States
Copyright Office or works for which an application to register the work with the
United States Copyright Office has been filed.
Section 1.2 "Intellectual Property" means the entire right, title, and interest
in and to all proprietary rights encompassed within the categories of
Copyrights, Know-How, and Patents, and the Mark.
Section 1.3 "Know-How" means unpatented technology, inventions, designs,
drawings, processes, recipes, formulae, data, technical information, and other
industrial, commercial property that: (i) are known to Array as of the Effective
Date; (ii) are secret, in the sense that they are not generally known or easily
accessible to others; and (iii) relate to the Products and Services. A list of
Know-How licensed hereunder is attached to this Agreement as Schedule 2 and
incorporated by reference herein.
Section 1.4 "Mark" means the common law trademark and service mark "ARRAY".
Section 1.5 "Patents" means the United States patents and design patents that
had been issued as of the Effective Date as well as United States patent
applications filed as of the Effective Date. A list of Patents licensed
hereunder is attached to this Agreement as Schedule 1 and incorporated by
reference herein.
Section 1.6 "Products and Services" means: (i) VoipGate, Array Version 2, Array
Series 3000, and any products developed from the foregoing; and (ii)
international long distance telecommunications services that allow users to
perform phone-to-phone dialing via Voice Over Internet Protocol, and related
services.
Section 1.7 Any capitalized term contained in this Agreement that is not
expressly defined herein shall be deemed to have the meaning ascribed to it by
the Strategic Alliance Agreement.
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ARTICLE 2
EFFECTIVE DATE AND TERM
Section 2.1 Effective Date. This Agreement shall be effective as of the date
first set forth above (the "Effective Date").
Section 2.2 Term. This Agreement and the licenses granted herein shall become
effective as of the Effective Date and shall remain in effect for an initial
term of five (5) years.
Section 2.3 ePHONE's Option to Renew the Agreement or to Purchase the
Intellectual Property. Upon the conclusion of the initial term of this
Agreement, ePHONE, in its sole discretion, may elect: (i) to allow the Agreement
to expire; (ii) to renew the Agreement under the identical terms and conditions
set forth hereunder for an additional term of five (5) years; or (iii) to
terminate the Agreement by purchasing the Intellectual Property.
(a) In order to exercise its option to purchase the Intellectual Property,
ePHONE must give Array and Comdial notice of its election to exercise
such option within six (6) months prior to the end of the initial term
of this Agreement. In the event ePHONE elects to exercise its option to
purchase the Intellectual Property, ePHONE shall be entitled to
purchase the Intellectual Property for the fair market value of the
Intellectual Property, determined at the time ePHONE exercises its
option to purchase the Intellectual Property. For this purpose, the
fair market value of the Intellectual Property shall be determined by
two investment bankers, one selected by Array or Comdial and the other
selected by ePHONE. If the two investment bankers are not able to agree
upon the fair market value of the Intellectual Property, the investment
bankers shall choose a third investment banker and the average of the
values asserted by the two investment bankers who assert the two
amounts closest in value shall be deemed the fair market value of the
Intellectual Property.
(b) In the event ePHONE exercises its option to purchase the Intellectual
Property, ePHONE agrees to grant Comdial and Array, and their
successors and affiliates, a nonexclusive, irrevocable, royalty free
license to the Intellectual Property.
ARTICLE 3
LICENSE TO INTELLECTUAL PROPERTY
Section 3.1 Grant of Patent License. Subject to the terms and conditions of this
Agreement, Array grants to ePHONE, and ePHONE accepts, an exclusive right and
license to the Patents to make, have made, use, and sell the Products and
Services, on a worldwide basis. ePHONE shall be entitled to sublicense, assign,
or transfer the rights granted herein without the prior written consent of
Array. The license granted herein shall terminate upon the expiration or
termination of this Agreement.
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(a) Patent License Territory. ePHONE acknowledges that the Patents cover
only the United States; practicing the technology covered by the
Patents outside of the United States will be at ePHONE's sole risk and
discretion.
(b) Patent License Term. Notwithstanding anything to the contrary provided
herein, the license to the Patents granted herein shall terminate upon
the conclusion of the term of the relevant Patent, unless sooner
terminated pursuant to the terms of this Agreement.
(c) Notice. When utilizing the Patents, ePHONE agrees that where reasonable
and practical, any patented designs, devices, objects of manufacture,
or any other patented items shall bear the appropriate patent notice.
(d) Prosecution of Patent Applications. ePHONE shall make all reasonable
efforts to assist Array or Comdial with the prosecution of any patent
applications encompassed within the definition of the Patents licensed
hereunder, including executing any necessary documents and providing
such evidence and expert assistance as ePHONE may have within its
control.
Section 3.2 Grant of Know-How License. Subject to the terms and conditions of
this Agreement, Array grants to ePHONE, and ePHONE accepts, an exclusive right
and license to the Know-How to make, have made, use, and sell the Products and
Services, on a worldwide basis. ePHONE shall be entitled to sublicense, assign,
or transfer the rights granted herein without the prior written consent of
Array. The license granted herein shall terminate upon the expiration or
termination of this Agreement.
Section 3.3 Grant of Copyright License. Subject to the terms and conditions of
this Agreement, Array hereby grants ePHONE an exclusive right and license to the
Copyrights for use in connection with selling, manufacturing, marketing or
rendering of Products and Services, on a worldwide basis. ePHONE shall be
entitled to sublicense, assign or transfer the rights granted herein without the
prior written consent of Array. The license granted herein shall terminate upon
the expiration or termination of this Agreement.
(a) Notice. When using the Copyrights, ePHONE agrees that where reasonable
and practicable, use of the Copyrights shall be accompanied by the
symbol (C), the date of copyright, and the name of the copyright owner.
Section 3.4 Grant of Mark License. Subject to the terms and conditions of this
Agreement, Array grants to ePHONE, and ePHONE accepts, an exclusive right and
license to the Mark as necessary to produce, promote, and sell Products and
Services, on a worldwide basis. ePHONE acknowledges and agrees that its use of
the Mark shall inure to Array's benefit. ePHONE shall be entitled to sublicense,
assign, or transfer the rights granted herein without the prior written consent
of Array. The license granted herein shall terminate upon the expiration or
termination of this Agreement.
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(a) Quality Control. ePHONE agrees that all Products to which the Mark is
affixed shall be formulated, manufactured, promoted, and sold or
provided in a first rate manner and all Services with which the Mark is
associated shall be rendered in a first rate manner. ePHONE understands
and agrees that Array has the right to and will monitor the quality of
Products and Services provided under the Mark. Upon written request
from Array or Comdial, ePHONE shall provide to Array and Comdial
either: (i) a reasonable number of samples of the Products to which the
Mark is affixed, or (ii) a reasonable written description of the
Services that ePHONE provides under the Mark and the manner in which
the Mark is used in connection with such Services, so that Array and
Comdial may monitor the quality of such Products or Services and
otherwise protect and maintain Array's rights in the Mark. Upon written
notice to ePHONE, representatives of Array or Comdial may visit and
inspect ePHONE's facilities in order to monitor the quality of the
Products and Services.
In the event Array or Comdial reasonably determines that
the Products sold or Services provided by ePHONE under the Mark are not
of a sufficiently high quality, Array or Comdial shall so notify ePHONE
in writing and ePHONE shall have thirty (30) days in which to (i)
reassure Array and Comdial that the quality of the Products or Services
is in fact commensurate with the specified standard or (ii) take steps
to improve the quality of the Products or Services to meet such
standard. If, at the end of such thirty (30) day period, Array or
Comdial is not reasonably satisfied that the quality of the Products
sold or Services provided by ePHONE under the Mark meets the specified
standard, Array or Comdial may terminate this Agreement upon thirty
(30) days' written notice to ePHONE.
(b) Trademark and Service Mark Notices. When affixing the Mark to Products,
ePHONE agrees that where reasonable and practicable, the Mark shall be
accompanied by the symbol (TM) on labels, packaging, and advertising
and promotional materials. When using the Mark in connection with
Services, ePHONE agrees that where reasonable and practicable, the Mark
shall be accompanied by the symbol (sm) on advertising and promotional
materials.
Section 3.5 Retention of Ownership Rights and Right to License or Assign.
Nothing in this Agreement or in ePHONE's use of the Intellectual Property shall
grant ePHONE any rights in or to the Intellectual Property other than the rights
expressly licensed hereunder. The licenses granted herein are exclusive as
between Array and unrelated third parties. Nonetheless, Array shall retain all
rights in and to the Intellectual Property, including the right to license or
assign the Intellectual Property, in whole or in part, to Comdial, to any
majority owned subsidiary of Comdial, or to any successor to Comdial's business,
provided that such license or assignment shall have no detrimental effect on
ePHONE's rights and obligations hereunder. Notwithstanding the foregoing or
anything to the contrary contained herein, neither Array nor Comdial, nor any
successor or affiliate thereof, shall be entitled to use the Mark in connection
with products or services that are marketed in direct competition with the
Products and Services.
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ARTICLE 4
ROYALTIES
Section 4.1 Royalty Payments. In partial consideration for the licenses to
Intellectual Property granted herein and for the transactions contemplated under
the Strategic Alliance Agreement, ePHONE shall pay Array, or such other entity
as Array may designate, a royalty equal to two percent (2%) (the "Royalty Rate")
of ePHONE's Consolidated Gross Sales, as hereinafter defined.
(a) The royalty amounts set forth herein shall accrue upon the recognition
by ePHONE of revenues for transactions that would be included in
Consolidated Gross Sales and shall be paid by ePHONE on a calendar
quarterly basis. For each of the first three (3) quarters of each
calendar year, such quarterly royalty amount shall be calculated at the
Royalty Rate applied to Consolidated Gross Sales during such quarter,
and shall be paid not later than forty-five (45) days after the end of
such quarter. For the fourth quarter of each calendar year, such
quarterly royalty amount shall be an amount equal to the Royalty Rate
applied to Consolidated Gross Sales for the calendar year, less the
quarterly royalty payment amounts made for the prior three (3) quarters
of that year, and shall be paid not later than ninety (90) days after
the end of such calendar year.
(b) For purposes of determining the royalty to be paid by ePHONE, the term
"Consolidated Gross Sales" shall mean all sales resulting from ePHONE's
business activities, as reflected in ePHONE's Business Plan.
(c) Each royalty payment hereunder shall be accompanied by a written report
describing the calculation of such payment. Furthermore, ePHONE agrees
to maintain complete and accurate records sufficient to substantiate
the calculation of payments made hereunder. Array or its designee may,
from time to time, inspect such records to verify the accuracy of
payments made hereunder; provided, however, that ePHONE shall receive
at least thirty (30) days written notice of such inspections and such
inspections shall take place at ePHONE's offices during ePHONE's
regular business hours. Array or its designee shall bear all costs of
such inspections, unless an inspection reveals a discrepancy of more
than three percent (3%) in ePHONE's favor between the royalty actually
paid and the royalty that should have been paid, based on ePHONE's
Consolidated Gross Sales, in which case ePHONE shall bear all costs of
the inspection that revealed the discrepancy.
(d) Notwithstanding the foregoing, ePHONE shall pay to Array or its
designee the following minimum royalty amounts:
(i) During the first year of the term of this Agreement, ePHONE
shall pay a minimum annual royalty amount of $180,000 (the
"First Year Minimum Royalty"). In the event Consolidated Gross
Sales for the first year are less than $9,000,000, ePHONE
shall pay such additional royalty amounts as shall be
necessary to cause the total royalty amount paid for such year
to be at least equal to the First Year Minimum Royalty. Such
amounts shall be paid not later than the due date for the
first quarterly royalty payment due after the close of the
first year.
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(ii) For each calendar quarter after the first year of the term of
this Agreement, ePHONE shall pay a minimum quarterly royalty
amount of $125,000 (the "Quarterly Minimum Royalty"). In the
event Consolidated Gross Sales during any quarter are less
than $6,250,000, ePHONE shall pay such additional royalty
amounts as shall be necessary to cause the total royalty
amount paid for such quarter to be at least equal to the
Quarterly Minimum Royalty. In the event any calendar quarter
shall be less than three (3) months, the Quarterly Minimum
Royalty for such quarter shall be prorated on a daily or other
appropriate basis.
Section 4.2 Non-Payment of Royalty Amounts. In the event ePHONE is unable, after
exhausting all of its consolidated cash and cash equivalent assets, to pay Array
or its designee the full amount of any royalty payment at the time the payment
is due, the following provisions shall be applicable.
(a) ePHONE shall give Array or its designee notice of ePHONE's inability to
pay any portion of any royalty payment, which notice shall be
accompanied by a written statement by ePHONE's principal lenders and
credit facilities confirming ePHONE's inability to make such payment
and the fact that ePHONE has exhausted all of its consolidated cash and
cash equivalent assets.
(b) The total unpaid amount of any royalty payment (the "Delinquent
Payment") shall accrue interest at the annual rate of ten percent (10%)
during the first year after the Delinquent Payment was due. For each
three (3) month period thereafter, for so long as any portion of the
Delinquent Payment remains unpaid, the interest rate applicable to the
Delinquent Payment will increase by one (1) percentage point for each
such three (3) month period.
(c) In its sole discretion, Array or its designee may elect to accept
ePHONE stock in lieu of the Delinquent Payment and accrued interest
thereon. If Array or its designee exercises this option, Array or its
designee shall be entitled to receive an amount of ePHONE stock
equivalent in value to the Delinquent Payment, calculated at a twenty
percent (20%) discount from the average of the closing prices of such
stock on the five (5) trading days prior to the date on which Array or
its designee elects to exercise this option. The equivalent value so
determined may be paid to Array or its designee either in ePHONE common
stock or in warrants for the purchase of ePHONE common stock, the terms
of which are reasonably satisfactory to Array or its designee, and
which provide for an exercise price of not more than one cent ($0.01)
per share. ePHONE agrees to provide Array or its designee demand and
piggy back registration rights for registration on an established stock
exchange or on the Nasdaq national market for its shares, or for the
warrants and the warrant shares to be issued upon exercise of the
warrants, and to assist in the registration process. Array shall have
at least two (2) demand registration rights for each year so long as
any of such shares, or such warrants or warrant shares, remain
unregistered. Within sixty (60) days after the Closing Date, as defined
in the Strategic Alliance Agreement, the parties agree to negotiate in
good faith to execute a registration rights agreement with terms and
conditions that are consistent with the terms of this Agreement and
that are customary and usual with respect to such agreements.
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(d) Notwithstanding any of the provisions of this Agreement, in the event
any royalty payment or portion thereof remains unpaid for one (1) year,
or Array or its designee accept warrants for such payment and the
warrants are not registered within such year, then ePHONE's license to
the Intellectual Property shall no longer be exclusive and Array shall
be entitled to license the Intellectual Property to third parties other
than ePHONE.
ARTICLE 5
OWNERSHIP AND PROTECTION OF INTELLECTUAL PROPERTY
Section 5.1 Ownership. Nothing in this Agreement or in ePHONE's use of the
Intellectual Property shall grant ePHONE any rights in or to the Intellectual
Property other than the rights expressly licensed hereunder. ePHONE acknowledges
Array's rights in the Intellectual Property. ePHONE shall not commit, or cause
any third party to commit, any act challenging, contesting, or in any way
impairing or attempting to impair Array's rights in and to the Intellectual
Property.
Section 5.2 Infringement by Third Parties. If ePHONE learns of any activity by a
third party that might constitute infringement of Array's rights in any of the
Intellectual Property, or if any third party asserts that ePHONE's use of the
Intellectual Property constitutes unauthorized use or infringement, ePHONE shall
so notify Array. Any action or litigation resulting from any claim of
infringement arising hereunder shall be handled by Array or Comdial. ePHONE
shall make all reasonable efforts to assist Array or Comdial with any such
action or litigation, including providing such evidence and expert assistance as
ePHONE may have within its control.
Section 5.3 Rights in Improvements, Developments, Enhancements, Modifications,
and Inventions.
(a) CTVoice Release 2A. Within thirty (30) days following the Effective
Date, ePHONE shall deliver to Array the source code for the product
CTVoice Release 2A, which product shall have the same functionality and
all of the capabilities of the product Array Series 3000. Array, or
such other entity as Array may designate, shall own all rights in such
source code, including without limitation all intellectual property
rights. The source code shall be included within the definition of
Intellectual Property for purposes of this Agreement, and it shall be
licensed to ePHONE pursuant to the terms and conditions hereunder.
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(i) Until the first anniversary of the Effective Date, ePHONE
shall provide to Array or its designee any improvements,
developments, enhancements, modifications, or inventions that
resolve any functional problems or other technological
difficulties with the CTVoice Release 2A product ("Bug
Fixes"). ePHONE shall own all rights in the Bug Fixes,
including without limitation all intellectual property rights.
Nonetheless, by providing Array or its designee with the Bug
Fixes, ePHONE shall be deemed to have granted Array or its
designee, and such parties' successors and affiliates, a
nonexclusive, irrevocable, royalty free license to the Bug
Fixes.
(ii) After the first anniversary of the Effective Date, ePHONE and
Array or its designee agree to negotiate in good faith
regarding the terms and conditions under which any Bug Fixes
developed, invented, or created by employees or agents of
ePHONE after the first anniversary of the Effective Date may
be licensed to Array or its designee. ePHONE shall charge
Array or its designee rates at least as low as the lowest
rates charged to third parties not affiliated with ePHONE for
such licenses.
(b) Improvements, Developments, Enhancements, Modifications, and Inventions
other than CTVoice Release 2A.
(i) If any of the employees or agents of ePHONE improves,
develops, enhances, modifies, or invents technology, works, or
other intangible property, related to or arising from the
Intellectual Property licensed hereunder, ePHONE shall own all
rights in such technology, works, or other intangible
property, including without limitation all intellectual
property rights.
(ii) If any of the employees or agents of Array or Comdial
improves, develops, enhances, modifies, or invents technology,
works, or other intangible property, related to or arising
from the Intellectual Property licensed hereunder, Array or
Comdial, as appropriate, shall own all rights in such
technology, works, or other intangible property, including
without limitation all intellectual property rights.
(iii) The parties agree to negotiate in good faith regarding the
terms and conditions under which any improvements,
developments, enhancements, modifications, or inventions
encompassed by this Section 5.3(b) may be licensed to the
other parties. The parties shall charge rates at least as low
as the lowest rates charged by the parties to unaffiliated
third parties for such licenses.
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ARTICLE 6
WARRANTIES, DISCLAIMERS, INDEMNIFICATION,
AND LIMITATION OF LIABILITY
Section 6.1 Warranties. ePHONE represents and warrants that it shall use the
Intellectual Property only in accordance with the terms and conditions of this
Agreement.
Section 6.2 Representations and Disclaimers.
(a) Array and Comdial each represent and warrant that the Patents set forth
on Schedule 1 and the Know-How set forth on Schedule 2 accurately list
all of the Intellectual Property owned by Array that has been duly
registered with, filed in, or issued by, as the case may be, the United
States Patent and Trademark Office. Array owns the entire right, title,
and interest in and to the Patents and the Know-How, including without
limitation the exclusive right to use and license the same. To the
knowledge of Array, no Person, as defined in the Strategic Alliance
Agreement, is infringing upon any of the Patents or the Know-How.
(b) The Intellectual Property constitutes all of the intellectual property
necessary to conduct the business and operations of Array as conducted
as of the Effective Date. To the knowledge of Array, there is no basis
for any claim of infringement by any Person, as defined in the
Strategic Alliance Agreement, with regard to any of the Intellectual
Property.
(c) Notwithstanding the foregoing, neither Array nor Comdial represents or
warrants that: (i) the Intellectual Property is suitable for use in
connection with Products or Services; (ii) use of the Intellectual
Property will enable ePHONE to obtain specific results; (iii) the
Intellectual Property does not infringe the rights of third parties; or
(iv) use of the Intellectual Property will not cause any loss, damage,
or injury. ePHONE will use the Intellectual Property at its own risk
and neither Array nor Comdial shall be responsible for any Products or
Services provided through the use of the Intellectual Property or for
any other exploitation of the Intellectual Property.
Section 6.3 Indemnification.
(a) ePHONE agrees to be solely responsible for, and to defend, indemnify,
and hold Array and Comdial, and any of their successors or affiliates,
harmless against any and all claims, actions, suits, liabilities,
demands, expenses (including reasonable attorneys' fees and
disbursements), losses, costs, or damages asserted against or incurred
by Array, Comdial, or any of their successors or affiliates, arising
out of or in connection with (i) Products produced or Services rendered
by ePHONE, (ii) the use of the Intellectual Property by ePHONE, or
(iii) any breach of ePHONE's obligations hereunder.
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(b) Array and Comdial, jointly and severally, agree to be solely
responsible for, and to defend, indemnify, and hold ePHONE, and any of
its successors or affiliates, harmless against any and all claims,
actions, suits, liabilities, demands, expenses (including reasonable
attorneys' fees and disbursements), losses, costs, or damages asserted
against or incurred by ePHONE, or any of its successors or affiliates,
arising out of or in connection with (i) any failure of the
representations and warranties set forth in Section 6.2 of this
Agreement to be true and correct or (ii) any breach of Array's or
Comdial's obligations hereunder.
Section 6.4 Limitation of Liability. No party to this Agreement shall under any
circumstances be liable for any special, incidental, consequential, indirect, or
punitive damages arising from breach of warranty, breach of contract,
negligence, or any other legal theory arising from or related to this Agreement,
even if such party or its agents or employees have been advised of the
possibility of such damages.
ARTICLE 7
DEFAULT AND TERMINATION
Section 7.1 Events of Default. Any one of the following shall constitute an
Event of Default by ePHONE:
(a) ePHONE defaulting in the performance of any covenant, agreement, term,
or provision under this Agreement, and such default continuing for a
period of thirty (30) days after written notice thereof by Array or
Comdial to ePHONE;
(b) ePHONE filing a voluntary petition for bankruptcy, reorganization, or
an arrangement under any bankruptcy or insolvency law, or an
involuntary petition under any such law being filed against ePHONE and
not dismissed within ninety (90) days; or
(c) ePHONE making an assignment for the benefit of its creditors.
Section 7.2 Remedies. Without limiting other remedies available to Array or
Comdial at law or equity, upon the occurrence of an Event of Default by ePHONE,
either Array or Comdial may, at their option, terminate this Agreement by giving
written notice to ePHONE.
Section 7.3 Discontinuation of Use. Following the expiration or termination of
this Agreement, for any reason other than ePHONE's election of its option to
purchase the Intellectual Property pursuant to Section 2.3, ePHONE shall
immediately cease use of the Intellectual Property licensed under this
Agreement.
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ARTICLE 8
CONFIDENTIALITY
Section 8.1 ePHONE's Confidentiality Obligations. The parties acknowledge that,
during the ordinary course of business, ePHONE will be required to disclose
confidential and proprietary information to its customers and other parties.
During the term of this Agreement and thereafter, ePHONE agrees that it will
enter into confidentiality agreements or nondisclosure agreements with usual and
customary terms and conditions prior to disclosing the Know-How and all other
technology, inventions, software, hardware, designs, drawings, processes,
recipes, formulae, data, technical information and the like, which are disclosed
by Array or Comdial to ePHONE or received by ePHONE's personnel under this
Agreement.
Section 8.2 Array's and Comdial's Confidentiality Obligations. The parties
acknowledge that, during the ordinary course of business, Array and Comdial will
be required to disclose confidential and proprietary information to its
customers and other parties. During the term of this Agreement and thereafter,
Array and Comdial agree that they, jointly or individually, will enter into
confidentiality agreements or nondisclosure agreements with usual and customary
terms and conditions prior to disclosing all technology, inventions, software,
hardware, designs, drawings, processes, recipes, formulae, data, technical
information and the like, which are disclosed by ePHONE to Array or Comdial or
received by Array or Comdial's personnel under this Agreement.
Section 8.3 Exceptions to Confidentiality Obligations. The confidentiality
obligations set forth in this Article 8 shall not apply to any information that:
(i) is or becomes generally available to the public other than as a result of
disclosure by one of the parties or the parties' agents, employees,
representatives, or advisors; (ii) is rightfully disclosed to either of the
parties by a third party without any breach of the confidentiality obligations
hereunder. Any of the parties may disclose the other parties' confidential
information to its personnel and independent contractors, including, without
limitation, lawyers, accountants, and consultants, when the course of their
employment necessitates such disclosure; provided, however, that the disclosing
party shall take appropriate measures to maintain the confidentiality of all
confidential information disclosed to or obtained by such party's personnel or
independent contractors.
Section 8.4 Return of Confidential Information. Upon the expiration or
termination of this Agreement, for any reason other than ePHONE's election of
its option to purchase the Intellectual Property pursuant to Section 2.3, each
party hereto shall return to the other parties, as applicable, all materials or
items that contain, embody, or relate to any confidential information belonging
to the other parties, including, without limitation, documents, drawings,
software, hardware, databases, electronic information, storage media, samples,
and models. Each party shall return all such materials to the other parties
within fifteen (15) days of the date of expiration or termination.
12
<PAGE>
ARTICLE 9
TECHNICAL ASSISTANCE
Section 9.1 Technical Assistance Services. ePHONE shall use commercially
reasonable efforts to make its employees and agents available to Array and
Comdial to provide technical assistance with the Intellectual Property, any
improvements, developments, enhancements, modifications, or inventions related
thereto, or any other technical matters related to ePHONE's business. ePHONE
shall charge Array and Comdial rates at least as low as the lowest rates charged
to third parties not affiliated with ePHONE for such technical assistance
services.
ARTICLE 10
GENERAL PROVISIONS
Section 10.1 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties and their
respective successors and permitted assigns.
Section 10.2 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Any of the parties hereto shall be permitted to assign this
Agreement and its rights and obligations hereunder to a successor in interest of
all or substantially all of its assets, or to an affiliated entity.
Section 10.3 Amendments. No amendment of any provision of this Agreement shall
be valid unless the amendment shall be in writing and signed by all parties
hereto.
Section 10.4 Waivers. No waiver by any party of any default, misrepresentation,
or breach of warranty or covenant hereunder, regardless of whether intentional,
shall be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
Section 10.5 Severability. Any term or condition of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
Section 10.6 Construction. The parties have participated mutually in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted mutually by the parties and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
13
<PAGE>
Section 10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) upon
confirmation of receipt of facsimile or electronic mail; (ii) one (1) business
day following the date sent when sent by overnight delivery; or (iii) five (5)
business days following the date mailed when mailed by registered or certified
mail return receipt requested and postage prepaid to the following address:
If to Array or Comdial:
Comdial Corporation
1180 Seminole Trail
Charlottesville, Virginia 22906
Attention: William G. Mustain
Tel: (804) 978-2518
Fax: (804) 978-2512
E-mail: [email protected]
Copy to:
McGuire, Woods, Battle & Boothe LLP
310 4th Street NE, Suite 300
P. O. Box 1288
Charlottesville, Virginia 22902-1288
Attention: Robert E. Stroud, Esquire
Tel: (804) 977-2511
Fax: (804) 980-2272
E-mail: [email protected]
If to ePHONE:
ePHONE Telecom, Inc.
355 Burrard Street, Suite 1000
Vancouver, British Columbia, Canada V6C 2G8
Attention: Robert G. Clarke
Tel: (604) 482-6116
Fax: (604) 482-1116
E-mail: [email protected]
14
<PAGE>
Copy to:
Arnold & Porter
555 Twelfth Street NW
Washington, D.C. 20004-1202
Attention: Paul D. Freshour, Esquire
Tel: (202) 942-5872
Fax: (202) 942-5999
E-mail: [email protected]
Section 10.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 10.9 Headings. The Article and Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 10.10 Entire Agreement. The Strategic Alliance Agreement, this
Agreement, and the other Agreements referred to and incorporated by reference in
the Strategic Alliance Agreement shall constitute the entire agreement between
the parties and supersede any prior understandings, agreements, covenants,
warranties, or representations by or between the parties, written or oral.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ARE ON THE NEXT PAGE]
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
ARRAY TELECOM CORPORATION
By:_______________________
Name:_____________________
Title:____________________
ePHONE TELECOM, INC.
By:_______________________
Name:_____________________
Title:____________________
COMDIAL CORPORATION
By:_______________________
Name:_____________________
Title:____________________
16
<PAGE>
SCHEDULE 1
LIST OF PATENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Title Serial Number Filing Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
System, Method, and Computer Program Product for Managing a 09/393,288 09/10/1999
Carrier Exchange Network
- --------------------------------------------------------------------------------------------------------------------
System, Method and Computer Program Product for Point-to-Point 09/430,297 10/29/1999
Band-width Conversation in an IP Network
- --------------------------------------------------------------------------------------------------------------------
Method, System and Computer Program Product Providing Voice Over 09/393,658 09/10/1999
the Internet Communication
- --------------------------------------------------------------------------------------------------------------------
Method, System and Computer Program Product for Managing 09/527,915 03/17/2000
Database Servers and Services
- --------------------------------------------------------------------------------------------------------------------
System, Method and Computer Program Product Managing Routing 60/173,750 12/30/1999
Servers and Services
- --------------------------------------------------------------------------------------------------------------------
System, Method and Computer Program Product Managing Routing PCT/US00/00009 01/10/2000
Servers and Services
- --------------------------------------------------------------------------------------------------------------------
System, Method and Computer Program Product Managing Routing 09/527,920 03/17/2000
Servers and Services
- --------------------------------------------------------------------------------------------------------------------
Method, System and Computer Program Product for Managing Jitter 09/429,652 10/29/1999
- --------------------------------------------------------------------------------------------------------------------
Method, System and Computer Program Product for Managing Jitter PCT/US00/02330 02/01/2000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
SCHEDULE 2
LIST OF KNOW-HOW
Method, System and Computer Program Product for Route Quality Management
(According to Sterne, Kessler, Goldstein & Fox, P.L.L.C., the
patent application for this invention is in the process of being
prepared.)
Any other unpatented technology, inventions, designs, drawings, processes,
recipes, formulae, data, technical information, and other industrial, commercial
property that: (i) are known to Array as of the Effective Date; (ii) are secret,
in the sense that they are not generally known or easily accessible to others;
and (iii) relate to the Products and Services.
18
Exhibit 99.1
I. NEWS RELEASE
ePHONE Telecom, Comdial & Array Telecom finalize agreement set to create a
global IP network.
Herndon, VA - April 5, 2000 - ePHONE Telecom, Inc. (OTC:EPHO) announced today
that the strategic alliance with Comdial Corporation (Nasdaq:CMDL) to create a
worldwide network for Voice over the Internet has been finalized.
As a result of the agreement, ePHONE has made an initial payment to Comdial of
$3 million for the fixed assets of Array Telecom and the transfer of Array's
Herndon, Virginia facilities. The agreement creates an exclusive licensing
agreement for all Voice over Internet Protocol (VoIP) technology developed by
Array Telecom for a period of five years. During that period, ePHONE will make
royalty payments to Comdial with an option to acquire the technology at the end
of the period. Array Telecom, a wholly owned subsidiary of Comdial Corporation,
is a developer of world class, award-winning IP telephony software and provides
a full line of carrier class VoIP gateways.
ePHONE and Comdial entered into this renewable five-year strategic alliance for
the purpose of building a global IP network and providing a full complement of
telecommunications services, including phone-to-phone one-step dialing utilizing
Array's patented "VoIP" technology. Under the terms of this strategic alliance,
ePHONE will have full access to Comdial's distribution channel, which includes
over 2,000 dealers worldwide to complement ePHONE's own distribution channel.
ePHONE has an aggressive plan to establish itself as the premier provider of
advanced telecommunications services and is planning to begin deployment of over
300 points of presence (POP's) immediately.
About ePHONE
ePHONE is a "next generation" global telecommunications carrier, poised to
exploit the rapid advancement of Internet Telephony technology. ePHONE is
building a worldwide Internet Protocol (IP) network, to deliver a wide range of
telecommunications services. For additional information about ePHONE and its
products, log on to http://www.ephonetel.com
About Comdial
Comdial Corporation is a provider of integrated communications solutions. The
company designs, manufactures and markets digital switching systems and advanced
software solutions for small and mid-sized organizations. Comdial also provides
specialized communications solutions for computer telephony integration (CTI),
hospitality, senior housing and real estate businesses. Comdial trades on the
Nasdaq under the symbol "CMDL". For more information about Comdial and its
products log on to http://www.comdial.com
About Array Telecom Corp.
Array Telecom Corp, a Comdial subsidiary, is a provider of carrier-class and
enterprise IP telephony gateway products. For more information about Array
Telecom, visit http://www.arraytel.com.
<PAGE>
II. FORWARD-LOOKING-STATEMENT
Statements in this news release looking forward in time involve risks and
uncertainties, including the risks associated with the effect of changing
economic conditions, trends in the development of the Internet as a commercial
medium and carrier of telephony traffic, market acceptance risks, technological
development risks, seasonality and other risk factors.
ePHONE Telecom, Inc.
Ben Langlais
Director, Investor Relations
888-799-3265
[email protected]
Comdial Corporation
Cass English
Director, Investor Relations
804-978-2571
[email protected]
................................................................................
If you have received this communication by mistake, or do not wish to receive
these updates in the future, please advise us, either by fax at:
(514)-940-3233 or by e-mail:[email protected], Is your mail being forwarded?
Please supply the address it was sent to.
