INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of December, 1997
between Applied Digital Access, Inc., a Delaware corporation ("Corporation"),
whose address is 9855 Scranton Road, San Diego, California 92121 and
__________________ ("Officer"), whose address is __________________.
RECITALS:
A. WHEREAS, Officer, an officer (but not currently a member of the
Board of Directors) of Corporation, performs a valuable service in such
capacity for Corporation; and
B. WHEREAS, the stockholders of Corporation have adopted Bylaws (the
"Bylaws") providing for the indemnification of the officers, directors,
agents and employees of Corporation to the maximum extent authorized by
Section 145 of the Delaware General Corporation Law, as amended (the "Law");
and
C. WHEREAS, the Bylaws and the Law, as amended and in effect from
time to time or any successor or other statutes of Delaware having similar
import and effect, currently purports to be the controlling law governing
Corporation with respect to certain aspects of corporate law, including
indemnification of directors and officers; and
D. WHEREAS, in accordance with the authorization provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies
of Directors and Officers Liability Insurance ("D & O Insurance"), covering
certain liabilities which may be incurred by its directors and officers in
the performance of services as directors and officers of Corporation; and
E. WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
F. WHEREAS, in order to induce Officer to continue to serve as an
officer of Corporation, Corporation has determined and agreed to enter into
this contract with Officer.
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The following terms used in this Agreement
shall have the meanings set forth below. Other terms are defined where
appropriate in this Agreement.
(a) "Disinterested Director" shall mean a director of Corporation
who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Officer.
(b) "Expenses" shall include all direct and indirect costs
(including, without
limitation, attorneys' fees, retainers, court costs, transcripts, fees of
experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, all other
disbursements or out-of-pocket expenses and reasonable compensation for time
spent by Officer for which he or she is otherwise not compensated by
Corporation) actually and reasonably incurred in connection with a Proceeding
or establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.
(c) "Final Adverse Determination" shall mean that a determination
that Officer is not entitled to indemnification shall have been made pursuant
to Section 5 hereof and either (i) a final adjudication in a Delaware court
or decision of an arbitrator pursuant to Section 13(a) hereof shall have
denied Officer's right to indemnification hereunder, or (ii) Officer shall
have failed to file a complaint in a Delaware court or seek an arbitrator's
award pursuant to Section 13(a) for a period of one hundred twenty (120) days
after the determination made pursuant to Section 5 hereof.
(d) "Independent Legal Counsel" shall mean a law firm or member of
a law firm selected by Corporation and approved by Officer (which approval
shall not be unreasonably withheld) and that neither is presently nor in the
past five years has been retained to represent: (i) Corporation, in any
material matter, or (ii) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Legal Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either Corporation or Officer in an
action to determine Officer's right to indemnification under this Agreement.
(e) "Liabilities" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, and penalties and amounts paid in settlement (including all
interest assessments and other charges paid or payable in connection with or
in respect of such judgments, fines, penalties or amounts paid in settlement)
of any proceeding.
(f) "Proceeding" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, including any appeal therefrom.
(g) "Change of Control" shall mean the occurrence of any of the
following events after the date of this Agreement:
(i) A change in the composition of the Board of Directors of
Corporation (the "Board"), as a result of which fewer than two-thirds (2/3)
of the incumbent directors are directors who either (1) had been directors of
Corporation twenty-four (24) months prior to such change or (2) were elected,
or nominated for election, to the Board with the affirmative votes of at
least a majority of the directors who had been directors of Corporation 24
months prior to such change and who were still in office at the time of the
election or
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nomination; or
(ii) Any "person" (as such term is used in section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) through the
acquisition or aggregation of securities is or becomes the beneficial owner,
directly or indirectly, of securities of Corporation representing twenty
percent (20%) or more of the combined voting power of Corporation's then
outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors
(the "Capital Stock"), except that any change in ownership of Corporation's
securities by any person resulting solely from a reduction in the aggregate
number of outstanding shares of Capital Stock, and any decrease thereafter in
such person's ownership of securities, shall be disregarded until such person
increases in any manner, directly or indirectly, such person's beneficial
ownership of any securities of Corporation.
2. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless
and indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
3. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 4 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
(a) against any and all legal expenses (including attorneys'
fees), witness fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by Officer in connection with any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the right of
Corporation) to which Officer is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Officer is, was or
at any time becomes a director, officer, employee or agent of Corporation, or
is or was serving or at any time serves at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer
by Corporation under the non-exclusivity provisions of the Bylaws of
Corporation and the Law.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 2 hereof or reimbursed pursuant to any D & O Insurance
purchased and maintained by Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment
is rendered against Officer for an accounting of profits made from the
purchase or sale by Officer of
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securities of Corporation pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions
of any federal, state or local statutory law;
(d) on account of Officer's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct if such conduct has been established by a judgment or
other final adjudication adverse to Officer (an "Adverse Judgment");
(e) provided there has been no Change of Control, on account of or
arising in response to any action, suit or proceeding (other than an action,
suit or proceeding referred to in Section 14(b) hereof) initiated by Officer
or any of Officer's affiliates against Corporation or any officer, director
or stockholder of Corporation unless such action, suit or proceeding was
authorized in the specific case by action of the Board of Directors of
Corporation;
(f) if a final decision by a Court having jurisdiction in the
matter shall determine that such indemnification is not lawful; or
(g) on account of any action, suit or proceeding to the extent
that Officer is a plaintiff, a counter-complainant or a cross-complainant
therein (other than an action, suit or proceeding permitted by Section 4(e)
hereof).
5. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) Whenever Officer believes that he or she is entitled to
indemnification pursuant to this Agreement, Officer shall submit a written
request for indemnification to Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Officer to support his or her claim for indemnification. Officer shall
submit his or her claim for indemnification within a reasonable time not to
exceed five years after any judgment, order, settlement, dismissal,
arbitration award, conviction, acceptance of a plea of nolo contendere or its
equivalent, final termination or other disposition or partial disposition of
any Proceeding, whichever is the later date for which Officer requests
indemnification. The President or the Secretary or other appropriate officer
shall, promptly upon receipt of Officer's request for indemnification, advise
the Board of Directors in writing that Officer has made such a request.
Determination of Officer's entitlement to indemnification shall be made not
later than ninety (90) days after Corporation's receipt of his or her written
request for such indemnification.
(b) The Officer shall be entitled to select the forum in which
Officer's request for indemnification will be heard, which selection shall be
included in the written request for indemnification required in Section 5(a).
This forum shall be any one of the following:
(i) The stockholders of Corporation;
(ii) A quorum of the Board of Directors consisting of
Disinterested
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Directors;
(iii) Independent Legal Counsel, who shall make the
determination in a written opinion; or
(iv) A panel of three arbitrators, one selected by
Corporation, another by Officer and the third by the first two arbitrators
selected. If for any reason three arbitrators are not selected within thirty
(30) days after the appointment of the first arbitrator, then selection of
additional arbitrators shall be made by the American Arbitration Association.
If any arbitrator resigns or is unable to serve in such capacity for any
reason, the American Arbitration Association shall select his or her
replacement. The arbitration shall be conducted pursuant to the commercial
arbitration rules of the American Arbitration Association now in effect.
If Officer fails to make such designation, his or her claim
shall be determined by the forum selected by Corporation.
6. PRESUMPTION AND EFFECT OF CERTAIN PROCEEDINGS. Upon making a
request for indemnification, Officer shall be presumed to be entitled to
indemnification under this Agreement and Corporation shall have the burden of
proof to overcome that presumption in reaching any contrary determination.
The termination of any Proceeding by judgment, order, settlement, arbitration
award or conviction, or upon a plea of nolo contendere or its equivalent
shall not affect this presumption or, except as may be provided in Section 4
hereof, establish a presumption with regard to any factual matter relevant to
determining Officer's rights to indemnification hereunder. If the person or
persons so empowered to make a determination pursuant to Section 5(b) hereof
shall have failed to make the requested determination within thirty (30) days
after any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, or
other disposition or partial disposition of any Proceeding or any other event
which could enable Corporation to determine Officer's entitlement to
indemnification, the requisite determination that Officer is entitled to
indemnification shall be deemed to have been made.
7. CONTRIBUTION. If the indemnification provided in Sections 2 and 3
is unavailable and may not be paid to Officer for any reason other than those
set forth in Section 4, then in respect of any threatened, pending or
completed action, suit or proceeding in which Corporation is or is alleged to
be jointly liable with Officer (or would be if joined in such action, suit or
proceeding), Corporation shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by Officer in such
proportion as is appropriate to reflect (i) the relative benefits received by
Corporation on the one hand and Officer on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Officer on the other
hand in connection with the events which resulted in such expenses,
judgments, fines or settlement amounts, as well as any other relevant
equitable considerations. The relative fault of Corporation on the one hand
and of Officer on the other shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such
expenses, judgments,
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fines or settlement amounts. Corporation agrees that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.
8. INSURANCE AND FUNDING. Corporation hereby represents and warrants
that it shall purchase and maintain insurance to protect itself and/or
Officer against any Expenses and Liabilities in connection with any
Proceeding to the fullest extent permitted by the Law. In the event of a
Change of Control, Corporation shall establish a letter of credit, as
provided in Section 9, to ensure the payment of such amounts as may be
necessary to effect indemnification or advancement of Expenses as provided in
this Agreement.
9. LETTER OF CREDIT.
(a) In order to secure the obligations of Corporation to indemnify
and advance Expenses to Officer pursuant to this Agreement, Corporation shall
obtain at the time of any Change of Control, upon request of any officer, an
irrevocable standby letter of credit naming the officers of the Corporation
in office at the time of a Change of Control as joint beneficiaries (the
"Letter of Credit"). The Letter of Credit shall be in an appropriate amount
not less than one million dollars ($1,000,000), shall be issued by a
commercial bank headquartered in the United States having assets in excess of
$10 billion and capital according to its most recent published reports equal
to or greater than the then applicable minimum capital standards promulgated
by such bank's primary federal regulator and shall contain terms and
conditions reasonably acceptable to all directors. The Letter of Credit
shall provide that Officer may from time to time draw certain amounts
thereunder, upon written certification by Officer to the issuer of the Letter
of Credit that (i) Officer has made written request upon Corporation for an
amount not less than the amount he or she is drawing under the Letter of
Credit and that Corporation has failed or refused to provide him with such
amount in full within thirty (30) days after receipt of the request, and (ii)
Officer believes that he or she is entitled under the terms of this Agreement
to the amount which he or she is drawing upon under the Letter of Credit.
The issuance of the Letter of Credit shall not, in any way, diminish
Corporation's obligation to indemnify Officer against Expenses and
Liabilities to the full extent required by this Agreement.
(b) Once Corporation has obtained the Letter of Credit,
Corporation shall maintain and renew the Letter of Credit or substitute
letter of credit meeting the criteria of Section 9(a) during the term of this
Agreement so that the Letter of Credit shall have an initial term of five
years, be renewed for successive five-year terms, and always have at least
one year of its term remaining.
10. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at
the request of Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise) and shall continue thereafter so long as Officer shall
be subject to any possible claim or threatened, pending or completed action,
suit or proceeding, whether civil, criminal or investigative, by reason of
the fact that Officer was serving Corporation or such other entity in
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any capacity referred to herein.
11. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by
Officer of notice of the commencement of any action, suit or proceeding,
Officer will, if a claim in respect thereof is to be made against Corporation
under this Agreement, notify Corporation of the commencement thereof; but the
omission so to notify Corporation will not relieve it from any liability
which it may have to Officer otherwise than under this Agreement. With
respect to any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) Except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Officer. After notice from Corporation to Officer
of its election to assume the defense thereof, Corporation will not be liable
to Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Officer
shall have the right to employ his or her own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice
from Corporation of its assumption of the defense thereof shall be at the
expense of Officer unless (i) the employment of counsel by Officer has been
authorized by Corporation, (ii) Officer shall have reasonably concluded that
there may be a conflict of interest between Corporation and Officer in the
conduct of the defense of such action or (iii) Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Officer's separate counsel shall be at the
expense of Corporation. Corporation shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of
Corporation or as to which Officer shall have made the conclusion provided
for in (ii) above; and
(c) Provided there has been no Change of Control, Corporation
shall not be liable to indemnify Officer under this Agreement for any amounts
paid in settlement of any action or claim effected without its written
consent, which consent shall not be unreasonably withheld. Corporation shall
be permitted to settle any action except that it shall not settle any action
or claim in any manner which would impose any penalty, out-of-pocket
liability, or limitation on Officer without Officer's written consent.
12. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own counsel
pursuant to Section 11(b)(i) through (iii) above, Corporation shall advance
to Officer, prior to any final disposition of any threatened or pending
action, suit or proceeding, whether civil, criminal, administrative or
investigative, any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit or
proceeding within ten (10) days after receiving copies of invoices presented
to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable
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expenses paid by Corporation in defending any civil or criminal action, suit
or proceeding against Officer in the event and only to the extent it shall be
ultimately determined by a final judicial decision (from which there is no
right of appeal) that Officer is not entitled, under the provisions of the
Law, the Bylaws, this Agreement or otherwise, to be indemnified by
Corporation for such expenses.
13. REMEDIES OF OFFICER.
(a) In the event that (i) a determination pursuant to Section 5
hereof is made that Officer is not entitled to indemnification, (ii) advances
of Expenses are not made pursuant to this Agreement, (iii) payment has not
been timely made following a determination of entitlement to indemnification
pursuant to this Agreement, or (iv) Officer otherwise seeks enforcement of
this Agreement, Officer shall be entitled to a final adjudication in an
appropriate court of his or her rights. Alternatively, Officer at his or her
option may seek an award in arbitration to be conducted by a single
arbitrator pursuant to the commercial arbitration rules of the American
Arbitration Association now in effect, whose decision is to be made within
ninety (90) days following the filing of the demand for arbitration. The
Corporation shall not oppose Officer's right to seek any such adjudication or
arbitration award.
(b) In the event that a determination that Officer is not entitled
to indemnification, in whole or in part, has been made pursuant to Section 5
hereof, the decision in the judicial proceeding or arbitration provided in
paragraph (a) of this Section 13 shall be made de novo and Officer shall not
be prejudiced by reason of a determination that he or she is not entitled to
indemnification.
(c) If a determination that Officer is entitled to indemnification
has been made pursuant to Section 5 hereof or otherwise pursuant to the terms
of this Agreement, Corporation shall be bound by such determination in the
absence of (i) a misrepresentation of a material fact by Officer or (ii) a
specific finding (which has become final) by an appropriate court that all or
any part of such indemnification is expressly prohibited by law.
(d) In any court proceeding pursuant to this Section 13,
Corporation shall be precluded from asserting that the procedures and
presumptions of this Agreement are not valid, binding and enforceable. The
Corporation shall stipulate in any such court or before any such arbitrator
that Corporation is bound by all the provisions of this Agreement and is
precluded from making any assertion to the contrary.
(e) Expenses reasonably incurred by Officer in connection with his
or her request for indemnification under this Agreement, meeting enforcement
of this Agreement or to recover damages for breach of this Agreement shall be
borne by Corporation.
(f) Corporation and Officer agree herein that a monetary remedy
for breach of this Agreement, at some later date, will be inadequate,
impracticable and difficult of proof, and further agree that such breach
would cause Officer irreparable harm. Accordingly, Corporation and Officer
agree that Officer shall be entitled to temporary and permanent injunctive
relief to
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enforce this Agreement without the necessity of proving actual damages or
irreparable harm. The Corporation and Officer further agree that Officer
shall be entitled to such injunctive relief, including temporary restraining
orders, preliminary injunctions and permanent injunctions, without the
necessity of posting bond or other undertaking in connection therewith. Any
such requirement of bond or undertaking is hereby waived by Corporation, and
Corporation acknowledges that in the absence of such a waiver, a bond or
undertaking may be required by the court.
14. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby
in order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in
such capacity.
(b) In the event Officer is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Officer for all of
Officer's reasonable fees and expenses in bringing and pursuing such action.
15. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
or all of the provisions hereof shall be held to be invalid or unenforceable
to any extent for any reason, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions hereof, or the
obligation of the Corporation to indemnify the Officer to the full extent
provided by the Bylaws or the Law, and the affected provision shall be
construed and enforced so as to effectuate the parties' intent to the maximum
extent possible.
16. GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the internal laws of the State of Delaware.
17. CONSENT TO JURISDICTION. The Corporation and Officer each
irrevocably consent to jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out
of or relates to this Agreement and agree that any action instituted under
this Agreement shall be brought only in the state courts of the State of
Delaware.
18. BINDING EFFECT. This Agreement shall be binding upon Officer and
upon Corporation, its successors and assigns, and shall inure to the benefit
of Officer, his or her heirs, executors, administrators, personal
representatives and assigns and to the benefit of Corporation, its successors
and assigns.
19. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties hereto and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter
of this Agreement, except as specifically referred to herein. This Agreement
supersedes any and all agreements regarding indemnification heretofore
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entered into by the parties.
20. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any
purpose unless set forth in writing signed by both parties hereto.
21. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
22. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
23. SURVIVAL OF RIGHTS. The rights conferred on Officer by this
Agreement shall continue after Officer has ceased to be a director, officer,
employee or other agent of Corporation or such other entity.
24. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed to Officer or to
Corporation, as the case may be, at the address shown on page 1 of this
Agreement, or to such other address as may have been furnished by either
party to the other, and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the
date on which it is so mailed.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
Officer: APPLIED DIGITAL ACCESS, INC.
By:
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(Signature)
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Print Name Print Name and Title
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