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Exhibit 2.2
ESCROW AGREEMENT
This Escrow Agreement (this "Escrow Agreement") is made and entered into as
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of August 1, 2000 (the "Effective Time") by and among TranSwitch Corporation, a
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Delaware corporation ("Parent"); the undersigned security holders (collectively
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the "Holders") of Alacrity Communications, Inc., a California corporation
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("Alacrity"); KLM Capital Partners L.P., as the representative of the Holders
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(the "Indemnification Representative"); and State Street Bank and Trust Company,
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as escrow agent of the Escrow Shares (as defined below) (the "Escrow Agent").
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A. TXC Acquisition Corporation, a California corporation and wholly owned
subsidiary of Parent ("Merger Sub"), Parent, Alacrity and certain stockholders
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of Alacrity have entered into an Agreement and Plan of Reorganization dated as
of July 25, 2000 (the "Merger Agreement") setting forth certain terms and
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conditions pursuant to which Merger Sub is being merged into Alacrity (the
"Merger").
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B. Pursuant to Section 2.2 of the Merger Agreement, the Total TranSwitch
Common Shares (as defined therein) are to be issued to the Holders.
C. The Merger Agreement provides that ten percent (10%) (the "Escrow
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Amount") of (i) the Total TranSwitch Common Shares issued for Total Alacrity
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Securities (as defined in the Merger Agreement) pursuant to the Merger plus (ii)
such number of Total TranSwitch Common Shares that shall equal ten percent (10%)
of the TranSwitch Stock, as defined in the Purchase Agreement, dated the date
hereof, among Parent, Alacrity, Merger Sub, a wholly owned subsidiary of Parent,
Current Ventures II, Ltd. and Triophy Investments, Ltd. will be placed in an
escrow account to secure certain indemnification obligations of the Holders to
Parent under Article X of the Merger Agreement on the terms and conditions set
forth therein and herein.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
covenants and agreements contained in the Merger Agreement and in this Escrow
Agreement, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW ACCOUNT
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1.1 Deposit of Shares. Parent shall deposit as soon as practicable on
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the Holders' behalf with the Escrow Agent a certificate representing the number
of Escrow Shares issued pursuant to the Merger Agreement registered in the name
of Embassy & Co. as nominee for the Escrow Agent (the "Initial Escrow Shares").
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Any shares of Parent capital stock that result from any share dividend,
reclassification, stock split, subdivision or combination of shares,
recapitalization, merger or other events made with respect to any Escrow Shares
held in escrow under this Escrow Agreement ("Additional Shares") shall be issued
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in the name of the Escrow Agent or its nominee and shall be held by the Escrow
Agent in accordance with this Escrow Agreement. Unless otherwise indicated, as
used
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in this Escrow Agreement, the term "Escrow Shares" includes the Initial Escrow
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Shares and any Additional Shares. The Escrow Agent agrees to accept delivery of
the Escrow Shares and to hold such Escrow Shares in escrow in accordance with
this Escrow Agreement and to release the Escrow Shares out of escrow as provided
in this Escrow Agreement.
1.2 Dividends; Voting and Rights of Ownership. Any cash dividends,
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dividends payable in property or other distributions of any kind (except for
Additional Shares) made in respect of the Escrow Shares shall be distributed
currently by Parent to the Holders on a pro rata basis. The Holders shall have
the right to direct the Escrow Agent in writing as to the exercise of any voting
rights pertaining to the Escrow Shares, and the Escrow Agent shall comply with
any such written instructions. In the absence of such instructions, the Escrow
Agent shall not vote any of the Escrow Shares. The Escrow Agent shall be under
no obligation to preserve, protect or exercise voting or other rights in the
Escrow Shares, and shall be responsible only for reasonable measures to maintain
the physical safekeeping thereof, and otherwise to perform and observe such
duties on its part as are expressly set forth in this Agreement, except that it
shall, at the written request of the Holders given to the Escrow Agent at least
three business days prior to the date on which the Escrow agent is requested
therein to take any action, deliver to the Holders a proxy or other instrument
in the form supplied to it by the Holders for voting or otherwise exercising any
right of consent with respect to any of the Escrow Shares held by it hereunder,
to authorize therein the Holders to exercise such voting or consent authority in
respect of the Escrow Shares. The Escrow Agent shall not be responsible for
forwarding to any party, notifying any party with respect to, or taking any
action with respect to, any notice, solicitation or other document or
information, written or otherwise, received from any issuer or other person with
respect to the Escrow Shares, including but not limited to, proxy material,
tenders, options, the pendency of calls and maturities and expiration of rights.
While the Escrow Shares remain in the Escrow Agent's possession pursuant to this
Escrow Agreement, the Holders shall retain and shall be able to exercise all
other incidents of ownership of the Escrow Shares that are not inconsistent with
the terms and conditions hereof.
1.3 No Encumbrance. None of the Escrow Shares or any beneficial
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interest therein may be pledged, sold, assigned or transferred, other than by
operation of law. Written notice of any assignment or transfer shall be given to
the Escrow Agent and Parent in writing, and no such assignment or transfer shall
be valid until such notice is given.
2. RESOLUTION OF CLAIMS
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2.1 Indemnification Obligations. The Escrow Shares shall serve as a
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source (but not the sole source) of payment for the indemnity obligations of the
Holders under Article X of the Merger Agreement. Payment for any amount
determined as provided below to be owing to Parent under such indemnity
obligations under the Merger Agreement ("Damages") and any award of attorneys'
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fees and charges owing to Parent pursuant to Section 2.3(c)(iv) or 12.2 of this
Agreement (a "Prevailing Party Award") shall be made by the release of Escrow
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Shares to Parent (each such payment, an "Escrow Adjustment"), by the Escrow
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Agent. By the execution of this Escrow Agreement, each of the Holders agrees to
be bound by the indemnification provisions set forth in Article X of the Merger
Agreement and confirms that the issuance of the Escrow Amount of the Total
TranSwitch Common Shares pursuant to the Merger Agreement is subject to this
Escrow Agreement. Notwithstanding anything to
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the contrary herein, Parent shall not be entitled to receive payment of any
portion of a Prevailing Party Award which is already a part of Damages (i.e.,
there shall be no double payment of legal fees). Upon joint written instructions
from the Parent and/or Indemnification Representative, as the case may be, to
the Escrow Agent to make any Escrow Adjustment pursuant to Sections
2.3(a),(b),(c)(iv), 3.3 or 12.2, the Escrow Agent shall be entitled to request
that the Parent and Indemnification Representative determine and certify to the
Escrow Agent the amount of any Escrow Adjustment, and to identify that portion
of the Escrow Adjustment which constitutes Damages and that portion of the
Escrow Adjustment which constitutes a Prevailing Party Award, to the extent
applicable. Any Escrow Adjustments and corresponding release to Parent of Escrow
Shares shall be made in proportion to each of the Holders' interest in the
Escrow Shares as of the date or dates specified and the manner provided for in
this Escrow Agreement, which percentage interests shall be certified in writing
to the Escrow Agent. Each Escrow Adjustment to the Escrow Shares shall be made
by the release by the Escrow Agent to Parent of Escrow Shares having an
aggregate value equal to the Damages and any Prevailing Party Award, with the
per share value of such shares being based, for all purposes under this Escrow
Agreement, on the Average Price (as defined in the Merger Agreement) (adjusted
for any share dividend, reclassification, stock split, subdivision or
combination of shares, recapitalization, merger or other events) notwithstanding
any changes in market value of Total TranSwitch Common Shares after the Closing
Date, as certified to the Escrow Agent by Parent. In any circumstance in which
the Escrow Agent is required to make a determination of per share value of the
Escrow Shares in order to perform under or administer this Agreement, the Escrow
Agent shall be entitled to request Parent to determine and certify to the Escrow
Agent the per share value of any such Escrow Shares, and Parent shall promptly
provide such written certification to the Escrow Agent, with a copy to the
Indemnification Representative. The Escrow Agent shall be entitled to rely
conclusively upon any such certification of per share value without any duty to
verify or recalculate the same, and the Escrow Agent shall not be liable for any
action or omission of, or delay on the part of, Parent in such connection.
Notwithstanding any term hereof to the contrary, in any such instance, the
Escrow Agent shall be entitled to refrain from taking any action otherwise
required hereunder (and which requires a determination of per share value),
without liability on its part, until it is provided with notice in accordance
with this Agreement. In lieu of releasing any fractional Escrow Shares, any
fraction of a released Escrow Share that would otherwise be released shall be
rounded to the nearest whole Escrow Share.
2.2 Notice of Claims. Promptly after the receipt by Parent of notice
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or discovery of any claim, damage, or legal action or proceeding giving rise to
indemnification rights under the Merger Agreement, after giving effect to the
aggregate minimum claims of Threshold Amount (as defined in the Merger Agreement
(a "Claim"), Parent shall give the Indemnification Representative written notice
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of such Claim and shall provide a copy of such notice to the Escrow Agent. Each
notice of a Claim by Parent (a "Notice of Claim") shall be in writing and shall
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be delivered on or before the Release Date (as defined in Section 3.1 below).
2.3 Resolution of Claims. Any Notice of Claim received by the
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Indemnification Representative and the Escrow Agent pursuant to Section 2.2
above shall be resolved as follows:
(a) Uncontested Claims. In the event that the Indemnification
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Representative does not contest a Notice of Claim (an "Uncontested Claim") in
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writing within thirty (30) calendar days after receipt by the Escrow Agent of
such Notice of Claim, as provided below in Section 2.3(b), Parent may deliver to
the Escrow Agent, with a copy to the Indemnification Representative, a written
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demand by Parent (a "Parent Demand") stating that a Notice of Claim has been
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given as required in this Escrow Agreement and that no notice of contest has
been received by the Escrow Agent from the Indemnification Representative during
the period specified in this Escrow Agreement, and further setting forth the
proposed Escrow Adjustments to be made in accordance with this Section 2.3(a).
Within thirty (30) calendar days after receipt by the Escrow Agent of the Parent
Demand, the Indemnification Representative may object by a written notice
delivered to Parent and the Escrow Agent to the computations or other
administrative matters relating to the proposed Escrow Adjustments (but may not
object to the validity or amount of the Claim previously disclosed in the Notice
of Claim and not previously timely objected to under paragraph (b)), whereupon
the Escrow Agent shall not make any of the Escrow Adjustments until either: (i)
Parent and the Indemnification Representative shall have given the Escrow Agent
written notice setting forth agreed Escrow Adjustments, or (ii) the matter is
resolved as provided in Sections 2.3(b) and 2.3(c). Upon satisfaction of the
foregoing, the Escrow Agent, as directed in writing by Parent, and Parent shall
promptly take all steps to release the final Escrow Adjustments.
(b) Contested Claims. In the event that the Indemnification
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Representative gives written notice to Parent and the Escrow Agent contesting
all or a portion of a Notice of Claim (a "Contested Claim") within the 30-day
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period provided above, (i) matters that are subject to third party claims
against Parent or Alacrity in a litigation or arbitration shall await the final
decision, award or settlement of such litigation or arbitration, and (ii)
matters that arise between Parent on the one hand, and Alacrity and/or the
Holders on the other hand, including any disputes regarding performance or
nonperformance of a party's obligations under this Escrow Agreement ("Arbitrable
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Claims") shall be settled in accordance with Section 2.3(c) below. Parent and
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Indemnification Representative shall certify in writing to the Escrow Agent
whether a Contested Claim is an Arbitrable Claim, and is thus subject to Section
2.3(c). The Parent and Indemnification Representative agree that any Arbitrable
Claim is between the Parent and Indemnification Representative, the Escrow Agent
is not a party to any Arbitrable Claim, and shall have no duty or obligation to
monitor or enforce the provisions of Section 2.3(c) hereof, including without
limitation any payment of costs pursuant to Section 2.3(c)(iv), or to determine
whether a Contested Claim is an Arbitrable Claim. Any portion of a Notice of
Claim that is not contested or is subsequently settled by Parent and the
Indemnification Representative shall be resolved as set forth above in Section
2.3(a), provided that in the case of a settlement the value of Escrow Shares
shall equal the Average Price notwithstanding any change in the market value of
Parent Common Shares. If written notice is received by the Escrow Agent that a
Notice of Claim is contested in whole or in part by the Indemnification
Representative, then the Escrow Agent shall hold hereunder after what would
otherwise be the Release Date (as defined in Section 3.1 below), the number of
Escrow Shares specified in the Release Notice or as otherwise provided in
Section 3.1, until the earlier of: (i) receipt of a settlement agreement
executed by Parent and the Indemnification Representative setting forth a
resolution of the Notice of Claim and the Escrow Adjustments; (ii) receipt of a
written notice from Parent (a "Parent Distribution Notice") attaching a copy of
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the final award or decision of an arbitrator under paragraph (c) below and
setting forth the Escrow Adjustments (Parent shall at the same time provide a
copy of the Parent Distribution Notice to the Indemnification Representative);
or (iii) receipt of a written notice from the Indemnification Representative (a
"Representative Distribution Notice") attaching a copy of the final award or
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decision of an arbitrator under paragraph (c) below that no Escrow Adjustments
are to be made as a result of such award (the Indemnification Representative
shall at the same time provide a copy of the Representative Distribution Notice
to Parent). If the earliest of the three events described in the preceding
sentence is (i) or (ii), the Escrow Agent shall, within twenty (20) calendar
days after receipt of the settlement agreement or the Parent Distribution
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Notice, as applicable, (a) release to Parent the number of Escrow Shares
specified in the Escrow Adjustments and (b) if the Release Date has occurred,
and there are no remaining unresolved Contested Claims, release to the Holders
the balance of the Escrow Shares in accordance with their percentage interests
which shall be certified in writing to the Escrow Agent. If the earliest of the
three events described above is (iii) and the Release Date has occurred, and
there are no remaining unresolved Contested Claims, the Escrow Agent shall,
within twenty (20) calendar days after receipt of the Representative
Distribution Notice, release to the Holders the Retained Escrow (as defined in
Section 3.1), in accordance with the Holders' interests therein as certified in
writing to the Escrow Agent, provided that if the Release Date has not occurred
the Escrow Shares shall continue to be held pursuant to the terms of this
Agreement. If the award or decision of the arbitrator concludes that Escrow
Shares are to be released to Parent either in satisfaction of Damages or as
Prevailing Party Awards, the arbitrator shall specify the number of Escrow
Shares to be so released to Parent either in the arbitrator's final award or
decision or a supplementary report or finding. In the event that the Escrow
Agent institutes an action for interpleader in accordance with Section 4.6 of
this Escrow Agreement as a result of a dispute between the parties, the parties
hereby agree to jointly seek to stay such interpleader action pending the
resolution of any arbitration commenced by the parties or any dispute pursuant
to this Section 2.3(b) and Section 2.3(c).
(c) Arbitration.
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(i) Arbitration Rules. Any Arbitrable Claim, and any
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dispute between the Holders and Parent under this Escrow Agreement, shall be
submitted to final and binding arbitration before a single arbitrator in
Milpitas. California in accordance with the commercial arbitration rules of the
American Arbitration Association.
(ii) Binding Effect. The final decision of the
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arbitrator shall be furnished in writing to the Escrow Agent, the
Indemnification Representative, the Holders and Parent and will constitute a
conclusive determination of the issue in question, binding upon the Holders, the
Indemnification Representative and Parent. The arbitrator shall have the
authority to grant any equitable and legal remedies that would be available in
any judicial proceeding instituted to resolve an Arbitrable Claim. Any judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction over the subject matter thereof.
(iii) Compensation of Arbitrator. The arbitrator will be
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compensated for his or her services, as provided below in Section 2.3(c)(iv), in
accordance with the commercial arbitration rules of the American Arbitration
Association.
(iv) Payment of Costs. Subject to the limitations in
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Article X of the Merger Agreement, the substantially prevailing party in any
arbitration shall be entitled to an award of attorneys' fees and costs, and all
costs of arbitration, including those provided for above, will be paid by the
losing party, subject in each case to a determination by the arbitrator as to
which party is the substantially prevailing party and the amount of such fees
and costs to be allocated to such party and subject to the terms of Section
2.3(c)(iii). Any amounts payable to Parent by or on account of the Holders under
this subsection will be reimbursed as if the amount of such awarded fees and
expenses were an Uncontested Claim.
(v) Terms of Arbitration. The arbitrator chosen in
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accordance with
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these provisions shall not have the power to alter, amend or otherwise affect
the terms of these arbitration provisions or the provisions of this Escrow
Agreement, the Merger Agreement or any other documents that are executed in
connection therewith.
(vi) Exclusive Remedy. Arbitration or mediation under
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this Section 2.3(c) shall be the sole and exclusive remedy of the parties for
any Arbitrable Claim arising out of this Escrow Agreement.
3. RELEASE FROM ESCROW
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3.1 Release of Escrow Shares. The Escrow Shares shall be released by
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the Escrow Agent and Parent as soon as practicable, taking into account the
notices to be delivered under this Section 3.1, on the date that is one (1) year
after the Effective Time (the "Release Date") less: (a) any Escrow Shares
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delivered to or deliverable to Parent in satisfaction of Uncontested Claims or
Contested Claims which have been settled by the parties hereto, and (b) any of
the Escrow Shares subject to delivery to Parent in accordance with Section
2.3(b) with respect to any then pending Contested Claims. Within ten (10) of the
Escrow Agent's business days ("Business Days") after the Release Date, Parent
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and the Indemnification Representative shall deliver to the Escrow Agent a
written notice (a "Release Notice") setting forth the number of Escrow Shares to
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be released by the Escrow Agent (the "Released Escrow"), including the number of
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Escrow Shares to be released to each Holder and the number of Escrow Shares to
be retained as provided in this Section 3.1 (the "Retained Escrow"), Parent and
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the Indemnification Representative shall make a good faith effort to agree on a
reasonable portion of the Escrow Shares to retain for pending Contested Claims
and Prevailing Party Awards and related expenses. Until such agreement is
reached, or a determination is made in accordance with Section 2.3(c), the
remaining Escrow Shares shall be the Retained Escrow. The Escrow Agent shall be
authorized to act in accordance with any Release Notice, and shall have no duty
or obligation to determine whether the Retained Escrow, if any, is sufficient to
pay any outstanding Contested Claims and/or Prevailing Party Awards, to the
extent applicable. The Released Escrow shall be released to the Holders in
proportion to their respective interests in the Initial Escrow Shares as
certified in writing to the Escrow Agent. In lieu of releasing any fractional
Escrow Shares, any fraction of a released Escrow Share that would otherwise be
released shall be rounded to the nearest whole Escrow Share. Within ten (10)
Business Days after receipt of the Release Notice, Escrow Agent shall deliver
(by overnight courier service) to each Holder evidence of ownership of the
number of Escrow Shares in the names of the appropriate Holders as certified in
writing to the Escrow Agent. The Escrow Agent shall not be required to take
such action until the Escrow Agent has received the Release Notice executed by
Parent and the Indemnification Representative or, in the event Parent and the
Indemnification Representative fail to execute and deliver a jointly approved
Release Notice, a final award or decision which specifies the distribution of
the Escrow Shares.
3.2 Release of Retained Escrow. Upon the resolution of Contested
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Claims as provided for in Section 2.3(b), the Retained Escrow shall be subject
to release by the Escrow Agent to Parent and/or to the Holders in accordance
with Section 2.3(b), this Section and as otherwise provided for in this Escrow
Agreement. The Escrow Agent and Parent shall cause the transfer agent to
transfer to Parent the number of Escrow Shares to be released to Parent pursuant
to Section 2.3(b) and reissue certificates for Escrow Shares that are to be
either distributed to the Holders pursuant to Section 3.1 or further retained by
the Escrow Agent pending the resolution of Contested Claims and/or Prevailing
Party Awards. Any Escrow Shares released from escrow to Parent shall be subject
to cancellation by
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Parent without requiring Parent to pay any consideration whatsoever in receipt
thereof to Alacrity or any of the Holders.
3.3 Expenses of Indemnification Representative. The Indemnification
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Representative shall be entitled to be reimbursed his reasonable out-of-pocket
expenses and the reasonable fees and disbursements of counsel retained by him.
Such reimbursements shall be treated as an Uncontested Claim on a pro rata basis
among the contributors to the Escrow Shares, for all services performed pursuant
to the Merger Agreement and this Escrow Agreement; provided, however, that
payment of any Escrow Adjustment shall take priority over payments to the
Indemnification Representative, as provided herein. The Escrow Agent shall
follow the joint written instructions of the Indemnification Representative and
Parent concerning the release or sale of Escrow Shares relating to the
reimbursement of the Indemnification Representative. If upon termination of
this Agreement the Indemnification Representative shall not have received the
reimbursements to which he is entitled hereunder, then the Indemnification
Representative shall be entitled to reimbursement from the Holders on a joint
and several basis.
(a) In connection with any sale of the Escrow Shares pursuant to Section
3.3, of this Agreement, the Escrow Agent shall be entitled to receive and rely
upon, prior to taking action in that regard, written direction from the
Indemnification Representative and Parent as to the manner and method to be
undertaken in carrying out such sale, including without limitation written
direction (i) identifying the number of shares to be sold, (ii) identifying the
brokerage firm the Indemnification Representative and Parent request to be used
or instructing the Escrow Agent to use its affiliated brokerage service, and
(iii) setting forth any necessary or special instructions with respect to the
sale (including any stop loss or minimum price per share instruction); and the
Indemnification Representative and Parent shall execute and deliver any
instruments reasonably required by the Escrow Agent in order to carry out such
sale or liquidation.
(b) The Escrow Agent shall have no responsibility in connection with such
sale other than to make delivery of the Escrow Shares to the selected brokerage
firm, with instruction (including any special instruction provided by the
Indemnification Representative and Parent, and to receive and deposit into the
escrow account (to be administered and distributed in accordance with this
Agreement) any net sale proceeds received therefrom. The Escrow Agent shall
have no duty or obligation to determine or accomplish compliance with any
applicable transfer restrictions; and it shall be the sole obligation of the
party directing such sale to take any remaining actions, and to provide or
deliver any necessary instruments or opinions (at its expense) necessary to
comply with applicable transfer restrictions or applicable securities laws. The
Escrow Agent shall have no liability for any actions or omissions of any such
brokerage firm, and shall have no liability for the price or execution achieved.
Without limiting the generality of the foregoing, the Indemnification
Representative and Parent expressly acknowledge that (a) the Escrow Shares may
need to be sent to a transfer agent to be reissued in saleable form, (b) the
Escrow Shares may contain or be subject to transfer restrictions that may limit
their marketability and impose restrictions upon the number or types of
purchasers to whom they can be offered or sold, and (c) the Escrow Agent shall
have no liability for any failure or delay (or any price change during any such
delay) on the part of the Indemnification Representative and Parent or any
transfer agent, or caused by any necessary registration or delivery procedures,
or compliance with any applicable transfer restrictions involved in the transfer
of such Escrow Shares.
(c) The Escrow Agent shall be entitled to contract with any brokerage firm
(which may be selected by the Escrow Agent without liability on its part, taking
into consideration any brokerage firm
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requested by the Indemnification Representative and Parent, as provided above),
which may be affiliated with the Escrow Agent, and may enter into any such
contract on a basis which provides that such brokerage firm shall use its "best
efforts" to effect such sale. The Escrow Agent shall be indemnified hereunder
for any costs, expenses and risks associated therewith or arising thereunder
(other than resulting from its own gross negligence or willful misconduct), and
the proceeds of sale to which the Indemnification Representative shall be
entitled shall be net of all brokerage commissions and charges.
(d) The net sale proceeds of any such sale of Escrow Shares received by
the Escrow Agent shall be distributed to the Indemnification Representative in
accordance with the joint written instructions of Indemnification Representative
and Parent less a $5.00 per Holder fee for the proration of the Net Sales Price
and for the preparation of individual 1099-B (the "Sales Administration Fee").
The Sales Administration fee shall be assessed each day a sale is affected until
the total number of shares specified in such written direction from the
Indemnification Representative and Parent are sold; provided that the minimum
Sales Administration Fee per sale transaction shall be $500.00.
4. ESCROW AGENT
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4.1 Duties. The duties and responsibilities of the Escrow Agent
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hereunder shall be entirely administrative and not discretionary and shall be
determined solely by the express provisions of this Escrow Agreement and no
duties shall be implied. The Escrow Agent shall not be responsible for any of
the agreements referred to or described herein (including without limitation the
Merger Agreement), or for determining or compelling compliance therewith, and
shall not otherwise be bound thereby. The Escrow Agent shall be obligated to
act only in accordance with written instructions received by it as provided in
this Escrow Agreement and is authorized hereby to comply with any orders,
judgments, or decrees of any court with or without jurisdiction and shall not be
liable as a result of its compliance with the same.
4.2 Legal Opinions. As to any questions arising in connection with
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the administration of this Escrow Agreement, the Escrow Agent may rely
absolutely upon the joint instruction of Parent and the Indemnification
Representative or the opinions given to the Escrow Agent by its outside counsel
or in-house counsel and shall be free of liability for acting or refraining from
acting in reliance on such opinions.
4.3 Signatures. The Escrow Agent may rely absolutely upon the
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genuineness and authorization of the signature and purported signature of any
party upon any instruction, notice, release, receipt or other document delivered
to it pursuant to this Escrow Agreement.
4.4 Receipts and Releases. The Escrow Agent may, as a condition to
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the disbursement of monies or disposition of securities as provided herein,
require from the payee or recipient a receipt therefor and, upon final payment
or disposition, a release of the Escrow Agent from any liability arising out of
its execution or performance of this Escrow Agreement, such release to be in a
form reasonably satisfactory to the Escrow Agent.
4.5 Refrain from Action. The Escrow Agent shall be entitled to
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refrain from taking any action contemplated by this Escrow Agreement in the
event it becomes aware of any dispute
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between Alacrity, the Holders and Parent as to any material facts or as to the
happening of any event precedent to such action.
4.6 Interpleader. If any controversy arises between the parties
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hereto or with any third person, the Escrow Agent shall not be required to
determine the same or to take any action, but the Escrow Agent in its discretion
may institute such interpleader or other proceedings in connection therewith as
the Escrow Agent may deem proper, and in following either course, the Escrow
Agent shall not be liable.
4.7 Other Provisions. The Escrow Agent may rely and shall be
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protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall be under no duty to inquire into or investigate the
validity, accuracy or content of any such document. The Escrow Agent shall be
not be liable for any action taken or omitted by it unless a court of competent
jurisdiction determines that the primary cause of a loss to the Parent, the
Indemnification Representative, or the Holders was the Escrow Agent's gross
negligence, willful neglect, or bad faith. In the administration of this Escrow
Agreement, the Escrow Agent may execute any of its powers and perform its duties
hereunder directly or through agents or attorneys and may, consult with counsel,
including in-house counsel, accountants and other skilled persons to be selected
and retained by it. The Escrow Agent shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the advice or opinion
of any such counsel, accountants or other skilled persons. The Escrow Agent
shall not be obligated to take any legal or other action hereunder which might
in its judgment involve or cause it to incur any expense or liability unless it
shall have been furnished with acceptable indemnification.
5. INDEMNIFICATION
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5.1 Waiver and Indemnification. Parent, Alacrity, the
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Indemnification Representative and the Holders agree to and hereby do waive any
suit, claim, demand or cause of action of any kind which they may have or may
assert against the Escrow Agent arising out of or relating to the execution or
performance by the Escrow Agent of this Escrow Agreement, unless such suit,
claim, demand or cause of action is based upon the willful neglect or gross
negligence or bad faith of the Escrow Agent. Parent, Alacrity and the Holders
further agree, jointly and severally, to indemnify and hold Escrow Agent and its
directors, officers, agents and employees (collectively, the "Indemnitees")
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harmless from and against any and all claims, liabilities, losses, damages,
fines, penalties, and expenses, including out-of-pocket, incidental expenses,
reasonable legal fees and expenses, and the allocated costs and expenses of in-
house counsel and legal staff ("Losses") that may be imposed on, incurred by, or
------
asserted against, the Indemnitees or any of them for following any instructions
or other directions upon which the Escrow Agent is authorized to rely pursuant
to the terms of this Escrow Agreement, provided the Escrow Agent has not acted
with gross negligence, willful neglect or bad faith. In addition to and not in
limitation of the immediately preceding sentence, Parent, Alacrity and the
Holders also agree, jointly and severally, to indemnify and hold the Indemnitees
and each of them harmless from and against any and all Losses that may be
imposed on, incurred by, or asserted against the Indemnitees or any of them in
connection with or arising out of the Escrow Agent's performance under this
Escrow Agreement, provided the Escrow Agent has not acted with gross negligence,
willful neglect or bad faith. The provisions of this Section 5.1 shall survive
the
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<PAGE>
termination of this Escrow Agreement and the resignation or removal of the
Escrow Agent for any reason. Anything in this Escrow Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of such
loss or damage and regardless of the form of action.
5.2 Conditions to Indemnification. The Escrow Agent shall have no
-----------------------------
more or less responsibility or liability on account of any action or omission of
any book-entry depository, securities intermediary or other sub-escrow agent
employed by the Escrow Agent than any such book-entry depository, securities
intermediary or other sub-escrow agent has to the Escrow Agent, except to the
extent that such action or omission of any book-entry depository, securities
intermediary or other sub-escrow agent was caused by the Escrow Agent's own
gross negligence, bad faith or willful misconduct in breach of this Agreement.
6. ACKNOWLEDGMENT BY THE ESCROW AGENT
----------------------------------
By execution and delivery of this Escrow Agreement, the Escrow Agent
acknowledges that the terms and provisions of this Escrow Agreement are
acceptable and it agrees to carry out the provisions of this Escrow Agreement on
its part.
7. RESIGNATION OR REMOVAL OF ESCROW AGENT; SUCCESSOR
-------------------------------------------------
7.1 Resignation and Removal.
-----------------------
7.1.1 Notice. The Escrow Agent may resign as such following the
------
giving of thirty (30) days' prior written notice to the other parties hereto.
Similarly, the Escrow Agent may be removed and replaced following the giving of
thirty (30) days' prior written notice to be given to the Escrow Agent jointly
by the Indemnification Representative and Parent. In either event, the duties
of the Escrow Agent shall terminate thirty (30) days after the date of such
notice (or as of such earlier date as may be mutually agreeable), and the Escrow
Agent shall then deliver the balance of the Escrow Shares then in its possession
to a successor Escrow Agent as shall be appointed by the other parties hereto as
evidenced by a written notice filed with the Escrow Agent.
7.1.2 Court Appointment. If the parties hereto are unable to
-----------------
agree upon a successor or shall have failed to appoint a successor prior to the
expiration of thirty (30) days following the date of the notice of resignation
or removal, then the acting Escrow Agent, at the expense of the Holders and
Parent, may petition any court of competent jurisdiction for the appointment of
a successor Escrow Agent or other appropriate relief, and any such resulting
appointment shall be binding upon all of the parties hereto.
7.2 Successors. Every successor appointed hereunder shall execute,
----------
acknowledge and deliver to its predecessor, and also to the Indemnification
Representative and Parent, an instrument in writing accepting such appointment
hereunder, and thereupon such successor, without any further act, shall become
fully vested with all the duties, responsibilities and obligations of its
predecessor; but such predecessor shall, nevertheless, on the written request of
its successor or any of the parties hereto, execute and deliver an instrument or
instruments transferring to such successor all the rights of such
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<PAGE>
predecessor hereunder, and shall duly assign, transfer and deliver all property,
securities and monies held by it pursuant to this Escrow Agreement to its
successor. Should any instrument be required by any successor for more fully
vesting in such successor the duties, responsibilities, and obligations hereby
vested or intended to be vested in the predecessor, any and all such instruments
in writing shall, on the request of any of the other parties hereto, be
executed, acknowledged, and delivered by the predecessor.
7.3 New Escrow Agent. In the event of an appointment of a successor,
----------------
the predecessor shall cease to be Escrow Agent of any funds, securities or other
assets and records it may hold pursuant to this Escrow Agreement, and the
successor shall become such Escrow Agent.
7.4 Release. Upon acknowledgment by any successor Escrow Agent of
-------
the receipt of the then remaining balance of the Escrow Shares, the then acting
Escrow Agent shall be fully released and relieved of all duties,
responsibilities and obligations under this Escrow Agreement that may arise and
accrue thereafter.
7.5 Successors. Any corporation or association into which the Escrow
----------
Agent in its individual capacity may be merged or converted or with which it may
be consolidated, or any corporation or association resulting from any merger,
conversion or consolidation to which the Escrow Agent in its individual capacity
shall be a party, or any corporation or association to which all or
substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be sold or otherwise transferred, shall be the Escrow
Agent hereunder without further act.
8. FEE
---
(a) Parent agrees (i) to pay or reimburse the Escrow Agent for its
attorney's fees and expenses incurred in connection with the preparation of this
Agreement and (ii) to pay the Escrow Agent's compensation for its normal
services hereunder in accordance with the fee schedule attached as Exhibit 8,
which may be subject to change hereafter on an annual basis.
(b) Parent agrees to reimburse the Escrow Agent on demand for all costs
and expenses incurred in connection with the administration of this Agreement or
the escrow created hereby or the performance or observance of its duties
hereunder which are in excess of its compensation for normal services hereunder,
including without limitation, payment of any legal fees and expenses incurred by
the Escrow Agent in connection with resolution of any claim by any party
hereunder.
9. INDEMNIFICATION REPRESENTATIVE
------------------------------
9.1 Appointment and Authority. For purposes of this Escrow
-------------------------
Agreement, the Holders have, by the execution of this Escrow Agreement,
irrevocably consented to the appointment of the Indemnification Representative
as representative of the Holders and as the attorney-in-fact for and on behalf
of each Holder, and, subject to the express limitations set forth below, the
taking by the Indemnification Representative of any and all actions and the
making of any decisions required or permitted to be taken by him under this
Escrow Agreement, including but not limited to the exercise of the power to:
(i) authorize delivery to Parent of the Escrow Shares, or any portion thereof,
in satisfaction of Claims otherwise in connection with an Escrow Adjustment,
(ii) agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts
-11-
<PAGE>
and awards of arbitrators with respect to such Claims, (iii) resolve any Claims,
and (iv) take all actions necessary in the judgment of the Indemnification
Representative for the accomplishment of the foregoing and all of the other
terms, conditions, and limitations of this Escrow Agreement. Any notice given to
the Indemnification Representative will constitute notice to each and all of the
Holders at the time notice is given to the Indemnification Representative. Any
action taken by, or notice or instruction received from, the Indemnification
Representative will be deemed to be an action by, or notice or instruction from,
each and all of the Holders. Parent and the Escrow Agent will disregard any
notice or instruction received from any Holder other than the Indemnification
Representative with regard to this Escrow Agreement. The Indemnification
Representative shall have unlimited authority and power to act on behalf of each
Holder with respect to this Escrow Agreement and the disposition, settlement, or
other handling of all Claims, notices, rights, or obligations arising under this
Escrow Agreement so long as all Holders are treated in the same manner (in
respect of their proportional interests in the Escrow Shares).
9.2 Indemnification. As among the Parent, Alacrity, the Holders and
---------------
the Indemnification Representative, the Indemnification Representative shall not
suffer any liability or loss for any act performed or omitted to be performed by
him under this Escrow Agreement in the absence of adjudicated gross negligence,
willful neglect or bad faith. The Indemnification Representative may consult
with counsel and other experts as may be reasonably necessary to advise him with
respect to his rights and obligations hereunder and shall be fully protected by
any act taken, suffered, permitted, or omitted in good faith in accordance with
the advice of such counsel and experts. The Indemnification Representative
shall not be responsible for the sufficiency or accuracy of the form, execution,
validity, or genuineness of documents or securities now or hereafter deposited
hereunder, or of any endorsement thereof or for any lack of endorsement thereon,
or for any description therein, nor shall he be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement, and the Indemnification Representative shall be fully protected in
relying upon any written notice, demand, certificate or document which he in
good faith believes to be genuine.
9.3 Death or Disability; Successors. In the event of the death or
-------------------------------
permanent disability of the Indemnification Representative, or his resignation
as the Indemnification Representative, a successor Indemnification
Representative shall be elected by a majority vote of the Holders, with each
Holder to be given a vote equal to his proportionate share of the Escrow Shares.
The Holders shall cause to be delivered to Parent and the Escrow Agent prompt
written notice of such election of a successor Indemnification Representative.
Each successor Indemnification Representative shall have all of the power,
authority, rights, and privileges conferred by this Agreement upon the original
Indemnification Representative, and the term, "Indemnification Representative"
------------------------------
as used herein shall be deemed to include any successor Indemnification
Representative. Until notified in writing by the Indemnification Representative
that he has resigned, the Escrow Agent may act upon the directions, instructions
and notices of the Indemnification Representative named above and, thereafter,
upon the directions, instructions and notices of any successor named in a
writing executed by a majority-in-interest of the Holders filed with the Escrow
Agent.
-12-
<PAGE>
10. TERMINATION; DEFICIENCY CLAIMS
------------------------------
This Escrow Agreement and the escrow created hereby shall terminate
following Escrow Agent's delivery of all remaining Escrow Shares to the Holders
and/or Parent pursuant to Section 2 or 3.
11. TAX MATTERS
-----------
The parties hereto acknowledge that the Escrow Shares are held in the
escrow account on behalf of the Stockholders and that for tax reporting purposes
all interest or other income earned from the investment of the Escrow Shares
shall be allocable and taxed to the Holders in each taxable year in which earned
on a pro rata basis according to their respective interests in the Escrow
Shares.
12. MISCELLANEOUS PROVISIONS
------------------------
12.1 Parties in Interest. This Escrow Agreement is not intended, nor
-------------------
shall it be construed, to confer any enforceable rights on any person not a
party hereto. All of the terms and provisions of this Escrow Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
12.2 Attorneys' Fees. In the event of any action to enforce any
---------------
provision of this Escrow Agreement, or on account of any default under or breach
of this Escrow Agreement, the substantially prevailing party in such action
shall be entitled to recover, in addition to all other relief, from the other
party all attorneys' fees incurred by the substantially prevailing party in
connection with such action (including, but not limited to, any appeal thereof).
Notwithstanding the foregoing, the Parent shall reimburse the Escrow Agent for
any fees, including any legal fees and expenses, incurred by the Escrow Agent
pursuant to Section 8 of this Agreement. The Escrow Agent shall be under no duty
or obligation to monitor or enforce any action between the Parent and
Indemnification Representative pursuant to this Section 12.2; provided, however,
that the Escrow Agent shall pay any Prevailing Party Awards in accordance with
this Agreement.
12.3 Entire Agreement. This Escrow Agreement constitutes the final
----------------
and entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior arrangements or understandings.
12.4 Notices. All notices, requests, demands or other communications
-------
which are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given: (i) on the date of
delivery if personally delivered by hand, (ii) upon the date scheduled for
delivery after such notice is sent by a internationally recognized overnight or
second day express courier or (iii) by fax upon written confirmation (including
the automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice:
If to Parent: TranSwitch Corporation
-------------
Three Enterprise Drive
Shelton, CT 06484
Attention: Michael F. Stauff, Chief Financial Officer
-13-
<PAGE>
Telephone No.:(203) 929-8810
Fax No.: (203) 925-4979
With copies to:
---------------
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: Timothy C. Maguire, Esq.
Telephone No.: (617) 248-7000
Fax No.: (617) 248-7100
If to Parent's
--------------
Transfer Agent: Boston EquiServe, L.P.
--------------
150 Royall Street
Canton, MA 02021
Attention: Craig Carr
Telephone No.: (781) 575-2338
Fax No.: (781) 575-2549
If to the Indemnification
-------------------------
Representative:
---------------
KLM Capital Management, Inc.
T-E-N Almaden Blvd., Ste. 988
San Jose, CA 95113
Telephone No.(408) 970-8888
Fax No: (408) 970-8887
With copies to:
--------------
Wilson Sonsini Goodrich & Rosati PC
650 Page Mill Road
Palo Alto, CA 94304
Attention Mark J. Casper, Esq.
Telephone No.: (650) 565-3650
Fax No: (650) 493-6811
If to the Escrow Agent: If by mail:
-----------------------
State Street Bank and Trust Company
Global Investor Service Group
Corporate Trust P.O. Box 778
Boston, MA 02102-0778
Telephone No.: (617) 662-1785
Fax No.: (617) 662-1466
-14-
<PAGE>
If by courier:
--------------
State Street Bank and Trust Company
Global Investor Services Group
Corporate Trust Department
2 Avenue de Lafayette, 6/th/ Floor
Boston, MA 02111-1724
Attention: Lynn Palmiter
Telephone: (617) 662-1785
Telecopy: (617) 662-1466
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 12.4.
12.5 Changes. The terms of this Escrow Agreement may not be modified
-------
or amended, or any provisions hereof waived, temporarily or permanently, except
pursuant to the written agreement of Parent, the Indemnification Representative
and the Escrow Agent.
12.6 Severability. If any term or provision of this Escrow Agreement
------------
or the application thereof as to any person or circumstance shall to any extent
be invalid or unenforceable, the remaining terms and provisions of this Escrow
Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby and each term and provision of this Escrow
Agreement shall be valid and enforceable to the fullest extent permitted by law.
12.7 Counterparts. This Escrow Agreement may be executed in two or
------------
more partially or fully executed counterparts, each of which shall be deemed an
original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument. The execution and delivery of a
Signature Page to Escrow Agreement in the form annexed to this Escrow Agreement
by any party hereto who shall have been furnished the final form of this Escrow
Agreement shall constitute the execution and delivery of this Escrow Agreement
by such party.
12.8 Headings. The headings of the various sections of this Escrow
--------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Escrow Agreement.
12.9 Governing Law. This Escrow Agreement shall be construed and
-------------
controlled by the laws of the Commonwealth of Massachusetts without regard to
the principles of conflicts of laws.
12.10 Binding Effect. This Escrow Agreement shall inure to the
--------------
benefit of and be binding upon the parties hereto and their respective heirs,
affiliates, successors and assigns.
12.11 Release of Escrow Shares. Under no circumstances should the
------------------------ --
terms of the escrow agreement require the Escrow Agent to release or distribute
Escrow Shares or property (or take similar action, such as making a draw on an
underlying letter of credit) sooner than two (2) business
-15-
<PAGE>
days after the Escrow Agent has received the requisite notices or paperwork in
good form, or passage of the applicable claims period or release date, as the
case may be.
12.12 Tax Indemnification. Parent and Indemnification Representative
-------------------
agree, jointly and severally, (i) to assume any and all obligations imposed now
or hereafter by any applicable tax law with respect to any payment or
distribution of the Escrow Funds or performance of other activities under this
Agreement, (ii) to instruct the Escrow Agent in writing with respect to the
Escrow Agent's responsibility for withholding and other taxes, assessments or
other governmental charges, and to instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Agreement, and (iii) to indemnify and hold the Escrow Agent harmless
from any liability or obligation on account of taxes, assessments, additions for
late payment, interest, penalties, expenses and other governmental charges that
may be assessed or asserted against the Escrow Agent in connection with or
relating to any payment made or other activities performed under the terms of
this Agreement, including without limitation any liability for the withholding
or deduction of (or the failure to withhold or deduct) the same, and any
liability for failure to obtain proper certifications or to report properly to
governmental authorities in connection with this Agreement, including costs and
expenses (including reasonable legal fees and expenses), interest and penalties.
The foregoing indemnification and agreement to hold harmless shall survive the
termination of this Agreement.
12.13 Dispute Resolution. It is understood and agreed that should
------------------
any dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Escrow Shares, or should any claim be made upon the
Escrow Agent or the Escrow Shares by a third party, the Escrow Agent upon
receipt of notice of such dispute or claim is authorized and shall be entitled
(at its sole option and election) to retain in its possession without liability
to anyone, all or any of said Shares until such dispute shall have been settled
either by the mutual written agreement of the parties involved or by a final
order, decree or judgment of a court in the United States of America, the time
for perfection of an appeal of such order, decree or judgment having expired.
The Escrow Agent may, but shall be under no duty whatsoever to, institute or
defend any legal proceedings which relate to the Escrow Shares.
12.14 Consent to Jurisdiction and Service. Each of the interested
-----------------------------------
parties hereby absolutely and irrevocably consents and submits to the
jurisdiction of the courts in the Commonwealth of Massachusetts and of any
Federal court located in said Commonwealth in connection with any actions or
proceedings brought against any of the interested parties (or each of them) by
the Escrow Agent arising out of or relating to this Escrow Agreement. In any
such action or proceeding, each of the interested parties each hereby absolutely
and irrevocably (i) waives any objection to jurisdiction or venue, (ii) waives
personal service of any summons, complaint, declaration or other process, and
(iii) agrees that the service thereof may be made by certified or registered
first-class mail directed to such party, as the case may be, at their respective
addresses in accordance with Section 12.4 hereof.
12.15 Force Majeure. The Escrow Agent shall not be responsible for
-------------
delays or failures in performance resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures, computer viruses, power failures, earthquakes
or other disasters.
-16-
<PAGE>
12.16 Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
12.17 Delivery of Escrow Shares. The Escrow Agent is not the
-------------------------
transfer agent of the Escrow Shares. When shares are required to be delivered
by the Escrow Agent to Parent or the Indemnification Representative pursuant to
this Agreement, delivery shall be made by the Escrow Agent's instructing such
stock transfer agent to deliver certificates to Parent or Indemnification
Representative at their addresses set forth in 12.4.
-17-
<PAGE>
Signature Page to Escrow Agreement
IN WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as
of the day and year first above written.
TRANSWITCH CORPORATION ALACRITY COMMUNICATIONS, INC.
By: /s/ Robert G. Pico By: /s/ Lee Bauman
--------------------------- --------------------------
Title: Vice President Title: President
INDEMNIFICATION REPRESENTATIVE:
KLM Capital Partners Fund, L.P.
By: KLM Capital Management, Inc.
/s/ Jerald P. Shaevitz
-------------------------------
Name: Jerald P. Shaevitz
ESCROW AGENT
STATE STREET BANK AND TRUST COMPANY,
AS ESCROW AGENT
By: /s/ Chi C. Ma
---------------------------
Authorized Signatory
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<PAGE>
INDIVIDUALS:
Name of Shareholder: Zheng Liu
By: /s/ Robert Brownell
-------------------------
Robert Brownell
By: /s/ Jim Cansler
-------------------------
Jim Cansler
By: /s/ Thomas Cushing
-------------------------
Thomas Cushing
By: /s/ Raymond Grefe
-------------------------
Raymond Grefe
By: /s/ Chang Sull Kang
-------------------------
Chang Sull Kang
By: /s/ Allan Lin
-------------------------
Allan Lin
By: /s/ Annie Liu
-------------------------
Annie Liu
By: /s/ Jiong Liu
-------------------------
Jiong Liu
By: /s/ Zheng Liu
-------------------------
Zheng Liu
By: /s/ Raymond S. Venoski
-------------------------
Raymond S. Venoski
By: /s/ Lee Teck Seng
-------------------------
Lee Teck Seng
By: /s/ Baoxing Tang
-------------------------
Baoxing Tang
By: /s/ Dennis Tsurumaki
-------------------------
Dennis Tsurumaki
By: /s/ Ming Wu
-------------------------
Ming Wu
By: /s/ Linda Yang
-------------------------
-19-
<PAGE>
Linda Yang
By: /s/ Zheng Liu & Linda Yang
--------------------------
Zheng Liu and Linda Yang
By: /s/ Jun Zhu
-------------------------
Jun Zhu
-20-
<PAGE>
HOLDERS:
Entity
WS INVESTMENT CO.
By: /s/ Mario Rosati
-------------------------
Mario Rosati
BENNETT J. BAUER AND CYNTHIA L. BAUER,
TRUSTEES OF THE BENNETT AND CYNTHIA BAUER
REVOCABLE TRUST
By: /s/ Bennett J. Bauer
-------------------------
Cynthia L. Bauer
CURRENT VENTURES GROUP, LTD
By: /s/ Jerald P. Shaevitz
-------------------------
Jerald P. Shaevitz
Senior Vice President
KLM Capital Management, Inc.
DPI 1999 INVESTMENT PARTNERS
By: /s/ Michael W. Scott
-------------------------
Michael W. Scott, Partner
EDB VENTURES PTE LTD
By: /s/ Liow Voon Kheong
--------------------
Liow Voon Kheong
General Manager
KLM CAPITAL PARTNERS FUND, L.P.
By: /s/ Jerald P. Shaevitz
-------------------------
Jerald P. Shaevitz
Senior Vice President
KLM Capital Management, Inc.
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<PAGE>
TECHNOLOGY FUND PTE LTD
By: /s/ Chin Chao
-------------------------
Chin Chao, Director
TRIOPHY INVESTMENTS LTD
By: /s/ K.S. Chay
-------------------------
K.S. Chay, Investments Advisor
-22-
<PAGE>
Exhibit 8
Escrow Agent Fee Schedule
-------------------------
Parent/Alacrity Escrow
----------------------
Acceptance Fee
--------------
Waived.
Annual Escrow Fee
-----------------
An annual fee for ordinary services shall be payable in the amount of
$3,500 plus $35.00 per shareholder per year or any part of a year (the "Annual
Fee"). The Annual Fee shall be due and payable in advance, upon signing of the
Escrow Agreement, thereafter upon each anniversary date. The Annual Fee shall be
subject to adjustment by the Escrow Agent annually, upon notice.
Investment Transaction Fee; Wire Transfer Fees
----------------------------------------------
A charge to cover the purchase and sale of investments held in the
escrow account under administration shall be charged as follows: 40.00 basis
points per annum of the average daily net assets for assets held in a money
market account (the "Investment Transaction Fee"). A wire transfer fee of
$20.00 per wire shall be charged for each outgoing wire transfer.
Access Fee
----------
Waived.
Extraordinary Administrative Expenses
-------------------------------------
In addition to the Annual Fee, fees for extraordinary services will be
determined and charged by appraisal. Such services may include, but are not
limited to, additional responsibilities and services incurred in case of
default, or dispute or third party claim upon the escrow fund.
Out of Pocket Expenses
----------------------
Out-of-pocket expenses, such as but not limited to counsel fees and
expenses, telephone, postage, insurance, shipping charges, outside investment
charges and supplies, will be charged at cost.
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