Exhibit 10.63
MEMORANDUM OF UNDERSTANDING
October 18, 2006
This Memorandum of Understanding (“Memorandum”) sets forth the agreement between
LG-Nortel Co.Ltd (“LGN”) and Vertical Communications, Inc (“Vertical”) and
relates to the proposed Agreement and Plan of Merger (the “Merger Agreement”)
between Vertical, Vodavi Technology, Inc., a Delaware corporation (“Vodavi”),
a(nd Vertical Acquisition Sub, Inc., a Delaware corporation (“Vertical
Acquisition Sub”) pursuant to which Vodavi will become a wholly owned subsidiary
of Vertical (the “Merger”).
LGN owns 862,500 shares of the common stock of Vodavi. The Merger Agreement has
been approved by the Board of Directors of Vodavi, Vertical, and Vertical
Acquisition Sub.
In connection with the Merger Agreement, and pursuant to that certain Voting
Agreement, of even date herewith, between Vertical, LGN, and Vodavi (the “Voting
Agreement”), LGN has agreed to vote its shares of Vodavi common stock in favor
of the Merger Agreement.
Vertical and LGN have discussed the potential of LGN reinvesting the merger
consideration received as a result of the Merger into equity securities of
Vertical. Vertical is currently raising funds through both debt and equity
investors to finance the transactions contemplated by the Merger.
To facilitate the transactions proposed by the Merger, and to induce LGN to sign
the Voting Agreement, Vertical hereby acknowledges to LGN the following:

  •   Vertical will continue to support the LGN product line consistent with the
relationship Vodavi has historically had with LGN;     •   Vertical will
distribute, on a non-exclusive basis, certain LG-Nortel products in fulfilling
purchase orders for Nortel and supporting the LG-Nortel products sold by Nortel
in North America on mutually acceptable terms;     •   Vertical will use its
best efforts to enter into reasonably acceptable consulting agreements with the
existing CEO and CFO of Vodavi for a period of not less than nine months to
support the relationship transition between LGN and Vertical;     •   Vertical
will make available to LGN an investment into its equity securities on economic
terms no less favorable than those received by any other investor in its current
financing efforts, provided however, LGN shall not be accorded any investors’
rights to approve and waive certain covenants and conditions in connection with
Vertical’s current financing efforts which may be held by other investors (the
“Investment”); and     •   Vertical shall use its best efforts to cause one
(1) designee of LGN to be elected to the Board of Directors of Vertical at the
earliest feasible time following consummation of the Merger and shall continue
to do so for so long as LGN holds at least 80% of the outstanding shares
purchased by LGN in the Investment.

 

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LGN hereby acknowledges to Vertical the following:

  •   LGN will honor its existing relationship with Vodavi and will assign all
rights under its supply agreement with Vodavi to Vertical; and     •   LGN shall
use its best efforts to execute all necessary investment documents related to
the Investment, including without limitation, a legally binding Securities
Purchase Agreement contemporaneously herewith, and shall thereunder commit to
invest substantially all of the merger consideration to be received by LGN upon
consummation of the merger (or approximately $6,500,000) as part of the
Investment.

[Signature Page Follows]

 

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      In witness whereof, the parties have entered into this Memorandum as of
the 18th day of October 2006.

            VERTICAL COMMUNICATIONS, INC.
      By:   /s/ ken clinebell         Name:   Ken Clinebell        Title:   CFO 
      LG-NORTEL CO. LTD
      By:   /s/ peter dans         Name:   Peter Dans        Title:   Chief
Financial Officer        VODAVI TECHNOLOGY, INC.
      By:   /s/ gregory k. roeper         Name:   Gregory K. Roeper       
Title:   Chief Executive Officer