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Exhibit 2.6 Execution Version STOCK PURCHASE AGREEMENT Dated as of December 30, 2004 among TELLABS, INC., THE STOCKHOLDERS AND THE OPTIONHOLDERS




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STOCK PURCHASE AGREEMENT TABLE OF CONTENTS PageARTICLE I PURCHASE AND SALE OF SHARES AND CANCELLATION OF OPTIONS
    
    
    2Section 1.1 Purchase and Sale of Shares and Cancellation of Options
    
    
    2Section 1.2 Closing Date
    
    
    2Section 1.3 Purchase Price
    
    
    2Section 1.4 Payment of the Purchase Price
    
    
    3Section 1.5 No Fractional Securities
    
    
    7Section 1.6 Buyers Additional Deliveries
    
    
    7Section 1.7 Sellers Deliveries
    
    
    7Section 1.8 Indemnity and Stock Escrows
    
    
    9Section 1.9 Further Assurances
    
    
    10Section 1.10 Escrow and Power of Attorney
    
    
    10Section 1.11 Withholding
    
    
    10Section 1.12 Agreed Tax Treatment
    
    
    10ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
    
    
    11Section 2.1 Organization of the Company
    
    
    11Section 2.2 Subsidiaries and Investments
    
    
    11Section 2.3 Capital Stock of the Company
    
    
    11Section 2.4 Title to Stock
    
    
    11Section 2.5 Authority of Sellers
    
    
    12Section 2.6 Financial Statements
    
    
    13Section 2.7 No Dividends; Absence of Certain Changes or Events
    
    
    13Section 2.8 No Undisclosed Liabilities
    
    
    15Section 2.9 Governmental Permits
    
    
    16Section 2.10 Taxes
    
    
    16Section 2.11 Actions, Proceedings and Violations
    
    
    18Section 2.12 Certain Agreements
    
    
    18Section 2.13 Employee Benefits
    
    
    19Section 2.14 Worker Safety and Environmental Laws
    
    
    20Section 2.15 Labor Matters
    
    
    20Section 2.16 Intellectual Property
    
    
    21Section 2.17 Availability of Assets and Legality of Use
    
    
    28Section 2.18 Real Property
    
    
    28Section 2.19 Real Property Leases
    
    
    28Section 2.20 Personal Property Leases
    
    
    28Section 2.21 Title to Assets
    
    
    28Section 2.22 Contracts
    
    
    28Section 2.23 Status of Contracts
    
    
    29Section 2.24 Insurance
    
    
    30Section 2.25 Brokers
    
    
    30
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PageSection 2.26 [Intentionally Omitted.]
    
    
    30Section 2.27 [Intentionally Omitted.]
    
    
    30Section 2.28 Depositaries; Powers of Attorney
    
    
    30Section 2.29 Absence of Certain Payments
    
    
    30Section 2.30 Transactions with Affiliates
    
    
    31Section 2.31 Securities Law Matters
    
    
    31Section 2.32 Product Warranty
    
    
    32Section 2.33 Books and Records
    
    
    32Section 2.34 Accounts Receivable
    
    
    33Section 2.35 Inventory
    
    
    33Section 2.36 Representations Complete
    
    
    33Section 2.37 Defined Liabilities
    
    
    33ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER
    
    
    33Section 3.1 Organization of Buyer
    
    
    34Section 3.2 Authority of Buyer
    
    
    34Section 3.3 Capital Structure
    
    
    34Section 3.4 SEC Documents and Other Reports
    
    
    35Section 3.5 No Finder
    
    
    35Section 3.6 Issuance of Buyer Shares
    
    
    35Section 3.7 No Other Representations
    
    
    35ARTICLE IV ADDITIONAL AGREEMENTS
    
    
    36Section 4.1 Covenant Not to Compete or Solicit Business
    
    
    36Section 4.2 Tax Matters
    
    
    37Section 4.3 Use of Name
    
    
    40Section 4.4 Waiver
    
    
    40Section 4.5 Employee Benefit Plans
    
    
    40Section 4.6 Operation of the Company
    
    
    40Section 4.7 Acceleration of Performance Conditions
    
    
    40ARTICLE V INDEMNIFICATION
    
    
    41Section 5.1 Indemnification by Sellers
    
    
    41Section 5.2 Indemnification by Buyer
    
    
    42Section 5.3 Notice and Determination of Claims and Forfeiture Events
    
    
    43Section 5.4 Resolution of Conflicts; Arbitration
    
    
    44Section 5.5 Seller Representative
    
    
    45Section 5.6 [Intentionally Omitted.]
    
    
    45Section 5.7 Third Party Claims
    
    
    45Section 5.8 Subsequent Dispositions
    
    
    46Section 5.9 No Contribution
    
    
    46Section 5.10 Certain Conflicts
    
    
    46Section 5.11 Treatments of Payments
    
    
    46Section 5.12 Exclusive Remedies
    
    
    46Section 5.13 No Double Recovery
    
    
    46ARTICLE VI FORFEITURE EVENTS
    
    
    47Section 6.1 Notice And Determination Of Forfeiture Events
    
    
    47ARTICLE VII GENERAL PROVISIONS
    
    
    48Section 7.1 Survival
    
    
    48
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PageSection 7.2 Confidential Nature of Information
    
    
    49Section 7.3 Governing Law; Venue
    
    
    49Section 7.4 Notices
    
    
    49Section 7.5 Successors and Assigns
    
    
    50Section 7.6 Access to Records after Closing
    
    
    50Section 7.7 Entire Agreement; Amendments
    
    
    51Section 7.8 Interpretation
    
    
    51Section 7.9 Waivers
    
    
    51Section 7.10 Expenses; Attorneys Fees
    
    
    51Section 7.11 Partial Invalidity
    
    
    51Section 7.12 Execution in Counterparts
    
    
    52Section 7.13 Definitions
    
    
    52Section 7.14 No Public Announcement
    
    
    59Section 7.15 Jurisdiction and Venue; Service of Process
    
    
    59
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AnnexesAnnex A
    
    SharesAnnex B
    
    OptionsExhibitsExhibit A
    
    Buyer SharesExhibit B
    
    Opinion of Counsel for the Company and Special Counsel to Asghar MostafaExhibit C
    
    Release and WaiverExhibit D
    
    Escrow AgreementExhibit E
    
    Share Escrow Agreement and Power of AttorneyExhibit F
    
    Option Escrow Agreement and Power of AttorneyExhibit G
    
    Guarantee of Asghar MostafaExhibit H
    
    Proprietary Information and Inventions AgreementExhibit I
    
    Bank Payoff LetterExhibit J
    
    Note Payoff Letter
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STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of December 30, 2004, among Tellabs, Inc., a Delaware
corporation (Buyer), on the one hand, and the Sellers (as hereinafter defined), on the
other hand. W I T N E S S E T H : WHEREAS, each of the parties set forth on Annex A hereto (collectively, the
Stockholders and each, a Stockholder) is the record and beneficial owner of (i)
the number of issued and outstanding shares of Class A Common Stock, $0.01 par value (the
Class A Shares), of Vinci Systems, Inc., a Delaware corporation (the Company),
and (ii) the number of issued and outstanding shares of Class B Common Stock, $0.01 par value (the
Class B Shares), of the Company, in each case set forth opposite such Stockholders name
on Annex A hereto (the Class A Shares and the Class B Shares being referred to collectively
herein as the Shares and each as a Share); WHEREAS, the Shares owned by the Stockholders constitute all of the issued and outstanding
shares of capital stock of the Company, which is engaged in the business of developing,
manufacturing and distributing software and hardware used in the telecommunications industry (the
Business); WHEREAS, each of the parties set forth on Annex B hereto (collectively, the
Optionholders and each, an Optionholder) is the record and beneficial owner of
the options (collectively, the Options and each, an Option) to purchase the
number of Class B Shares set forth opposite such Optionholders name on Annex B; WHEREAS, the Stockholders desire to sell to Buyer, and Buyer desires to purchase from the
Stockholders, all of such issued and outstanding Shares, all on the terms and subject to the
conditions set forth herein; WHEREAS, the Stockholders and the Optionholders (collectively, the Sellers) and
Buyer desire to provide for the cancellation and termination of all of the Options; WHEREAS, Asghar Mostafa owns all the limited liability company interests in Mostafa Group LLC,
the principal stockholder of the Company; and WHEREAS, in order to induce Buyer to enter into this Agreement and to consummate the
transactions contemplated hereby, Asghar Mostafa hereby is agreeing to be bound by Section
4.1 and Article VII, and has delivered a personal guaranty in connection herewith. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
hereinafter set forth, it is hereby agreed among the Company, each of the Sellers and Buyer as
follows:




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ARTICLE I
PURCHASE AND SALE OF SHARES AND CANCELLATION OF OPTIONS Section 1.1 Purchase and Sale of Shares and Cancellation of Options. Upon the terms
and subject to the conditions of this Agreement, on the Closing Date, (i) the Sellers shall sell,
transfer, assign, convey and deliver to Buyer, and Buyer shall purchase from the Sellers, free and
clear of all Encumbrances, an aggregate of 6,200,000 Class A Shares and an aggregate of 1,945,000
Class B Shares, in each case owned beneficially and of record by the Sellers, which shares
constitute, and will constitute as of the Closing Date, all of the issued and outstanding shares of
capital stock of the Company; and (ii) all Options shall be automatically canceled and terminated
without further action by any party, which Options constitute, and will constitute as of the
Closing Date, all of the issued and outstanding options for shares of the Companys capital stock. Section 1.2 Closing Date. The purchase and sale of the Shares and the cancellation
and termination of Options (the Closing) shall take place simultaneously with the
execution and delivery hereof at 10:00 A.M., local time, on December 30, 2004, at the offices of
Sidley Austin Brown & Wood LLP, 1501 K Street, N.W., Washington, D.C., or at such other place or at
such other time as shall be agreed upon by Buyer and the Seller Representative (such date and time
being hereinafter called the Closing Date). Section 1.3 Purchase Price. (a) The total purchase price for the Shares and the cancellation and termination of the
Options (the Purchase Price) shall be equal to the following and shall be payable as and
only to the extent provided in this Agreement and subject to the terms hereof, including the terms
of Sections 1.4 and 1.5: (i) Twenty Five Million Dollars ($25,000,000) minus all Defined Liabilities
(the First Cash Payment); plus (ii) 1,443,418 shares of Buyer Common Stock (the Buyer Shares), reduced for
any fractional shares pursuant to Section 1.5 (the Stock Payment); plus (iii) Three Million Dollars ($3,000,000) (the Second Cash Payment); plus (iv) Six Million Dollars ($6,000,000) (the Third Cash Payment); plus (v) Four Million Dollars ($4,000,000) (the Fourth Cash Payment); plus (vi) Two Million Dollars ($2,000,000) (the Fifth Cash Payment and together
with the First Cash Payment, the Second Cash Payment, the Third Cash Payment and the Fourth
Cash Payment, the Cash Payments and each a Cash Payment). The Cash
Payments excluding the First Cash Payment are hereinafter referred to as the Subsequent
Cash Payments. (b) The Purchase Price shall be allocated among the Sellers as follows: 2




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(i) For each Share, the Per Share Cash Price plus the Per Share Stock Price; and (ii) For each Share subject to purchase under each Option canceled, terminated and
relinquished hereby, (x) the Per Share Cash Price minus the exercise price per Share under
such Option set forth on Annex B hereto, plus (y) the Per Share Stock Price. (c) As used herein, the following terms have the following meanings: Base Share Cash Pricemeans the amounts resulting from dividing the Cash Payments by
9,060,000, the aggregate of the issued and outstanding Shares after the exercise of all Options. Defined Liabilitiesmeans all debt for borrowed money of the Company, (including
principal and interest and any notes issued by the Company to Asghar Mostafa or any of his
Affiliates (including Mostafa Venture Fund I, LLC)) and all amounts owing in respect of deferred
compensation. Payments to be made by the Company after Closing to UBS Securities LLC pursuant to
that certain letter agreement dated September 3, 2003 between the Company and UBS Securities LLC
shall not be deemed Defined Liabilities. Exercise Factormeans the amount resulting from dividing the aggregate exercise
price of all Options, as set forth in Annex B, respectively, by 9,060,000. Per Share Cash Pricemeans the Base Share Cash Price plus the Exercise Factor. Per Share Stock Pricemeans the number of Buyer Shares resulting from dividing the
Stock Payment by 9,060,000, the aggregate of the issued and outstanding Shares after the exercise
of all Options. Section 1.4 Payment of the Purchase Price. (a) At Closing Buyer shall pay the First Cash Payment as follows: (i) Buyer shall pay the Sellers an amount equal to the First Cash Payment minus
the Cash Escrow Amount (as defined below) by wire transfer of immediately available funds to
the account specified by written instructions from the Seller Representative at least 5 days
before the Closing Date (the Payment Account); and (ii) Buyer shall deposit with the Escrow Agent an amount equal to ten percent (10%) of
the First Cash Payment (the Cash Escrow Amount), as set forth in Section
1.8. (b) At Closing Buyer shall pay the Stock Payment, reduced for any fractional shares in
accordance with Section 1.5 hereof, by delivering to the Escrow Agent the Stock Payment, as
set forth in Section 1.8, to be held in escrow and released in accordance with the 3




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Escrow Agreement; provided that, (i) if at any time prior to June 30, 2006,(i) any Seller (other than Asghar Mostafa)
ceases to be employed by the Company as a result of (x) a Voluntary Departure from the
Company or (y) a termination for Cause by the Company, the portion of the Share Escrow Fund
(as defined in the Escrow Agreement) credited to the subaccount of such Seller under the
Escrow Agreement (including all Escrow Shares (as defined in the Escrow Agreement) and any
cash resulting from the sale of any any Escrow Shares and any dividends and distributions in
respect of such Escrow Shares, whether in cash, additional Buyer Shares or other property,
received by the Escrow Agent, in each case credited to such subaccount) shall be forfeited
by such Seller and shall immediately be returned to Buyer by the Escrow Agent. (ii) if at any time prior to June 30, 2006, (i) Asghar Mostafa ceases to be employed by
the Company as a result of (x) a Voluntary Departure from the Company or (y) a termination
for Cause by the Company, the entire Share Escrow Fund (including all Escrow Shares and any
cash resulting from the sale of any Escrow Shares and any dividends and distributions in
respect of all Escrow Shares, whether in cash, additional Buyer Shares or other property,
received by the Escrow Agent) shall be forfeited by all the Sellers and shall immediately be
returned to Buyer by the Escrow Agent. (iii) if at any time prior to June 30, 2006,(i) any two of Joseph Kralowetz, Douglas
Ortega or Michael Giovannoni cease to be employed by the Company as a result of (x) a
Voluntary Departure from the Company or (y) a termination for Cause by the Company the
entire Share Escrow Fund (including all Escrow Shares and any cash resulting from the sale
of any Escrow Shares and any dividends and distributions in respect of all Escrow Shares,
whether in cash, additional Buyer Shares or other property, received by the Escrow Agent)
shall be forfeited by all the Sellers and shall immediately be returned to Buyer by the
Escrow Agent. (iv) if at any time prior to June 30, 2006,(i) more than 50% of the employees of the
Company immediately prior to the Closing Date cease to be employed by the Company as a
result of (x) a Voluntary Departure from the Company or (y) a termination for Cause by the
Company, the entire Share Escrow Fund (including any and all Escrow Shares and cash
resulting from the sale of any Escrow Shares and dividends and distributions in respect of
all Escrow Shares, whether in cash, additional Buyer Shares or other property, received by
the Escrow Agent) shall be forfeited by all the Sellers and shall immediately be returned to
Buyer by the Escrow Agent. (v) The occurrence of the events giving rise to a forfeiture pursuant to clause (i)
immediately above is referred to in this Agreement as an Individual Forfeiture
Event and the occurrence of any of the events giving rise to any forfeiture pursuant to
clauses (ii), (iii) or (iv) immediately above is referred to in this Agreement as a
Total Forfeiture Event. The Purchase Price shall be deemed reduced by the value of the Escrow Shares and the
amount of cash resulting from the sale of any Escrow Shares, in each case to the 4




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extent forfeited pursuant hereto. The obligation of Buyer to make any Stock Payment
pursuant to this Agreement shall not be affected by the death of any Seller. (c) Buyer shall pay the Sellers the Second Cash Payment by wire transfer of immediately
available funds to the Payment Account no later than 10 days after the following is satisfied: (i) No later than February 28, 2005, the Company achieves a bill of materials (which
bill of materials shall include manufacturing costs and a power solution that Verizon
accepts as designed per the Buyer Product Specification Documents (PSD) for the 611 ONT (as
defined below), R10.1, and ONT Power Specification) (the BOM Expenses) of $281
with respect to the 611 ONT (assuming production of 500,000 units) and Buyer is able to
independently verify such BOM Expenses through its own supply chain. This target of $281
assumes that the Company will (x) use a Luminent triplexer with a cost of $55 and (y) have a
conversion cost of $30 using Breconridge as a contract manufacturer. In the event that
Buyer directs the Company to use an alternate triplexer or a different contract
manufacturer, the $281 target will be adjusted to reflect any increase in cost
dollar-for-dollar to the Company provided that the Company substantiates that it would have
received the above $55 and $30 costs, respectively but for Buyers direction to the Company
to use an alternative triplexer or a different contract manufacturer. (d) Buyer shall pay the Sellers the Third Cash Payment by wire transfer of immediately
available funds to the Payment Account no later than 10 days after all of the following conditions
are satisfied: (i) In the case of the Companys 611 ONT SFH, including both its hardware and software
components (the 611 ONT): (A) No later than February 28, 2005, the 611 ONT is released to Buyer with (i)
no critical issues and (ii) no major issues without acceptable workarounds, for
validation in accordance with the current plan set forth in Schedule
1.4(c)(i); provided, that if Buyer does not release to the Company Release 9.2
1G, with full functionality as it relates to ONT function and interoperability,
prior to January 31, 2005, such February 28, 2005 date and all subsequent dates
provided for below in this clause (i) shall be extended by a period equal to the
period between February 1, 2005 and the date the Buyer delivered to the Company said
deliverable; (B) No later than April 15, 2005, the 611 ONT is delivered to the Verizon
laboratory with (i) no critical issues and (ii) no major issues without acceptable
workarounds for testing; provided, that if Buyer does not release to the Company
Buyers OLT Release 9.2 1G by January 31, 2005 with full functionality as it relates
to ONT function and interoperability such April 15, 2005 date and all subsequent
dates provided for below in this clause (i) shall be extended by a period equal to
the period between aforementioned Buyer deliverable dates and the date the Buyer
delivered to the Company such functional OLT Release 9.2 1G; 5




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(C) No later than May 31, 2005, the Company has made all deliveries and taken
all actions to cause the Verizon laboratory to formally approve the 611 ONT for use
by Verizon; provided that in the event Verizon has not accepted Buyers OLT Release
9.2 1G by April 15, 2005, such May 31, 2005 date and all subsequent dates provided
for below in this clause (i) shall be extended by a period equal to the period
between April 16, 2005 and the date the Buyers OLT Release 9.2 1G has been accepted
into the laboratory by Verizon; and (D) No later than June 30, 2005, as such date may be extended as set forth in this
Section 1.4, the Company demonstrates remotely from its laboratory to a
remote Nortel 5200 or equivalent platform each of the following: (i) the 611 ONTs
hardware is able to support SIP based services; (ii) the 611 ONT is able to initiate
and receive calls and implement supplementary services (such as call waiting) on all
lines simultaneously; and (iii) the 611 ONT supports multiple analog lines and
invokes the supplementary services through the use of hook-flash and digit events. (e) Buyer shall pay the Sellers the Fourth Cash Payment by wire transfer of immediately
available funds to the Payment Account no later than 10 days after the following is satisfied: (i) No later than February 15, 2006, (y) the 612 ONT SFH shall be released for
production and (z) the Company achieves a bill of materials with respect to the 612 ONT SFH
having BOM Expenses of $210 (assuming production of 500,000 units) and Buyer is able to
independently verify such BOM Expenses through its own supply chain. The 612 ONT shall have
substantially the same functionality as the 611 ONT with all critical and major issues fixed
as agreed to by the Buyer and the Company shall have implemented MoCA functionality, as
defined by Verizon, on the 612 ONT if the Buyer determines that MoCA functionality is
needed for Verizon. If MoCA functionality is added to the 612 ONT pursuant to Buyers
request and the components needed for MoCA functionality are not available to the Company by
September 30, 2005, then the February 15, 2006 date set forth above shall be extended by a
period equal to the period between October 1, 2005 and the date of availability of
components to the Company; and BOM Expenses may increase beyond the $210 target by the
amount equal to the cost of those modifications and components needed solely for MoCA
functionality if requested by Buyer. (f) Buyer shall pay the Sellers the Fifth Cash Payment by wire transfer of immediately
available funds to the Payment Account no later than February 15, 2006 if the Companys expenses
other than for general and administrative expenses determined in accordance with Buyers practice
(including for product development as contemplated hereby and to comply with the Company
Agreements), do not exceed the $8.0 million in 2005 as set forth in Schedule 1.4(f). Notwithstanding the foregoing, if any performance by the Company is delayed due to the action or
failure to act by Verizon (unless such action or failure to act by Verizon is related to the 611
ONT or the 612 ONT in which case this provision shall have no effect as to such delay) (the 6




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Verizon Delay), then any and all subsequent dates provided for above in items (A), (B) or
(C) of clause (d)(i) above shall be extended by a period equal to the period of the Verizon Delay. If any of the foregoing conditions for making a Subsequent Cash Payment is not satisfied by the
date specified herein for such condition to be satisfied, as such date maybe extended in accordance
with such foregoing conditions, the Sellers will cease to be entitled to such Subsequent Cash
Payment and the Purchase Price will be reduced by such amount. The conditions for making the
Subsequent Cash Payments are referred to in this Agreement as the Performance Conditions
and the period for such performance provided for in this Section 1.4 is referred to in this
Agreement as the Performance Period. Section 1.5 No Fractional Securities. No certificates or scrip representing
fractional shares of Buyer Shares shall be issued as part of the Stock Payment. The number of Buyer
Shares to be deposited at Closing by Buyer with the Escrow Agent is the aggregate of the number of
Buyer Shares set forth opposite each Sellers name on Exhibit A, which numbers have been
rounded down to eliminate any fractional shares a Seller would have received hereunder otherwise. Section 1.6 Buyers Additional Deliveries. At Closing, Buyer shall deliver to the
Sellers all of the following: (a) Copies of Buyers Certificate of Incorporation certified as of a recent date by the
Secretary of State of the State of Delaware; (b) Certificate of good standing of Buyer issued as of a recent date by the Secretary of State
of the State of Delaware; (c) Certificate of the secretary or an assistant secretary of Buyer, dated the Closing Date,
in form and substance reasonably satisfactory to the Sellers, as to (i) no amendments to the
Certificate of Incorporation of Buyer since a specified date; (ii) the By-laws of Buyer; (iii) the
resolutions of the Board of Directors of Buyer authorizing the execution and performance of this
Agreement and the contemplated transactions; and (iv) incumbency and signatures of the officers of
Buyer executing this Agreement and any Buyer Ancillary Agreement; (d) the Escrow Agreement duly executed by Buyer; and (e) Evidence, in form and substance satisfactory to the Seller Representative, that all
Defined Liabilities have been paid in full; Section 1.7 Sellers Deliveries. At Closing the Sellers shall deliver to Buyer all
the following: (a) Copies of the Certificate of Incorporation of the Company certified as of a recent date by
the Secretary of State of the State of Delaware; (b) Certificate of good standing of the Company issued as of a recent date by the Secretary of
State of the State of Delaware; 7




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(c) Certificate of the secretary or an assistant secretary of the Company dated the Closing
Date, in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to the
Certificate of Incorporation of the Company since a specified date; and (ii) the By-laws of the
Company; (d) A certificate or certificates for the Shares held by each Stockholder, duly endorsed by
such Stockholder in blank or accompanied by stock powers duly executed by such Stockholder in
blank, in each case, in form satisfactory to Buyer; (e) The agreements evidencing the Options; (f) Opinion of counsel for the Company and special counsel to Asghar Mostafa (individually and
in his capacity as the Seller Representative) and Mostafa Group LLC, substantially in the form
contained in Exhibit B; (g) Signed resignations, effective as of the Closing, of each of the officers and directors of
the Company and any consultants of the Company specified by Buyer prior to the Closing; (h) A release and waiver, substantially in the form of Exhibit C, of any claim the
Sellers or Asghar Mostafa (in his personal capacity and in his capacity as the Seller
Representative) may have against the Company in respect of periods prior to the Closing; (i) All consents, waivers or approvals obtained by the Company with respect to the
consummation of the transactions contemplated by this Agreement; (j) The Escrow Agreement duly executed by the Sellers and the Seller Representative; (k) A statement in accordance with Treasury Regulation Sections 1.1445-2(c)(3) and 1.897-2(h)
certifying that the Company is not, and has not been, a United States real property holding
corporation for purposes of Sections 897 and 1445 of the Code, and Buyer shall have no actual
knowledge that such statement is false or receive a notice that the statement is false pursuant to
Treasury Regulation Section 1.1445-4. In addition, the Company shall have delivered to Buyer on
the Closing Date the notification to the IRS (as hereinafter defined), in accordance with the
requirements pursuant to Treasury Regulation Section 1.897-(h)(2), of delivery of the statement
referred to in the preceding sentence, signed by a responsible corporate officer of the Company.
The Company acknowledges that Buyer may cause the Company to file such notification with the IRS
(as hereinafter defined) on or after the Closing Date; (l) [Intentionally Omitted]; (m) A Proprietary Information and Inventions Agreement duly executed by each of the Sellers; (n) Complete and signed IRS Form W-8 or W-9, whichever is appropriate, from each of the
Sellers; 8




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(o) Guarantee duly executed by Asghar Mostafa; (p) Duly executed Bank Payoff Letter; (q) Duly executed Note Payoff Letter; and (r) Resignations of each of the directors and officers of the Company sepcified by Buyer. Section 1.8 Indemnity and Stock Escrows. (a) On or prior to the Closing Date, the Sellers, the Seller Representative, Buyer and
Computershare Trust Company, Inc., a Colorado trust company, as escrow agent (the Escrow
Agent), shall enter into an Escrow Agreement, substantially in the form of Exhibit D
(the Escrow Agreement), providing for the establishment of an escrow account (the
Escrow Account) with the Escrow Agent (i) in the case of the Cash Escrow Amount, to
secure the obligations of the Sellers to Buyer (and any Buyer Group Members) pursuant to
Article V (it being understood, for the avoidance of doubt, that claims arising under
Section 4.2 (relating to Taxes) shall be deemed to arise under Article V) and (ii)
in the case of the Stock Payment, to hold such payment subject to forfeiture by the Sellers as
provided in Section 1.4(b) and Article VI. (b) At the Closing, Buyer shall deposit in the Escrow Account so established the Cash Escrow
Amount together with the Stock Payment to be held and subsequently disbursed in accordance with the
terms, conditions and provisions of the Escrow Agreement. All dividends and distributions in
respect of the Stock Payment, whether in cash, additional Buyer Shares or other property and any
proceeds from the sale of any Escrow Shares, received by the Escrow Agent shall be held by the
Escrow Agent as part of the Escrow Account and not distributed to the Seller except in accordance
with the Escrow Agreement. The right of any Seller to receive any funds from the Cash Escrow Fund
(as defined in the Escrow Agreement) shall be conditioned upon such funds not being otherwise
distributed in accordance with the Escrow Agreement to indemnify or reimburse any Buyer Group
Member for Losses or Expenses in accordance with Article V or to pay or reimburse the
Escrow Agent for any fees and expenses that are to be deducted from the escrowed funds in
accordance with the Escrow Agreement. The right of any Seller to receive any shares or funds from
the Share Escrow Fund (as defined in the Escrow Agreement) shall be conditioned upon such shares or
funds not being otherwise forfeited as provided in Section 1.4(b) and Article VI or
used to pay or reimburse the Escrow Agent for any fees and expenses that are to be deducted from
the escrowed funds in accordance with the Escrow Agreement. The fees and expenses of the Escrow
Agent are to be borne one-half by Buyer and one-half by the Sellers. (c) Upon termination of the Escrow Agreement, any funds or shares remaining in the Escrow
Account (after making adequate provision for any distributions to any Buyer Group Member, the
Escrow Agent or the Seller Representative, as contemplated above) shall be distributed to the
Seller Representative as provided in the Escrow Agreement. 9




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Section 1.9 Further Assurances. The Sellers shall, at any time and from time to time
on and after the Closing Date, upon request by Buyer and without further consideration, take or
cause to be taken such actions and shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such transfers, conveyances and assurances as may be required or
desirable to more effectively (i) convey, transfer, assign, deliver, assure and confirm to Buyer
the Shares to be sold and transferred to Buyer hereunder, and for reducing to the possession of
Buyer such shares or to the possession of the Company any of the Companys assets or properties not
in its possession at the Closing Date; and (ii) cancel and terminate the Options. Section 1.10 Escrow and Power of Attorney. (a) Simultaneously with the execution and delivery hereof, each Stockholder executed and
delivered the Share Escrow Agreement and Power of Attorney in the form of Exhibit E hereto
dated as of the date hereof (herein called, with respect to any such Stockholder, its Share
Escrow Agreement and Power of Attorney), in each case with all appropriate blanks on the
Designated Stockholders signature page thereof being completed, as the Designated Stockholder
referred to therein, and, in connection therewith, delivered to Asghar Mostafa, as the Seller
Representative thereunder, (i) this Agreement as duly executed by such Stockholder; (ii)
certificates representing the number and type of Shares to be sold by such Stockholder hereunder;
and (iii) the other agreements, instruments or documents referred to therein being delivered by
such Stockholder to such Seller Representative. (b) Simultaneously with the execution and delivery hereof, each Optionholder executed and
delivered the Option Escrow Agreement and Power of Attorney in the form of Exhibit F hereto
(herein called, with respect to any Optionholder, its Option Escrow Agreement and Power of
Attorney) with all appropriate blanks on the Designated Optionholders signature page thereof
being completed, as the Designated Optionholder referred to therein, and, in connection therewith,
delivered to Asghar Mostafa, as the Seller Representative thereunder, (i) this Agreement as duly
executed by such Optionholder; and (ii) the other agreements, instruments or documents referred to
therein being delivered by such Optionholder to such Seller Representative. Section 1.11 Withholding. From the amount to be paid to each Seller under Section
1.3 or the Escrow Agreement, there shall be deducted, withheld, reported and paid over to the
IRS (as hereinafter defined) or other applicable governmental authority any Taxes imposed under
applicable provisions of law. Section 1.12 Agreed Tax Treatment. The parties hereto agree that (i) the Per Share
Cash Price plus the Per Share Stock Price delivered in respect of each Share pursuant to this
Article I (as adjusted to take into account any Individual Forfeiture Event or Total
Forfeiture Event) shall be treated for all Tax purposes as consideration paid for such Share
(except to the extent properly treated as imputed interest for such purposes) and (ii) the Per
Share Cash Price (minus the applicable exercise price) plus the Per Share Stock Price delivered in
cancellation of each Option pursuant to this Article I (as adjusted to take into account
any Individual Forfeiture Event or Total Forfeiture Event) shall be treated for all Tax purposes as
compensation income paid to the holder of the Option being cancelled, in all cases subject to
Section 5.11. 10




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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS As an inducement to Buyer to enter into this Agreement and to consummate the transactions
contemplated hereby, the Sellers, jointly and severally, represent and warrant to Buyer as follows: Section 2.1 Organization of the Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to carry on its business as now being conducted. The Company has no
Subsidiaries. The Company is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so qualified or
licensed and in good standing would not have a Material Adverse Effect on the Company. The Company
has delivered to Buyer true and complete copies of the Companys Certificates of Incorporation and
By-laws, as in effect on the date hereof, minute books and stock transfer records. All the
officers and directors of the Company since December 31, 2003 are Sellers. Section 2.2 Subsidiaries and Investments. The Company does not, directly or
indirectly, (a) own, of record or beneficially, any outstanding voting securities or other equity
interests in any corporation, partnership, joint venture or other entity, (b) otherwise control any
such corporation, partnership, joint venture or other entity or (c) have any obligation to make any
capital contribution to, or otherwise provide assets or cash to any such corporation, partnership,
joint venture or other entity. Each outstanding share of capital stock (or other voting security or
equity equivalent, as the case may be) of the Company is duly authorized, validly issued, fully
paid and nonassessable, and each such share (or other voting security or equity equivalent, as the
case may be) is owned by the Company, free and clear of all Encumbrances. Section 2.3 Capital Stock of the Company. The authorized capital stock of the Company
consists of (i) 7,000,000 Class A Shares, of which 6,200,000 shares are duly and validly issued
and outstanding, fully paid and nonassessable and owned, beneficially and of record by the
Stockholders listed on Annex A hereto as owning the same in the respective amounts
indicated thereon; and (ii) 3,000,000 Class B Shares, of which (x) 1,945,000 shares are duly and
validly issued and outstanding, fully paid and nonassessable and owned, beneficially and of record
by the Stockholders listed on Annex A hereto as owning the same in the respective amounts
indicated thereon and, (y) 915,000 Class B Shares are unissued but reserved for issuance upon the
exercise of the Options held of record by the Optionholders as listed on Annex B hereto.
None of such issued and outstanding shares or Options has been issued in violation of, or is
subject to, any preemptive or subscription rights. Section 2.4 Title to Stock. (a) Each of the Stockholders is the sole lawful and beneficial owner of the Shares to be sold
and delivered by such Seller to Buyer pursuant to this Agreement, free and 11




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clear of all
Encumbrances, and the delivery of such shares to Buyer pursuant to this Agreement will transfer and
convey good and marketable title thereto to Buyer, free and clear of all Encumbrances. Except for
this Agreement, there are no agreements, arrangements, warrants, options, puts, calls, rights or
other commitments, plans or understandings of any character relating to the issuance, sale,
purchase, redemption, conversion, exchange, registration, voting or transfer of any shares of
capital stock or other securities of the Company (including without limitation the Options). All
voting rights in the Company are vested exclusively in the Class A Shares. Each Stockholder is a
resident of (or, in the case of each Stockholder which is not an individual, its principal office
is located in) the state or country indicated below its name on Annex A hereto, and such
Stockholders residence (or, in such case, business address) is set forth below the Stockholders
name on Annex A hereto. (b) The aggregate number of Options outstanding, the number of Options held by each
Optionholder and the exercise price and period thereof is as set forth on Annex B, all of
which Options are duly and validly issued and outstanding, owned beneficially and of record solely
by the Optionholders as set forth in Annex B, free and clear of all Encumbrances.
Effective on the Closing Date, the Options shall be duly and validly canceled and terminated and
the Optionholders will not have any further rights thereunder, whether to purchase shares of
capital stock of the Company or otherwise. The Optionholders will not exercise any Option prior to
the Closing Date. The Options were issued pursuant to the Companys 2003 Nonqualified Stock Option
Plan (the Stock Option Plan). A true and complete copy of the Options and the Stock
Option Plan has been delivered to Buyer. Each Optionholder is a resident of (or, in the case of
each Optionholder which is not an individual, its principal office is located in) the state or
country indicated below its name on Annex B hereto, and such Optionholders residence (or,
in such case, business address) is set forth below the Optionholders name on Annex B
hereto. (c) Neither the Company nor any of the Sellers has assigned any right of first refusal with
respect to, or right to repurchase any, shares of the capital stock of the Company or, the
Options (or any shares issuable upon the exercise thereof). Section 2.5 Authority of Sellers. (a) In the case of each Seller which is not a natural person, as indicated on Annex A
hereto, such Seller is a duly and validly organized and existing corporation, partnership, limited
liability company or other entity, as the case may be. Each of the Sellers has the full legal
right, power, capacity and authority to execute and deliver this Agreement and all of the other
agreements and instruments to be executed and delivered by the such Seller to Buyer pursuant
hereto (collectively, such agreements and instruments of the Sellers being the Seller
Ancillary Agreements) to consummate the transactions contemplated hereby and thereby
(including the sale, transfer and delivery of such Sellers Shares to Buyer as herein provided and
cancellation and termination of the Options ) and to comply with the terms, conditions and
provisions hereof and thereof. (b) The execution, delivery and performance of this Agreement and the Seller Ancillary
Agreements by the Sellers have been duly authorized and approved by all necessary corporate,
partnership or other action on the part of the Sellers, as the case may be, and do not require any
further authorization or consent of the Company, the Sellers or any other person. 12




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This Agreement
constitutes and each Seller Ancillary Agreement, when duly executed and delivered by the Sellers
and the other parties thereto, will constitute the legal, valid and binding agreement of the
Sellers party thereto (and, in the case of the Share Escrow Agreement and Power of Attorney and the
Option Escrow Agreement and Power of Attorney, a legal, valid and binding agreement and power of
attorney) enforceable in accordance with their respective terms. Upon the execution and delivery
by the Seller Representative (as hereinafter defined) of the Escrow Agreement, the Escrow Agreement
will constitute the valid and binding obligation of the Seller Representative, enforceable against
the Seller Representative, in accordance with its terms. The Seller Representative has the
requisite power and authority to enter into the Escrow Agreement and to fulfill the terms thereof
contemplated thereby. (c) Except as set forth in Schedule 2.5(c), none of the execution and delivery of this
Agreement or of any of the Seller Ancillary Agreements, the consummation by the Sellers of any of
the transactions contemplated hereby or thereby, and compliance by the Sellers with or fulfillment
by the Sellers of the terms, conditions and provisions hereof or thereof will: (i) conflict with, result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under, or result in the creation or
imposition of any Encumbrance upon any of the assets or properties of the Sellers or of the
Company under, the Certificate of Incorporation or By-laws of the Company, any note,
instrument, agreement, mortgage, lease, license, franchise, Company Permit or judgment,
order, award or decree to which any of the Sellers or the Company is a party or any of the
assets or properties of any of the Sellers or the Company is subject or by which any of the
Sellers or the Company is bound, or any statute, other law or regulatory provision affecting
the Sellers or the Company or any of their respective assets or properties; or (ii) require the approval, consent, authorization or act of, or the making by any of
the Sellers or the Company of any declaration, filing or registration with, any third party
or any Governmental Body. Section 2.6 Financial Statements. Schedule 2.6 contains (i) the unaudited
balance sheet (the Balance Sheet) of the Company as of December 31, 2003 (the
Balance Sheet Date) and the related statements of income, stockholders equity and cash
flows for the year ended December 31, 2003 (the Annual Financial Statements), and (ii)
the unaudited balance sheet of the Company as of November 30, 2004 and the related statements of
income, stockholders equity and cash flows for the eleven months then ended (the Interim
Financial Statements and together with the Annual Financial Statements, the Financial
Statements). The Financial Statements have been prepared in conformity with GAAP consistently
applied and fairly present in all material respects the financial position of the Company at the
dates of such balance sheets and the results of its operations and cash flows for the respective
periods indicated (subject to any customary year-end adjustments which will not in the aggregate be
material). Section 2.7 No Dividends; Absence of Certain Changes or Events. (a) The Company has never declared or made, or agreed to declare or make, any payment of
dividends or distributions to its stockholders (and no record date with respect to 13




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any of the
foregoing has occurred) or purchased or redeemed, or agreed to purchase or redeem, any of its
capital stock or other equity. (b) Since the Balance Sheet Date there has been: (i) no Material Adverse Change with respect to the Company; or (ii) no damage, destruction, loss or claim made or filed against the Company (whether
or not covered by insurance) or condemnation or other taking which adversely affects the
results of operations, assets, properties, condition (financial or otherwise) or business of
the Company. (c) Since the Balance Sheet Date, the Company has conducted its business in all material
respects only in the ordinary course and in conformity with past practice. Without limiting the
generality of the foregoing, since the Balance Sheet Date, except as set forth in Schedule
2.7(c), the Company has not: (i) issued, delivered or agreed (conditionally or unconditionally) to issue or deliver,
or granted any option, warrant or other right to purchase, any of its capital stock or other
equity interest or any security convertible into its capital stock or other equity; (ii) issued, delivered or agreed (conditionally or unconditionally) to issue or deliver
any of its bonds, notes or other debt securities; (iii) paid any material obligation or liability (absolute or contingent) other than
current liabilities reflected on the Balance Sheet and current liabilities incurred since
the Balance Sheet Date in the ordinary course of business consistent with past practice; (iv) except in the ordinary course of business consistent with past practice, made or
permitted any material amendment or termination of any Company Agreement; (v) undertaken or committed to undertake capital expenditures exceeding $100,000 for
any single project or related series of projects or $250,000 in the aggregate; (vi) made charitable donations in excess of $10,000 in the aggregate; (vii) sold, leased (as lessor), transferred or otherwise disposed of (including any
transfers from the Company, or mortgaged or pledged, or imposed or suffered to be imposed
any Encumbrance on, any of the assets reflected on the Balance Sheet or any assets acquired
by the Company after the Balance Sheet Date, except for inventory and minor amounts of
personal property sold or otherwise disposed of for fair value in the ordinary course of its
business consistent with past practice and except for (A) liens for taxes and other
governmental charges and assessments which are not yet due and payable, (B) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and other like
liens arising in the ordinary course of business for sums not yet due and payable and (C)
other liens or imperfections on property which are not material in amount, do not interfere
with, and are not violated by the consummation of the transactions contemplated by, this
Agreement, and do not materially detract from the 14




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value or marketability of, or materially
impair the existing use of, the property affected by such lien or imperfection (each, a
Permitted Encumbrance); (viii) canceled any debts owed to or claims held by the Company (including the
settlement of any claims or litigation) other than in the ordinary course of its business
consistent with past practice; (ix) created, incurred or assumed, or agreed to create, incur or assume, any
indebtedness for borrowed money or entered into, as lessee, any capitalized lease
obligations; (x) accelerated or delayed collection of notes or accounts receivable in advance of or
beyond their regular due dates or the dates when the same would have been collected in the
ordinary course of its business consistent with past practice; (xi) delayed or accelerated payment of any account payable or other liability beyond or
in advance of its due date or the date when such liability would have been paid in the
ordinary course of its business consistent with past practice; (xii) instituted any increase in any compensation payable to any employee, director or
consultant of the Company or in any profit-sharing, bonus, incentive, deferred compensation,
insurance, pension, retirement, medical, hospital, disability, welfare or other benefits
made available to employees of the Company except, in case of employees other than directors
or officers, salary increases in connection with annual or periodic compensation reviews in
the ordinary course of business consistent with the Companys past practice; (xiii) made any Tax election or settled or compromised any material federal, state,
local or foreign income Tax liability; (xiv) prepared or filed any Tax Return (as hereinafter defined) inconsistent with past
practice or, on any such Tax Return, taken any position, made any election, or adopted any
method that is inconsistent with positions taken, elections made or methods used in
preparing or filing similar Tax Returns in prior periods; (xv) made any change in the accounting principles and practices used by the Company
from those applied in the preparation of the Financial Statements; (xvi) made any payment with respect to any Defined Liabilities other than the payment
of $103,000 to Branch Banking & Trust of Virginia, in satisfaction of all amounts owing
hereto; or (xvii) entered into or become committed to enter into any other material transaction
except in the ordinary course of business consistent with past practice or agreed or
committed to do or authorized any of the foregoing. Section 2.8 No Undisclosed Liabilities. Except as set forth in Schedule 2.8,
the Company is not subject to any liability (including, without limitation, unasserted claims, 15




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whether known or unknown), whether absolute, contingent, accrued or otherwise, which is not shown
or which is in excess of amounts shown or reserved for in the Balance Sheet, other than liabilities
of the same nature as those set forth in the Balance Sheet and the notes thereto and reasonably
incurred in the ordinary course of its business consistent with past practice after the Balance
Sheet Date. Section 2.9 Governmental Permits. The Company owns, holds or possesses all licenses,
franchises, permits, privileges, immunities, approvals and other authorizations from Governmental
Entities which are necessary to entitle it to own or lease, operate and use its assets and to carry
on and conduct its business substantially as currently conducted (herein collectively called
Company Permits). Complete and correct copies of all of the Company Permits have been
delivered by the Company to Buyer. The Company has fulfilled and performed its obligations under each of the material Company
Permits, and each of the material Company Permits is valid, subsisting and in full force and effect
and will continue in full force and effect after the Closing, in each case without (x) the
occurrence of any breach, default or forfeiture of rights thereunder, or (y) the consent, approval,
or act of, or the making of any filing with, any Governmental Entity. Section 2.10 Taxes. (a) Except as set forth in Schedule 2.10(a), (i) each of the Company and each Company
Group (as hereinafter defined) has timely filed all Tax Returns required to have been filed; (ii)
all such Tax Returns are complete and accurate and disclose all Taxes required to be paid by the
Company and each Company Group for the periods covered thereby and all Taxes (as hereinafter
defined) shown to be due on such Tax Returns have been timely paid; (iii) all Taxes (whether or not
shown on any Tax Return) owed by the Company or any Company Group have been timely paid; (iv) none
of the Company or any member of any Company Group has waived or been requested to waive any statute
of limitations in respect of Taxes, which waiver or request is currently in effect; (v) there is no
action, suit, investigation, audit, claim or assessment pending or proposed or threatened with
respect to Taxes of the Company or any Company Group and no basis exists therefor; (vi) all
deficiencies asserted or assessments made as a result of any examination of the Tax Returns
referred to in clause (i) have been paid in full; (vii) all Tax Sharing Arrangements (as
hereinafter defined) and Tax indemnity arrangements (in each case to which the Company is or
becomes a party) will terminate prior to the Closing and the Company will have no liability
thereunder on or after the Closing; (viii) there are no liens for Taxes upon the assets of the
Company except liens relating to current Taxes not yet due; (ix) all Taxes which the Company or any
Company Group is required by law to withhold or to collect for payment have been duly withheld and
collected, and have been paid or accrued, reserved against and entered on the books of the Company;
(x) the charges, accruals and reserves in respect of Taxes on the Balance Sheet are adequate to
provide for all unpaid Taxes of the Company as of the Balance Sheet Date; (xi) none of the Company
or any member of any Company Group is currently the beneficiary of any extension of time within
which to file any Tax Return; (xii) the Tax Returns referred to in clause (i) have been examined by
the appropriate taxing authority or the period for assessment of the Taxes in respect of which such
Tax Returns were required to be filed has expired; (xiii) during the last three years, the Company
has not been a party to any transaction treated by the parties thereto as one to which Section 355
of the Code (or any similar 16




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provision of state, local or foreign law) applied; (xiv) no income or
gain of the Company (or any predecessor) has been deferred pursuant to Treasury Regulation §§
1.1502-13 or 1.150214, or any similar or predecessor Treasury Regulation, whether proposed,
temporary or final; and (xv) no excess loss account (as described in Treasury Regulation §§
1.1502-19 and 1.1502-32) exists with respect to the stock of any Subsidiary of the Company. (b) (i) To the extent the Company has participated in a transaction that is described as a
reportable transaction within the meaning of Treasury Regulation § 1.6011-4(b)(1), such
participation has been adequately disclosed to the IRS on IRS Form 8886 (Reportable Transaction
Disclosure Statement) (or predecessor form) and (ii) none of the items of income, gain, loss,
deduction, and credit of the Company (or any predecessor), has been or is expected to be generated
by any transaction that is the same as or substantially similar to one of the types of transactions
that the IRS has identified (by notice, regulation, other form of published guidance or otherwise)
as a listed transaction pursuant to Treasury Regulation § 1.6011-4(b)(2). (c) No transaction contemplated by this Agreement is subject to withholding under Section 1445
of the Code and no stock transfer Taxes, sales Taxes, use Taxes, real estate transfer Taxes, or
other similar Taxes will be imposed on the transactions contemplated by this Agreement, other than
as set forth in Schedule 2.10(c) with respect to the cancellation of the Options held by
James Burke. (d) As a direct or indirect result of the transactions contemplated by this Agreement, no
payment or other benefit and no acceleration of the vesting or any options, payments or other
benefits, will be (or under Section 280G of the Code and the Treasury Regulations thereunder will
be presumed to be) a parachute payment to a disqualified individual as those terms are defined
in Section 280G of the Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future. (e) None of the Company or any predecessor of the Company (i) is (and none thereof has ever
been), a member of any affiliated group (as defined in Section 1504(a) of the Code without regard
to the limitations contained in Section 1504(b) of the Code) or any other group of corporations or
entities which files or has filed Tax Returns on a combined, consolidated or unitary basis or (ii)
has any liability for Taxes of another Person under Treasury Regulation § 1.1502-6 (or any similar
provision of state, local or foreign law). For purposes of this Agreement: (i) Company Group means any affiliated group (as
defined in Section 1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that, at any time on or before the Closing, includes or has included the
Company or any Subsidiary of the Company, or any predecessor of the Company or any Subsidiary of
the Company (or another such predecessor), or any other group of corporations that, at any time on
or before the Closing, files or has filed Tax Returns on a combined, consolidated or unitary basis
with the Company or any Subsidiary of the Company, or any predecessor of the Company or any
Subsidiary of the Company (or another such predecessor), (ii) Tax or Taxes
means any federal, state, local, foreign or provincial net income or gross income, gross receipts,
windfall profit, severance, property, production, sales, use, license, 17




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excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem, value-added, transfer,
stamp or environmental (including Taxes under Section 59A of the Code), or other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty imposed by any Governmental Body and any liability of the Company or any
Subsidiary of the Company for the payments of amounts with respect payments of a type described in
this clause (ii) as a result of being a member of a Company Group, or as a result of any obligation
of the Company or any Subsidiary under any Tax Sharing Arrangement or Tax indemnity arrangement,
(iii) Tax Return means any return, report or similar statement (including the attached
schedules) required to be filed with respect to any Tax, including, without limitation, any
information return, claim for refund, amended return or declaration of estimated Tax, and (iv)
Tax Sharing Arrangement means any written or unwritten agreement or arrangement for the
allocation or payment of Tax liabilities or payment for Tax benefits with respect to a combined,
consolidated or unitary Tax Return which Tax Return includes the Company or any Subsidiary of the
Company. Section 2.11 Actions, Proceedings and Violations. (a) Except as set forth in Schedule 2.11(a), there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against or involving the
Company, or against or involving any of the present or former directors, officers, employees, or,
to the Knowledge of the Company, consultants, agents or stockholders of the Company, as such, or
any of its or their properties, assets or business or any Company Plan (as hereinafter defined).
Except as set forth in Schedule 2.11(a), there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending or, to the Knowledge of the
Company, threatened against or involving the Company or any of its or their present or former
directors, officers, employees, or, to the Knowledge of the Company, consultants, agents or
stockholders, as such, or any of its or their properties, assets or business or any Company Plan
and the Company is not aware of any reasonable basis therefore, including without limitation, any
actions, suits or claims or legal, administrative or arbitration proceedings or investigations
relating to (i) prior employment of any of the Companys employees, the use in connection with the
Companys business of any information or techniques allegedly proprietary to any of their former
employers or their obligations under any agreements with prior employers or (ii) the transactions
contemplated by this Agreement and the Seller Ancillary Agreements. (b) The Company (i) has not violated its charter, bylaws or other organizational documents,
(ii) has complied in, all material respects, with all Requirements of Laws applicable to its
properties (and their uses), operations or businesses, and (iii) has not violated any order,
judgment, injunction, award or decree of any Governmental Entity. No notice of any such violation
or non compliance has been received by the Company. (c) For purposes of this Agreement, (i) Knowledge of the Company or
Knowledge means the actual knowledge of the individuals identified in Schedule
2.11(c), and (ii) Requirements of Laws means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by
any Governmental Entity or common law. Section 2.12 Certain Agreements. Except as set forth in Schedule 2.12, the 18




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Company is not a party to any oral or written agreement or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or, other than the Options pursuant hereto, the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 2.13 Employee Benefits. (a) Each Company Plan is listed in Schedule 2.13(a). With respect to each Company
Plan, the Company has delivered to Buyer a true and correct copy of (i) the only annual report
(Form 5500) that the Company has filed with the Internal Revenue Service (IRS), (ii) each
such Company Plan that has been reduced to writing and all amendments thereto, (iii) each trust
agreement, insurance contract or administration agreement relating to each such Company Plan, (iv)
a written summary of each unwritten Company Plan, (v) the most recent summary plan description or
other written explanation of each Company Plan provided to participants, (vi) the most recent
determination letter and request therefor, if any, issued by the IRS with respect to any Company
Plan intended to be qualified under Section 401(a) of the Code, (vii) any request for a
determination currently pending before the IRS and (viii) all correspondence with the IRS, the
Department of Labor, the SEC or Pension Benefit Guaranty Corporation relating to any outstanding
controversy or audit. Each Company Plan complies in all material respects with the Employee
Retirement Income Security Act of 1974, as amended (ERISA), the Code and all other
applicable statutes and governmental rules and regulations. Neither the Company nor any ERISA
Affiliate currently maintains, contributes to or has any liability under or, at any time during
the past six (6) years has maintained or contributed to, any pension plan which is subject to
Section 412 of the Code or Section 302 of ERISA or Title IV of ERISA. Neither the Company nor any
ERISA Affiliate currently maintains, contributes to or has any liability under or, at any time
during the past six (6) years has maintained, contributed to, or had any liability under, any
multiemployer plan (as defined in Section 4001(a)(3) of ERISA). Set forth in Schedule
2.13(a) is a schedule of any service credited to any participant under any Company Plan that
exceeds such participants actual service with the Company. (b) Except as listed in Schedule 2.13(b), with respect to the Company Plans, no event
or set of circumstances has occurred and there exists no condition or set of circumstances in
connection with which the Company or ERISA Affiliates or any Company Plan fiduciary could be
subject to any liability under the terms of such Company Plans, ERISA, the Code or any other
applicable law. All Company Plans that are intended by their terms to be, or are otherwise treated
by the Company as, qualified under Section 401(a) of the Code have been determined by the IRS to be
so qualified, or a timely application for such determination is now pending and the Company is not
aware of any reason why any such Company Plan is not so qualified in operation. Except as set
forth in Schedule 2.13(b), neither the Company nor any ERISA Affiliate has any liability or
obligation under any welfare plan or agreement to provide benefits after termination of employment
to any employee or dependent other than as required by Section 4980B of the Code. (c) As used herein, (i) Company Plan means a pension plan (as defined in 19




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Section
3(2) of ERISA, a welfare plan (as defined in Section 3(1) of ERISA), or any other written or oral
bonus, profit sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, restricted stock, stock appreciation right, holiday pay,
vacation, retention, severance, medical, dental, vision, disability, death benefit, sick leave,
fringe benefit, personnel policy, insurance or other plan, arrangement or understanding, in each
case established or maintained by the Company or any of its ERISA Affiliates or as to which the
Company or any of its ERISA Affiliates has contributed or otherwise may have any liability, and
(ii) ERISA Affiliate means any trade or business (whether or not incorporated) which
would be considered a single employer with the Company pursuant to Section 414(b), (c), (m) or (o)
of the Code and the regulations promulgated under those sections or pursuant to Section 4001(b) of
ERISA and the regulations promulgated thereunder. (d) Schedule 2.13(d) contains a list of all (i) employment, compensation and other
agreements with current and former employees, consultants and independent contractors providing
services to the Company or any ERISA Affiliate, (ii) severance programs and policies of the Company
and each ERISA Affiliate with or relating to its current and former employees, consultants and
independent contractors, and (iii) plans, programs, agreements and other arrangements of the
Company and each ERISA Affiliate with or relating to its current and former employees, consultants
and independent contractors containing change of control or similar provisions (collectively,
Company Employment Agreements). The Company has delivered to Buyer a true and correct
copy of each Company Employment Agreement and any amendments thereto. No Company Employment
Agreement or Company Plan provides for any payment to a current or former employee, consultant or
independent contractor to gross-up or otherwise compensate such person for any tax obligation
incurred by such person, including any excise tax obligation under Section 280G of the Code. Section 2.14 Worker Safety and Environmental Laws. The properties, assets and past
and present operations of the Company have been and are in all material respects in compliance with
all applicable federal, state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety and the protection
and clean-up of the environment and activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal, transportation or release of
hazardous materials. Section 2.15 Labor Matters. Schedule 2.15 contains a true and complete
listing of all employees of the Company, their annual salaries and their dates of hire. The
Company has complied in all material respects with all applicable laws, rules and regulations which
relate to prices, wages, hours, discrimination in employment and collective bargaining and to the
operation of its business and is not liable for any arrears of wages or any withholding taxes or
penalties for failure to comply with any of the foregoing. The Company is not a party to any
collective bargaining agreement or labor contract. The Company is not engaged in any unfair labor
practice with respect to any Persons employed by or otherwise performing services primarily for the
Company (the Company Business Personnel), and there is no unfair labor practice complaint
or grievance against the Company by the National Labor Relations Board or any comparable state
agency pending or threatened in writing with respect to the Company Business Personnel. There is
no labor strike, dispute, slowdown or stoppage pending or, to the 20




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Knowledge of the Company,
threatened against or affecting the Company which may interfere with the respective business
activities of the Company. Section 2.16 Intellectual Property. (a) For the purposes of this Agreement, the following terms shall have the meanings indicated: (i) Company Intellectual Property means Intellectual Property Rights,
including Company Registered Intellectual Property Rights (as defined below), that: (1) are
embodied in Products; or (2) were developed by or for the Company for use in the conduct of
the Business; or (3) are used in or necessary to the conduct of the Business; or (4) are
necessary to use Products; or (5) are owned or exclusively licensed by the Company. (ii) Products means any product or service (including products and services
under development) of the Company, including any Technology comprising such products or
services. (iii) Intellectual Property Rights means all of the following: (1) United
States, foreign, and international patent applications, utility model applications and
patents, as well as related applications and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations, and continuations-in-part, and equivalent
or similar rights anywhere in the world in inventions and discoveries including invention
disclosures (Patents); (2) know-how and any other confidential or proprietary
information that is protected as a trade secret (Trade Secrets); (3) copyrights,
copyright registrations and applications, and all other corresponding rights throughout the
world (Copyrights); (4) mask works, mask work applications, mask work
registrations, and any equivalent or similar rights in semiconductor masks, layouts,
architectures, or topology (Maskworks); (5) proprietary industrial designs and any
related registrations and applications throughout the world; (6) rights in World Wide Web
addresses and domain names and any related applications and registrations, all trade names,
logos, common law trademarks and service marks, trademark and service mark registrations and
applications and all associated goodwill throughout the world (Trademarks); and
(7) any similar, corresponding or equivalent rights to any of the foregoing anywhere in the
world. (iv) Registered Intellectual Property Rights means all United States,
international, and foreign: (1) Patents, excluding invention disclosures for which there are
no associated filed applications; (2) registered Trademarks and applications to register
Trademarks, including intent-to-use applications; (3) Copyright registrations and
applications to register Copyrights; (4) Maskwork registrations and applications to register
Maskworks; and (5) any other Intellectual Property Rights that are the subject of an
application, certificate, filing, registration, or other document issued by, filed with, or
recorded by, any state, government, or other public legal authority for the purpose of
creating, obtaining, perfecting or registering such Intellectual Property Rights. 21




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(v) Technology means all of the following: (1) works of authorship,
including computer programs, source code, executable code, documentation, designs, files,
net lists, and mask works; (2) inventions (whether or not patentable), and improvements; (3)
proprietary and confidential information, including technical data, customer and supplier
lists, know-how and any other information, to the extent protected as a trade secret; (4)
databases, data compilations, data collections, and technical data; (5) logos, trade names,
trade dress, trademarks, service marks, World Wide Web addresses, domain names, tools,
methods, and processes; and (6) all instantiations of the foregoing in any form and embodied
in any media. (b) Schedule 2.16(b) lists all Registered Intellectual Property Rights owned by, filed
in the name of, applied for by, or subject to a valid obligation of assignment to the Company as of
the date of this Agreement (Company Registered Intellectual Property Rights) and lists
any actual or threatened proceedings or actions before any court, tribunal (including the United
States Patent and Trademark Office (PTO) or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property Rights as of the date of this
Agreement. For each item of Company Registered Intellectual Property Rights, Schedule
2.16(b) identifies any assignment of any interests in the item of Company Registered
Intellectual Property Rights by the Company, or any co-ownership interests in the item of Company
Registered Intellectual Property Rights. (c) Schedule 2.16(c) contains a list of all agreements, commitments, contracts,
understandings, licenses, sublicenses, assignments and indemnities, which relate or pertain to any
Intellectual Property or software and are material to the conduct of the Companys business as
currently conducted, to which the Company is a party, showing in each case the parties thereto.
Correct and complete copies of all written items identified in Schedule 2.16(c) have been
delivered by the Company to Buyer. (d) To the Knowledge of the Company, as of the date of this Agreement, each item of Company
Registered Intellectual Property Rights, other than pending applications, is valid and subsisting.
No item of Company Registered Intellectual Property Rights that consists of a pending Patent
application fails to identify all pertinent inventors. Except as set forth in Schedule
2.16(d), no item of Company Registered Intellectual Property Rights has been abandoned,
withdrawn, or permitted to lapse. All necessary registration, maintenance, and renewal fees due
and payable to date in connection with Company Registered Intellectual Property Rights have been
paid and all necessary documents and certificates in connection with Company Registered
Intellectual Property Rights have been filed with the relevant patent, copyright, trademark, or
other authorities in the United States or foreign jurisdictions, as the case may be, for the
purposes of obtaining or maintaining the Company Registered Intellectual Property Rights. Except
as set forth on Schedule 2.16(d), and except for any actions prompted by acts of
Governmental Bodies or by potentially infringing acts of third parties of which are outside the
Knowledge of the Company, after due consultation with employees and/or third party agents of the
Company responsible for the administration of such Company Registered Intellectual Property Rights,
as of the date of this Agreement, there are no actions that must be taken by the Company within
ninety (90) days of the Closing Date, including the payment of any registration, maintenance or
renewal fees or the filing of any responses to PTO actions, documents, applications, or
certificates for the purposes of obtaining, maintaining, perfecting, or 22




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preserving or renewing any Company Registered Intellectual Property Rights. (e) Except as set forth in Schedule 2.16(e), as of the date of this Agreement, the
Company has no Knowledge of information, materials, facts, or circumstances that would constitute
prior art or that would render any of the Company Registered Intellectual Property Rights invalid
or unenforceable. The Company has not misrepresented, or failed to disclose, or knows of any
misrepresentation or failure to disclose, any fact or circumstances in any application for any
Company Registered Intellectual Property Right that would constitute fraud or a misrepresentation
with respect to the application or that would otherwise, as a matter of law, cause any Company
Registered Intellectual Property Right to be rendered unenforceable. (f) Except as set forth in Schedule 2.16(f), each item of Company Intellectual
Property owned or exclusively licensed by the Company is free and clear of any license grants or
other Encumbrances, except for Permitted Encumbrances and except for: (i) non-exclusive software
licenses granted to end-user customers in written contracts for end-user customer use of the
Products provided to the end-user customer by the Company in the Ordinary Course of Business; (ii)
any additional non-exclusive licenses implied by law to end-user customers for use of Products;
(iii) any non-exclusive licenses implied by law to visitors of the Companys website with respect
to the display on a visitors computer of information posted on the Companys website; and (iv) any
rights retained by the owner of any Company Intellectual Property that is exclusively licensed to
the Company. Nothing with respect to the Company Intellectual Property and items identified in
Schedule 2.16(f), nor any agreement, commitment, contract, understanding, license,
sublicense, assignment or indemnity which relates to any other intellectual property of any third
party, shall restrict the Companys right, power and authority to execute and deliver this
Agreement and the Company Ancillary Agreements, to consummate the transactions contemplated hereby
and thereby and to comply with or fulfill the terms, conditions or provisions hereof or thereof.
Except as set forth in Schedule 2.16(f) (which will distinguish between nonexclusive and
exclusive licenses), the Company is the exclusive owners of all Company Intellectual Property. The
Company has the sole and exclusive right to bring actions for management or unauthorized use of the
Company Intellectual Property that is either owned by, or within the scope of an exclusive license
to, the Company (including the right to seek past and future damages). Except as set forth in
Schedule 2.16(f), no item of Company Intellectual Property that is either owned by, or
within the scope of an exclusive license to, the Company is subject to any offer or commitment to
offer, arising from participation in any technical standards consortium or other standards body, to
license such Company Intellectual Property. (g) Except as set forth on Schedule 2.16(g), all Company Intellectual Property used in
or necessary to the conduct of the Business as presently conducted and all Products were created
solely by either (i) employees of the Company acting within the scope of their employment or (ii)
by third parties who have validly and irrevocably assigned all of their rights in such Company
Intellectual Property, including all Intellectual Property Rights, to the Company, and no third
party owns or has any such rights to any of the Company Intellectual Property. (h) The Company has taken steps that are commercially reasonable to protect the Company
Intellectual Property Rights in confidential information or proprietary information owned or
exclusively licensed by the Company, and has taken commercially reasonable steps to 23




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prevent any
disclosure by Company of any third party information provided to the Company under an obligation of
confidentiality. Without limiting the foregoing, the Company has and enforces, a policy requiring
each employee to execute, prior to commencing employment, a proprietary information,
confidentiality, and assignment agreement, substantially in the form attached as Schedule

2.16(h) (the Company Proprietary Information Agreement), and all current and former
employees of the Company executed the Company Proprietary Information Agreement prior to commencing
employment. The Company Proprietary Information Agreement is sufficient to vest in the Company
title to all Technology and related Intellectual Property Rights created by an employee within the
scope of employment with the Company. The Company is not in material breach of the terms of any of
the foregoing agreements and, to the Knowledge of the Company, no other party to any such agreement
is in material breach of the Company Proprietary Information Agreement. (i) Except as set forth on Schedule 2.16(i), the Company has not transferred ownership
of, or granted any exclusive license of or exclusive right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any Technology or Intellectual Property Right
that is Company Intellectual Property owned or exclusively licensed by the Company, or any Products
or portion thereof, to any third party. (j) Except as set forth on Schedule 2.16(j), Company Intellectual Property constitutes
all the Intellectual Property Rights used in or necessary to the conduct of the Business as it is
currently conducted. (k) The contracts listed in Schedule 2.16(k) are all written contracts to which the
Company is a party pursuant to which the Company acquires rights to any Company Intellectual
Property which is material to the Business. Except as set forth in Schedule 2.16(k), the
Company is not in material breach of any of the foregoing contracts and, to the Knowledge of the
Company, no other party to any contract is in material breach of the foregoing contracts. (l) Except as set forth on Schedule 2.16(l), and except for mass-market licenses for
software that is both not incorporated into the Products and not used in the manufacture of the
Products, no third party who has licensed to the Company any Technology used in the Business or any
Company Intellectual Property, has ownership rights, license rights, or any other claim to
improvements made by the Company to such Technology or Company Intellectual Property. (m) Schedule 2.16(m) lists all written contracts between the Company and any third
party under which the Company has, with respect to any infringement or misappropriation of the
Intellectual Property Rights of any third party, either: (i) made a representation or warranty;
(ii) agreed to, or assumed, any obligation or duty to defend, indemnify, reimburse, or hold
harmless any third party; or (iii) assumed or incurred any other obligation or liability. The
Company is not currently discharging, or has been called upon to discharge, any such obligation or
liability. (n) Except as set forth on Schedule 2.16(n) and the next sentence, the Business as
conducted in the past has not, and as currently conducted does not, and will not to the extent
conducted in the same manner following the Closing, infringe or misappropriate any 24




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Intellectual
Property Right of any third party, violate any right to privacy or publicity of any third party,
violate any moral rights of any third party, or constitute unfair competition or trade practices.
Except as set forth on Schedule 2.16(n), any commercial, off-the-shelf third party office
products, such as telephones, fax machines, copiers and personal computers, used in the conduct of
the Business as conducted in the past, or and as currently conducted: (i) was acquired in arms
length transactions from reputable companies; and (ii) to the Knowledge of the Company does not
infringe or misappropriate any Intellectual Property Right of any third party, violate any right to
privacy or publicity of any third party, violate any moral rights of any third party, or violate
any other rights of any third party. Except as set forth on Schedule 2.16(n), and except
for any infringement that arises only as a result of a combination of the Products with equipment
not provided by Company to the extent there exist substantial non-infringing uses for such Products
apart from such combination, the use of any or all Products has not, does not, and will not,
infringe or misappropriate any Intellectual Property Right of any third party. (o) Except as set forth on Schedule 2.16(o), the Company has not received notice of
any claim, or any basis for any claims, that the operation of the Business or any Products
infringes or misappropriates any Intellectual Property Right of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction. (p) There are no contracts between the Company any third party with respect to Company
Intellectual Property under which there is any material dispute regarding the scope of the contract
or regarding performance under the contract. (q) Except as set forth on Schedule 2.16(q), to the Knowledge of the Company, no third
party is infringing or misappropriating any Company Intellectual Property owned or exclusively
licensed by Company. (r) No Company Intellectual Property owned or, to the Knowledge of the Company, exclusively
licensed by the Company or any Products is subject to any proceeding or outstanding decree, order,
judgment or settlement agreement, or stipulation that restricts in any manner its use, transfer, or
licensing by the Company or affects the validity, use, or enforceability of such Company
Intellectual Property. To the Knowledge of the Company, no Company Intellectual Property or
Products are subject to any outstanding decree, order, judgment or settlement agreement, or
stipulation that restricts in any manner its use, enforcement, transfer, or licensing by the
Company as authorized by the contracts identified in Schedule 2.16(k). (s) No (i) Products or publications, (ii) material published or distributed by the Company, or
(iii) conduct or statement of the Company constitutes obscene material, a defamatory statement or
material, false advertising, or otherwise violates in any material respect any applicable
misappropriation, copyright, moral right, unfair competition, privacy, publicity or any other
similar law or regulation. (t) All Company Intellectual Property that is either owned by, or within the scope of an
exclusive license to, the Company is fully transferable, alienable, or licensable by the Company
without restriction and without payment of any kind to any third party. Except as set forth in the
contracts identified in Schedule 2.16(k), all Products are fully transferable, alienable, 25




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or licensable by the Company, without restriction and without payment of any kind to any third
party. (u) Except as disclosed in Schedule 2.16(u), neither this Agreement nor the completion
of the transactions contemplated by this Agreement, by operation of law or otherwise, of any
contracts to which the Company is party, will result in (i) the Company granting to any third party
any right to any Technology or Intellectual Property Right owned by, or licensed to, the Company,
which right would not have been granted in the absence of this Agreement or the completion of the
transactions contemplated hereby, (ii) the Company becoming bound by, or made subject to, any
non-compete or other restriction on the operation or scope of their respective businesses to which
the Company, as applicable, would not have been bound or subject to in the absence of this
Agreement or the completion of the transactions contemplated hereby, or (iii) the Company being
obligated to pay any royalties or other amounts to any third party in excess of those payable by
the Company, respectively, prior to the Closing in the absence of this Agreement or the completion
of the transactions contemplated hereby. The Companys officers and employees have not entered
into any agreement while employed by the Company and in the course of their employment relating to
the prohibition or restriction of competition or solicitation of customers, or any other similar
restrictive agreement or covenant, whether written or oral, with any Person other than the Company. (v) Except as disclosed in Schedule 2.16(v), there are no material design defects in
any Products. Except as disclosed in Schedule 2.16(v): (i) each individual version,
model and line of the Products for which development is complete, or which otherwise to date has
been provided to any reseller, original equipment manufacturer or any other customer of Company,
will operate substantially in conformance with all material specifications for such version, model
or line; and (ii) to the Knowledge of the Company, each such version, model or line is free from
material systemic defects. (w) Except as set forth in Schedule 2.16(w), no government funding, facilities, or
resources of a university, college, other educational institution or research center or funding
from third parties were used in the development of Products, nor in the in the development of
Company Intellectual Property that is either owned by or within the scope of an exclusive license
to Company, nor in the development by Company of any Company Intellectual Property, and no
Governmental Body, university, college, other educational institution, or research center has any
claim or right in or to Company Intellectual Property owned or exclusively licensed by the Company,
or to any Products. Except as set forth in Schedule 2.16(w), to the Knowledge of the
Company, no current or former employee of the Company who contributed to the creation or
development of any Company Intellectual Property has performed services for the government, a
university, college or other educational institution, or a research center, during a period of time
during which the employee was also performing services for the Company. Except as set forth in
Schedule 2.16(w), neither Company Intellectual Property that is either owned by, or within
the scope of an exclusive license to, the Company, nor any Product, has been licensed or otherwise
provided to a Governmental Body, nor does the Company have any current obligation to license or
assign any Product or other Company Intellectual Property to any Governmental Body. (x) Schedule 2.16(x) sets forth all software that is distributed as open source
software or under a similar licensing or distribution model (including but not limited to the 26




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GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public
License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community
Source License (SCSL), the Sun Industry Standards Source License (SISSL) and the Apache License)
used by the Company in the conduct of the Business (Open Source Materials). Schedule
2.16(x) describes the manner in which these Open Source Materials were used, including whether
and how the Open Source Materials were modified or distributed by the Company. Except as set forth
in Schedule 2.16(x), the Company has not (i) incorporated Open Source Materials into, or
combined Open Source Materials with, any Products, any Company Intellectual Property owned or
exclusively licensed by the Company, or any Company Intellectual Property that otherwise comprises
non-Open Source Materials portions of Company Intellectual Property; (ii) distributed Open Source
Materials in conjunction with any Products, any Company Intellectual Property owned or exclusively
licensed by the Company, or any Company Intellectual Property that otherwise comprises non-Open
Source Materials portions of Company Intellectual Property; or (iii) used Open Source Materials in
a manner that grants, or purports to grant, to any third party, any rights or immunities under any
Products, any Company Intellectual Property owned or exclusively licensed by the Company, or any
Company Intellectual Property that otherwise comprises non-Open Source Materials portions of
Company Intellectual Property (including, but not limited to, requiring that any such Products or
such Company Intellectual Property be (1) disclosed or distributed in source code form, (2)
licensed
for the purpose of making derivative works, or (3) redistributable at no charge). (y) Except as set forth in Schedule 2.16(y), the Products and Company Intellectual
Property to the extent incorporated into the Products, do not contain any computer code that (i) is
designed to disrupt, disable, harm, or otherwise impede in any harmful or improper manner,
including aesthetical disruptions or distortions, the operation of the Products or such Company
Intellectual Property (e.g., viruses or worms); (ii) is designed to disable the Products, such
Company Intellectual Property or any computer system or impair in any way their operation based on
the elapsing of a period of time, the exceeding of an authorized number of copies, or the
advancement to a particular date or other numeral (e.g., time bombs, time locks, or drop dead
devices); (iii) would permit the Company, or any third party to access the Products, such Company
Intellectual Property or any computer system (e.g., traps, access codes, or trap door devices); or
(iv) would permit the Company or any third party to track, monitor, or otherwise report the
operation and use of the Products or such Company Intellectual Property. (z) Except as disclosed in Schedule 2.16(z), neither the Company nor any third party
acting on its behalf has disclosed or delivered to any third party (other than employees and
independent contractors operating for the Companys benefit), or permitted the disclosure or
delivery to any escrow agent or other third party (other than employees and independent contractors
operating for the Companys benefit, or as required under any patent application identified in
Schedule 2.16(b) as Company Registered Intellectual Property Rights) of, any source code
portion of the Company Intellectual Property owned or exclusively licensed by the Company or one of
its Products. Except as disclosed in Schedule 2.16(z), no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time, or both) gives
rise to the obligation to make the disclosure or delivery to any third party of any source code
portion of the Company Intellectual Property that is either owned by, or within the scope of an
exclusive license to, the Company (other than employees and independent contractors 27




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operating for the Companys benefit, or as required under any patent application identified in
Schedule 2.16(b) as Company Registered Intellectual Property Rights). Neither the Company
nor any third party acting on their behalf has disclosed or delivered to any third party (other
than employees and independent contractors operating for the Companys benefit) any Trade Secrets
without a legal obligation to maintain the confidentiality of such Trade Secrets, wherein such
legal obligation is memorialized in a written contract identified in Schedule 2.22. Section 2.17 Availability of Assets and Legality of Use. Except as set forth in
Schedule 2.17, the assets owned or leased by the Company constitute all the assets used in
its business (including, but not limited to, all books, records, computers and computer programs
and data processing systems) and are in good condition (subject to normal wear and tear and
immaterial impairments of value and damage) and serviceable condition and are generally suitable
for the uses for which intended. There are no material services provided by any of the
stockholders of the Company or any of their Affiliates to the Company utilizing either (i) assets
not owned by the Company as of the Closing or (ii) Persons not employed by the Company. For
purposes of this Agreement, Affiliate means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common control with such
Person. For purposes of this Agreement, Person means any individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock company, trust or
unincorporated organization. Section 2.18 Real Property. The Company does not own any real property or hold any
option to acquire any real property. Section 2.19 Real Property Leases. Schedule 2.19 sets forth a list of each
lease or similar agreement under which the Company is lessee of, or holds or operates, any real
property owned by any third Person. Except as set forth in Schedule 2.19, the Company has
the right to quiet enjoyment of all the real property described in such Section of which it is the
lessee for the full term of each such lease or similar agreement (and any related renewal option)
relating thereto, and the leasehold or other interest of the Company in such real property is not
subject or subordinate to any Encumbrance except for Permitted Encumbrances. Complete and correct
copies of each such lease or similar agreement has been delivered by the Company to Buyer. Section 2.20 Personal Property Leases. Schedule 2.20 contains a list of each
lease or other agreement or right, whether written or oral, under which the Company is lessee of,
or holds or operates, any machinery, equipment, vehicle or other tangible personal property owned
by a third party, except for any such lease, agreement or right that is terminable by the Company
without penalty or payment on notice of 30 days or less, or which involves the payment by the
Company of rentals of less than $10,000 per year. Section 2.21 Title to Assets. The Company has good title to all of its assets
reflected on the Balance Sheet as being owned by it and all of the assets thereafter acquired by it
(except to the extent that such assets have been disposed of after the Balance Sheet Date in the
ordinary course of business consistent with past practice), free and clear of all Encumbrances,
except for Permitted Encumbrances and except as set forth in Schedule 2.21. Section 2.22 Contracts. Except as set forth in Schedule 2.22, the Company is 28




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not a party to or bound by: (i) any contract for the purchase or sale of real property; (ii) any contract for the purchase of goods or raw materials requiring one or more
payments by the Company in excess of $100,000 individually or in the aggregate; (iii) any contract for the sale of goods or services; (iv) any contracts relating to the marketing, distribution or manufacturing of
products, services, processes or technology, or any OEM contract; (v) any contract for the purchase, licensing or development of software to be used by
the Company other than contracts for the purchase or licensing of shrink-wrap, off-the-shelf
software not involving the payment of more than $20,000 in the aggregate; (vi) any guarantee of the obligations or liabilities of customers, suppliers, officers,
directors, employees, Affiliates of the Company, or any other Persons; (vii) any agreement which provides for, or relates to, the incurrence by the Company of
debt for borrowed money or the extension of credit by the Company to any other Person; (viii) any agreement or understanding with a third party that restricts the Company
from carrying on its business anywhere in the world; (ix) any contract which provides for, or relates to, any confidentiality arrangement or
any non-competition arrangement with any Person, including any current or former officer or
employee of the Company; (x) any contract or group of related contracts for capital expenditures in excess of
$100,000 for any single project or related series of projects; (xi) any partnership, joint venture or other similar arrangement or agreement involving
a sharing of profits or losses; (xii) any contract which involves payments or receipts by the Company of the Company of
more than $100,000; (xiii) any contract for any purpose (whether or not made in the ordinary course of the
business or otherwise not required to be listed or described in Schedule 2.22) which
is material to the Company or its business; or (xiv) any contract not made in the ordinary course of business. Section 2.23 Status of Contracts. Except as set forth in Schedule 2.23, each
of the leases, contracts and other agreements listed in Schedules 2.12, 2.16(b),
2.16(c), 2.16(h), 2.16(k), 2.16(l), 2.16(m), 2.19,
2.20 and 2.22 (collectively, the Company Agreements) 29




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constitutes a valid and binding obligation of the Company and, to the Knowledge of the
Company, the other parties thereto, and is in full force and effect and will continue in full force
and effect after the Closing, in each case without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder and without the consent, approval or act of, or
the making of any filing with, any other party. The Company has fulfilled and performed in all
material respects its obligations under each of the Company Agreements, and the Company is not in,
or alleged to be in, breach or default under, nor, to the Knowledge of the Company, is there or, to
the Knowledge of the Company, is there alleged to be any basis for termination of, any of the
Company Agreements and, to the Knowledge of the Company, no other party to any of the Company
Agreements has breached or defaulted thereunder, and no event has occurred and no condition or
state of facts exists which, with the passage of time or the giving of notice or both, would
constitute such a default or breach by the Company, to the Knowledge of the Company, by any such
other party. Complete and correct copies of each of the Company Agreements have heretofore been
delivered by the Company to Buyer. Section 2.24 Insurance. Schedule 2.24 sets forth a list of insurance
maintained, owned or held by the Company, copies of which have been provided to Buyer. All such
insurance policies are in full force and effect. To the Knowledge of the Company, such policies,
with respect to their amounts and types of coverage, are adequate to insure against risks to which
the Company is normally exposed in the operation of the Business, and are in amounts customarily
insured against in operations similar to the Company. The Company has complied with each such
insurance policies and has not failed to give any notice or to present any claim thereunder in a
due and timely manner. Section 2.25 Brokers. No broker, investment banker or other Person, other than the
fees and expenses owed to UBS Securities LLC pursuant to that certain letter agreement dated
September 3, 2003 a true and complete copy of which has been delivered to Buyer, is entitled to any
brokers, finders or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any
Seller. Section 2.26 [Intentionally Omitted. ] Section 2.27 [Intentionally Omitted. ] Section 2.28 Depositaries; Powers of Attorney. Schedule 2.28 sets forth (a)
the name and a brief description of all bank accounts, lock-boxes, safe deposit boxes, money market
funds, certificates of deposit, stocks, bonds, notes and other securities in the name of or owned
or controlled by the Company and the names of all persons authorized to draw thereon or to have
access thereto and (b) the name of each person, corporation, firm or other entity holding a general
or special power of attorney from the Company (together with a true and complete copy thereof). Section 2.29 Absence of Certain Payments. Except as set forth in Schedule
2.29; the Company is not involved in any transaction or other situation with any stockholder,
employee, officer, director or Affiliate of the Company which may be generally characterized as a
conflict of interest, including, but not limited to, direct or indirect interests in the business
of 30




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any competitors, suppliers or customers thereof, and (b) since the formation of the Company,
there have been no situations with respect to the Company which involved or involve (i) the use of
any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses
related to political activity or to any of the Companys customers or suppliers, (ii) the making of
any direct or indirect unlawful payments to government officials or others from corporate funds or
the establishment or maintenance of any unlawful or unrecorded funds, (iii) the receipt of any
illegal discounts or rebates or any other violation of the anti-trust laws; or (iv) any
investigation by any Governmental Body. Section 2.30 Transactions with Affiliates. Except as set forth in Schedule
2.30, there have been no material transactions in respect of the Company between the Company
and any Seller, officer, director or other Affiliate of the Company (including spouses, children
and other relatives of any of the foregoing). Section 2.31 Securities Law Matters. (a) Schedule 2.31(a) indicates, opposite the name of each Seller, whether such Seller
is an accredited investor as such term is defined in Regulation D promulgated pursuant to the
Securities Act. Each Seller, by reason of such Sellers knowledge in business or financial matters
is capable of evaluating the merits and risks of Sellers investment in the Buyer Shares, and
making an informed investment decision in connection therewith. (b) Each Seller is acquiring or will be acquiring the Buyer Shares for investment for Sellers
own account, not as a nominee or agent, for investment purposes only and not with the view to, or
for resale in connection with, any distribution thereof. Each Seller understands that the issuance
of the Buyer Shares pursuant hereto has not been, and will not be, registered under the Securities
Act by reason of Buyers reliance on a specific exemption from the registration provisions of the
Securities Act that depends upon, among other things, the bona fide nature of the investment intent
of the Sellers and the accuracy of the Sellers representations as expressed herein. Seller, if
other than a natural person, has not been formed for the specific purpose of acquiring the Buyer
Shares. (c) Each Seller acknowledges that there are substantial restrictions on the transferability of
the Buyer Shares; that the Buyer Shares are not, and the Sellers have no right to require that the
Buyer Shares be registered under the Securities Act; and that accordingly, each Seller will have to
hold the Buyer Shares until the time that such Seller is able to transfer the Buyer Shares in
compliance with all securities laws and the terms of this Agreement and the Escrow Agreement. (d) Each Seller has had the opportunity to (i) ask questions of, and receive answers from,
representatives of Buyer concerning Buyer and the terms and conditions of this transaction, as well
as to obtain any information requested by Seller, (ii) to thoroughly review the Buyer SEC
Documents, copies of which each Seller acknowledges receiving from Buyer prior the date hereof and
(iii) to consult with Sellers own advisors, including counsel and tax advisors. Sellers decision
to enter into the transactions contemplated hereby is based on Sellers own evaluation of the risks
and merits of the purchase and Buyers proposed business activities. 31




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(e) No Seller is acquiring the Buyer Shares as a result of or subsequent to any advertisement,
article, notice or other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or meeting, or any solicitation by
a person not previously known to such Seller in connection with investments in securities
generally. (f) Each certificate evidencing any of the Shares shall bear a legend substantially as
follows: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES HAVE BEEN REGISTERED UNDER SUCH ACT AND
ANY AND ALL SUCH OTHER APPLICABLE LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
AND AN OPINION OF COUNSEL HAS BEEN RENDERED TO THE CORPORATION IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS NOT
REQUIRED UNDER APPLICABLE SECURITIES LAWS THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS OF A STOCK
PURCHASE AGREEMENT AND AN ESCROW AGREEMENT, EACH DATED AS OF DECEMBER 30, 2004 AMONG
TELLABS, INC. AND THE PARTIES NAMED THEREIN, A COPY OF EACH OF WHICH IS ON FILE WITH THE
SECRETARY OF THE CORPORATION AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH
AGREEMENT. Section 2.32 Product Warranty. The technologies or products licensed, sold, leased,
and delivered and all services provided by the Company have conformed in all material respects with
all applicable contractual commitments and all express and implied warranties, and the Company have
no liability (whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due) for replacement or modification thereof or other damages in connection therewith.
Buyer has been given a copy of the standard terms and conditions of sale, subscription, license or
lease for each of the Companys products and services and copies of the Companys standard forms of
merchant agreements and professional services agreements. The Company has not agreed to any
product or service guaranty, warranty or other indemnity beyond the applicable standard terms and
conditions of sale, license or lease or beyond that implied or imposed by applicable law. Section 2.33 Books and Records. The books of account, minute books and stock record
books, all of which have been made available to Buyer, have been maintained in accordance with
reasonable business practices. The Companys minute books contain materially accurate and complete
records of all meetings held of, and corporate action taken by, the 32




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stockholders, the Boards of Directors, and committees of the Boards of Directors of the
Company, at which any corporate or shareholder action was taken or approved. There have been no
changes, alterations or additions to such minute books and records of the corporate proceedings of
the Company or prior to the Closing Date that have not been furnished to Buyer. Section 2.34 Accounts Receivable. All accounts receivable of the Company that are
reflected on the Balance Sheet (collectively, the Accounts Receivable) represent valid
obligations arising from sales actually made or services actually performed in the ordinary course
of business. There is no contest, claim, or right of set-off, other than returns in the ordinary
course of business, under any contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable. Schedule 2.34 contains a complete and
accurate list of all Accounts Receivable as of November 30, 2004, which list sets forth the aging
of such Accounts Receivable. Section 2.35 Inventory. From the Balance Sheet Date, to the Knowledge of the Company,
no event (including the passage of time) has occurred that could reasonably require the Company
pursuant to GAAP to revalue any of its assets, including writing down the value of capitalized
inventory. Section 2.36 Representations Complete. None of the representations or warranties of
the Sellers contained herein, none of the information contained in the Schedules referred to in
Article II, and none of the other information or documents furnished to Buyer or any of its
representatives by the Sellers or its representatives pursuant to the terms of this Agreement, is
false or misleading in any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect; provided, that
representations and warranties which address matters only as of a certain date shall be true and
correct in all material respects only as of such certain date. There is no fact which adversely
affects or in the future is likely to adversely affect the Company in any material respect which
has not been set forth or referred to in this Agreement or the Schedules hereto. Section 2.37 Defined Liabilities. The aggregate Defined Liabilities of the Company
equal $5,152,000, consisting of (i) an aggregate principal amount of $4,500,000 and $219,000 in
accrued and unpaid interest, owing under those certain Promissory notes dated as of July 14, 2003,
June 8, 2004 and September 30, 2004, respectively, issued by the Company to Asghar Mostafa and (ii)
$433,000 in earned but deferred compensation owing from the Company to Asghar Mostafa. No other
amounts are owing from the Company to Asghar Mostafa or any of his Affiliates. ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER As an inducement to the Company and the Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents and warrants to the Sellers and
agrees as follows: 33




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Section 3.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has full corporate power
and authority to own or lease and to operate and use its properties and assets and to carry on its
business as now conducted. Section 3.2 Authority of Buyer. (a) Buyer has the corporate power and authority to execute and deliver this Agreement and all
of the other agreements and instruments to be executed and delivered by Buyer pursuant hereto (the
Buyer Ancillary Agreements), to consummate the transactions contemplated hereby and
thereby and to comply with the terms, conditions and provisions hereof and thereof. (b) The execution, delivery and performance of this Agreement and the Buyer Ancillary
Agreements by Buyer have been duly authorized and approved by all necessary corporate action on
behalf of Buyers Board of Directors and do not require any further authorization or consent of
Buyer. This Agreement constitutes and each Buyer Ancillary Agreement, when executed and delivered
by Buyer and the other parties thereto, will constitute the legal, valid and binding agreement of
Buyer enforceable in accordance with its respective terms. (c) Assuming the accuracy of the Sellers representations contained in Section 2.31,
neither the execution and delivery of this Agreement or any Buyer Ancillary Agreement by Buyer or
the consummation by Buyer of any of the transactions contemplated hereby or thereby nor compliance
by Buyer with or fulfillment by Buyer of the terms, conditions and provisions hereof or thereof
will: (i) conflict with, result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under, the Certificate of Incorporation or
By-laws of Buyer or any material agreement or any judgment, order, award or decree to which
Buyer is a party or any of its properties is subject or by which Buyer is bound; or (ii) require the approval, consent, authorization or act of, or the making by Buyer of
any declaration, filing or registration with, any third party or any foreign, federal, state
or local court, governmental or regulatory body. Section 3.3 Capital Structure. As of the date hereof, the authorized capital stock of
Buyer consists of 1,000,000,000 shares of Buyer Common Stock and 5,000,000 shares of preferred
stock, $0.01 par value (the Buyer Preferred Stock). At the close of business on December
20, 2004, (i) 462,202,989 shares of Buyer Common Stock were issued and outstanding, (ii) no shares
of Buyer Common Stock were held in the treasury of Buyer or by Subsidiaries of Buyer, (iii) no
shares of Buyer Preferred Stock were issued or outstanding, (iv) 66,947,568 shares of Buyer Common
Stock were reserved for issuance pursuant to outstanding options, warrants or other rights to
purchase or otherwise acquire shares of Buyer Common Stock under Buyers plans or other
arrangements or pursuant to any plans or arrangements 34




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assumed by Buyer in connection with any acquisition, business combination or similar
transaction (collectively, the Buyer Stock Plans), and (v) 153,483 stock appreciation
rights granted pursuant to the Buyer Stock Plans were outstanding. As of the date of this
Agreement, except as set forth above and, except for the issuance of shares of Buyer Common Stock
pursuant to the Buyer Stock Plans, no shares of capital stock or other voting securities of Buyer
were issued, reserved for issuance or outstanding. All of the Buyer Shares issuable pursuant to
Section 1.3 of this Agreement, will be, when so issued and delivered in accordance with the
terms of this Agreement, duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. Section 3.4 SEC Documents and Other Reports. Buyer has filed all required documents
with the Securities and Exchange Commission (the SEC) between January 1, 2004 and the
date hereof (the Buyer SEC Documents). As of their respective dates or, if amended, as
of the date of the last amendment, the Buyer SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be, and, at the
respective times they were filed, none of the Buyer SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements (including, in each case, any notes thereto) of
Buyer included in the Buyer SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting principles (GAAP)
(except, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated financial position of Buyer
and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results
of their operations and their consolidated cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments and to any other adjustments
described therein). Section 3.5 No Finder. Neither Buyer nor any party acting on its behalf has paid or
become obligated to pay any fee or commission to any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement. Section 3.6 Issuance of Buyer Shares. Assuming the accuracy of the Sellers
representations and warranties contained in Section 2.31, the offer, issuance and sale of
the Buyer Shares at the Closing will be: (i) exempt from the registration and prospectus delivery
requirements of the Securities Act, and (ii) have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification requirements of all
applicable state securities laws. Buyer is acquiring the Shares for its own account and not with a
view to its distribution within the meaning of Section 2(11) of the Securities Act of 1933, as
amended, and the rules and regulations issued pursuant thereto. Section 3.7 No Other Representations. The Buyer acknowledges that, except for the
representations and warranties of the Sellers contained in Article II of this Agreement
(including the Schedules hereto) and any Seller Ancillary Agreements, the Sellers have not made any
representations or warranties, express or implied. 35




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ARTICLE IV
ADDITIONAL AGREEMENTS Section 4.1 Covenant Not to Compete or Solicit Business. In furtherance of the sale
of the Shares and the Company to Buyer and the cancellation of the Options hereunder by virtue of
the transactions contemplated hereby and more effectively to protect the value and goodwill of the
Company and the Business, each of the persons on Schedule 4.1 (collectively the
Restricted Persons) covenants and agrees that, for a period ending on the third
anniversary of the Closing Date, neither such Restricted Person nor any of its Affiliates will: (i) directly or indirectly (whether as principal, agent, independent contractor,
partner or otherwise) own, manage, operate, control, participate in, perform services for,
or otherwise carry on, a business similar to or competitive with the Business anywhere in
the world (it being understood by the parties hereto that the Business is not limited to any
particular region of the world and that such business may be engaged in effectively from any
location in any country); or (ii) induce or attempt to persuade any employee, agent or customer of the Company to
terminate such employment, agency or business; provided, however, that nothing set forth in this Section 4.1 shall prohibit the Restricted
Persons or their Affiliates from owning not in excess of 2% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and listed on any national or
regional stock exchange or reported on the National Association of Securities Dealers Automated
Quotations (Nasdaq) System. In addition, each of the Restricted Persons covenants and agrees that
neither it nor any of its Affiliates will divulge or make use of any trade secrets or other
confidential information of the Company other than to disclose such secrets and information to
Buyer or its Affiliates. In the event any of the Restricted Persons or any Affiliate of Restricted Persons violates any
of its obligations under this Section 4.1, Buyer may proceed against it in law or in equity
for such damages or other relief as a court may deem appropriate. Restricted Persons acknowledge
that a violation of this Section 4.1 may cause Buyer irreparable harm which may not be
adequately compensated for by money damages. Restricted Persons therefore agree that in the event
of any actual or threatened violation of this Section 4.1, Buyer shall be entitled, in
addition to other remedies that it may have, to a temporary restraining order and to preliminary
and final injunctive relief against Restricted Persons or such Affiliate of Restricted Persons to
prevent any violations of this Section 4.1, without the necessity of posting a bond. The
prevailing party in any action commenced under this Section 4.1 shall also be entitled to
receive reasonable attorneys fees and court costs. It is the intent and understanding of each
party hereto that if, in any action before any court or agency legally empowered to enforce this
Section 4.1, any term, restriction, covenant or promise in this Section 4.1 is
found to be unreasonable and for that reason unenforceable, then such term, restriction, covenant
or promise shall be deemed modified to the extent necessary to make it enforceable by such court or
agency. Nothing contained in Section 5.4 shall be deemed in any way to limit or restrict
Buyers rights under this paragraph. 36




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Section 4.2 Tax Matters. (a) (i) Each of the Sellers, jointly and severally, shall be liable for, and pursuant to
Article V agrees to indemnify and hold harmless each Buyer Group Member from and against
any and all Losses and Expenses incurred by such Buyer Group Member in connection with or arising
from all Taxes imposed on the Company or for which the Company may otherwise be liable (A) as a
result of having been a member of any Company Group (including, without limitation, Taxes for which
the Company or any Subsidiary of the Company may be liable pursuant to Treasury Regulation §
1.1502-6 or similar provisions of state, local or foreign law as a result of having been a member
of a Company Group or any obligations to contribute to the payment of a Tax determined on a
combined, consolidated or unitary basis with respect to any Company Group and any Taxes resulting
from the Company or any Subsidiary of the Company ceasing to be a member of any Company Group) or
(B) for any taxable year or period that ends on or before the Closing Date and, with respect to any
Straddle Period, the portion of such Straddle Period ending on and including the Closing Date;
provided, however, that in the case of any taxable year or period that begins
before the Closing Date and for which the Tax Return is required to be filed by Buyer pursuant to
Section 4.2(b), no Seller shall have any liability under this Section 4.2(a) with
respect thereto to the extent of the Taxes shown to be due on such Tax Return when initially filed
(or, in the case of any Straddle Period, the portion of such Taxes so shown that are attributable
under Section 4.2(a)(iii) to the period ending on and including the Closing Date), it being
agreed that this proviso shall not apply to the extent such Taxes so shown are or were (1) income
or franchise Taxes that individually or in the aggregate exceed $20,000, (2) not incurred in the
ordinary course of the Companys business, (3) computed by taking into account any deduction for
compensation arising as a result of the transactions contemplated by this Agreement, (4) not
properly withheld or remitted under applicable law or (5) attributable to the transactions
contemplated by this Agreement (Taxes described in this proviso Accrued Pre-Closing
Taxes). For the avoidance of doubt, the parties agree that for purposes of this Section
4.2(a)(i) Taxes of the Company shall be computed by taking into account the application of any
net operating loss carryovers or net capital loss carryovers of the Company available as of the
Closing Date (as adjusted from time to time as a result of any audit or other examination affecting
the amount thereof), in all cases to the extent such application is permitted under applicable Tax
law. (ii) Buyer shall be liable for, and pursuant to Article V agrees to indemnify
and hold harmless each Seller Group Member from and against any and all Losses and Expenses
incurred by such Seller Group Member in connection with or arising from (A) Taxes imposed on
the Company for any taxable year or period that begins after the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period beginning after the
Closing Date and (B) Accrued Pre-Closing Taxes; provided, however, that Buyer shall not be
liable for or pay, and shall not indemnify the Sellers against, any Taxes for which the
Sellers are liable under this Agreement (including, without limitation, Section 2.10
and Section 4.2(a)(i)). (iii) For purposes of paragraphs (a)(i) and (a)(ii) immediately above, whenever it is
necessary to determine the liability for Taxes of the Company for a Straddle Period, the
determination of the Taxes of the Company for the portion of the Straddle Period ending on
and including, and the portion of the Straddle Period beginning after, the 37




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Closing Date shall be determined by assuming that the Straddle Period consisted of two
taxable years or periods, one which ended at the close of the Closing Date and the other
which began at the beginning of the day following the Closing Date, and items of income,
gain, deduction, loss or credit of the Company for the Straddle Period shall be allocated
between such two taxable years or periods on a closing of the books basis by assuming that
the books of the Company were closed at the close of the Closing Date, provided, however,
that exemptions, allowances or deductions that are calculated on an annual basis, such as
the deduction for depreciation, shall be apportioned between such two taxable years or
periods on a daily basis. (iv) Each of the Sellers, jointly and severally, shall be liable for, and pursuant to
Article V agrees to indemnify and hold harmless each Buyer Group Member from and
against any and all Losses and Expenses incurred by such Buyer Group Member in connection
with or arising from any real property transfer or gains Tax, sales Tax, use Tax, stamp Tax,
stock transfer Tax, or other similar Tax imposed on the transactions contemplated by this
Agreement. (v) If any Seller becomes entitled to a refund or credit of Taxes for which it is
liable under paragraph (a) to indemnify a Buyer Group Member, and such refund or credit is
attributable to the carryback of losses, credits or similar items from a taxable year or
period that begins after the Closing Date and is attributable to the Company or any
Subsidiary of the Company, the Sellers shall promptly pay to Buyer the amount of such refund
or credit together with any interest thereon. In the event that any refund or credit of
Taxes for which a payment has been made to Buyer is subsequently reduced or disallowed,
Buyer shall indemnify and hold harmless the Sellers for any Tax assessed against the Sellers
by reason of the reduction or disallowance. (vi) On the Closing Date, each Seller shall deliver to Buyer a complete and signed IRS
Form W-8 or W-9, whichever is appropriate for such Seller. (b) The Sellers shall timely file or cause to be timely filed when due (taking into account
all extensions properly obtained) all Tax Returns that are required to be filed by or with respect
to the Company prior to the Closing Date and the Sellers shall remit (or cause to be remitted) any
Taxes due in respect of such Tax Returns, and Buyer shall timely file or cause to be timely filed
when due (taking into account all extensions properly obtained) all Tax Returns that are required
to be filed by or with respect to the Company on or after the Closing Date and Buyer shall remit
(or cause to be remitted) any Taxes due in respect of such Tax Returns. The Sellers or Buyer shall
reimburse the other party the Taxes for which the Sellers or Buyer is liable pursuant to paragraph
(a) of this Section 4.2 but which are payable with any Tax Return to be filed by the other
party pursuant to the previous sentence upon the written request of the party entitled to
reimbursement setting forth in detail the computation of the amount owed by the Sellers or Buyer,
as the case may be, but in no event earlier than 10 days prior to the due date for filing such Tax
Return. All Tax Returns which the Sellers are required to file or cause to be filed in accordance
with this paragraph (b) shall be prepared and filed in a manner consistent with past practice and,
on such Tax Returns, no position shall be taken, elections made or method adopted that is
inconsistent with positions taken, elections made or methods used in preparing and filing similar
Tax Returns in prior periods (including, but not limited to, positions which would have 38




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the effect of deferring income to periods for which Buyer is liable or accelerating deductions
to periods for which the Sellers are liable). (c) Buyer shall notify the Seller Representative upon receipt by Buyer, any of its Affiliates,
or the Company of notice of any pending or threatened federal, state, local or foreign Tax audits
or assessments which may materially affect the Tax liabilities of the Company for which the Sellers
would be required to indemnify Buyer pursuant to paragraph (a) of this Section 4.2,
provided that failure to comply with this provision shall not affect Buyers right to
indemnification hereunder. The Company shall have the sole control in any Tax audit or administrative or court proceeding
relating to taxable periods ending on or before the Closing Date; provided, however, that the
Seller Representative shall be permitted, at his expense, to be present at, and participate in, any
such audit or proceeding. (d) After the Closing Date, each of the Sellers and Buyer shall (and shall cause their
respective Affiliates to): (i) timely sign and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or
other reports with respect to, Taxes described in paragraph (a)(iv) of this Section
4.2 (relating to sales, transfer and similar Taxes); (ii) assist the other party in preparing any Tax Returns which such other party is
responsible for preparing and filing in accordance with paragraph (b) of this Section
4.2; (iii) cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Company; (iv) make available to the other and to any taxing authority as reasonably requested
all information, records, and documents relating to Taxes of the Company; (v) provide timely notice to the other in writing of any pending or threatened Tax
audits or assessments of the Company for taxable periods for which the other may have a
liability under this Section 4.2; and (vi) furnish the other with copies of all correspondence received from any taxing
authority in connection with any Tax audit or information request with respect to any such
taxable period. (e) Notwithstanding anything to the contrary in this Agreement, each of the Sellers, jointly
and severally, shall be liable for, and pursuant to Article V agrees to indemnify and hold
harmless each Buyer Group Member from and against, any and all Losses and Expenses incurred by such
Buyer Group Member in connection with or arising from Taxes imposed on each Seller as a result of
the transactions contemplated by this Agreement. (f) Buyer agrees not to make any election under Section 338 of the Code with 39




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respect to the purchase of the Shares pursuant to this Agreement without the approval of the
Seller Representative which shall not be unreasonably withheld, provided that it shall not be
unreasonable if Seller Representative withholds consent if the Sellers would incur a Tax liability
as a result of such election by Buyer. (g) Notwithstanding anything to the contrary in this Agreement, the obligations of the parties
set forth in this Section 4.2 shall be unconditional and absolute and shall remain in
effect without limitation as to time. Section 4.3 Use of Name. Each of the Sellers agrees and covenants that from and after
the Closing it shall not use the name Vinci Systems or a name which includes such name or the
name Vinci or any variations of such names in connection with any activity conducted by it or any
of its Affiliates. Section 4.4 Waiver. By execution hereof, the Company and each of the Sellers hereby
waives any right of first refusal with respect to, or right to repurchase any, shares of the
capital stock of the Company or the Options (or any shares issuable upon the exercise thereof), in
each case in connection with the sale of the Shares and the cancellation and termination of the
Options contemplated hereby. Section 4.5 Employee Benefit Plans. As soon as practicable after the Closing, Buyer
shall provide, or shall cause to be provided, employee benefit plans, programs and arrangements to
employees of the Company that are substantially similar to those made available to similarly
situated employees of Buyer. Upon the inclusion of the employees of the Company in any benefits
plan maintained or sponsored by Buyer or its Subsidiaries, including, without limitation, any plan
or arrangement providing vacation benefits, each Company employee shall receive credit for service
prior to the Closing Date with the Company to the same extent such service was counted under any
similar or corresponding Buyer plans for the purposes of determining eligibility to participate,
vesting and the level of benefits provided. If any such Company employee or their dependents are
included in any medical, dental or health plan other than the plan or plans they participated in
prior to the Closing Date, the Buyer Plan shall waive all limitations as to pre-existing conditions
and waiting periods. Section 4.6 Operation of the Company. During the Performance Period, (i) the
provisions set forth in Schedule 4.6 shall apply to the operations of the Company and (ii)
Sellers shall not take any action inconsistent with such provisions. Section 4.7 Acceleration of Performance Conditions. In the event that, during the
Performance Period, Buyer, without the consent of the Seller Representative (i) sells, transfers or
assigns or otherwise disposes of the material assets of the Company that are necessary for the
achievement of the Performance Conditions, in each case in a manner that deprives the Company of
the use thereof, (ii) sells more than 50% of the outstanding capital stock of the Company to a
party that is not an Affiliate of the Buyer, or (iii) prevents the Sellers from satisfying the
Performance Conditions by breaching the covenant contained in Section 4.6, then it shall be
deemed that the Sellers have satisfied any remaining Performance Conditions the time for satisfying
which has not expired under Section 1.4 as of the date of the occurrence of one of the
events described in clauses (i), (ii) and (iii) above. 40




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ARTICLE V
INDEMNIFICATION Section 5.1 Indemnification by Sellers. (a) Each of the Sellers, jointly and severally, agrees to indemnify and hold harmless each
Buyer Group Member from and against any and all Losses and Expenses incurred by such Buyer Group
Member in connection with or arising from: (i) any breach, or alleged breach, by any Seller of, or any other failure of any
Seller or any Restricted Person to perform, any of its covenants, agreements or obligations
in this Agreement or in any other agreement executed and delivered by or on behalf of such
Seller pursuant to this Agreement; and (ii) any breach, or alleged breach, of any warranty or the inaccuracy, or alleged
inaccuracy, of any representation of Seller contained or referred to in this Agreement or
any certificate or other document delivered by or on behalf of any Seller pursuant to this
Agreement; provided, however, without in any way limiting the Sellers indemnification obligations under
clause (i) of Section 5.1(a) or under clause (ii) of Section 5.1(a) with respect to
the Seller Designated Representations (as hereinafter defined), (x) the Sellers shall indemnify the
Buyer Group Members under clause (ii) of Section 5.1(a) (other than with respect to the
Seller Designated Representations as to which no such limitation shall apply) only in the event
that the aggregate amount (without duplication) of Loss and Expense borne by the Buyer Group
Members with respect thereto exceeds $150,000 but if in excess of such amount, then for the amount
of such excess. Sellers aggregate indemnification liability under clause (ii) of Section
5.1(a) (other than with respect to the Seller Designated Representations as to which no such
limitation shall apply) shall be an amount equal to twenty five percent (25%) of the Purchase
Price. Each Sellers (other than Mostafa Group, LLC, as to which this limitation shall not apply)
indemnification liability under clause (ii) of Section 5.1(a) (other than with respect to
the Seller Designated Representations as to which no such limitation shall apply) shall be an
amount equal to twenty five percent (25%) of such Sellers pro rata portion of the Purchase Price. (b) The indemnification provided for in clause (ii) of Section 5.1(a) shall terminate
on June 30, 2006 (and no claims shall be made by Buyer under clause (ii) of Section 5.1(a)
thereafter), except that the indemnification by the Sellers shall continue in any event as to: (i) any breach, or alleged breach, of any warranty or the inaccuracy, or alleged
inaccuracy, of any representation of the Sellers set forth in Sections 2.1,
2.3, 2.4, 2.5, 2.21, 2.25, or 2.31 (together
with Section 2.10, the Seller Designated Representations), as to which no
time limitation shall apply, and any breach, or alleged breach, of any warranty or the
inaccuracy, or alleged inaccuracy, of any representation of the Sellers set forth in
Section 2.10, which shall survive for sixty (60) days after the expiration date of
the applicable statute of limitations (including any extensions thereof); 41




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and (ii) any Loss or Expense as to which Buyer has notified the Sellers in accordance with
the provisions of Section 5.3 on or prior to the date such indemnification
obligation would otherwise terminate in accordance with this Section 5.1, as to
which the indemnification obligations of the Sellers shall continue until the liability of
the Sellers shall have been determined pursuant to this Article V, and the Sellers
shall have indemnified and reimbursed Buyer for the full amount of such Loss and Expense in
accordance with this Article V. (c) If, at the time Buyer is obligated to make a Subsequent Cash Payment in accordance with
Section 1.4 hereof, any Claim Notice given by a Buyer Group Member remains unresolved,
Buyer shall be entitled to reduce the amount of such Subsequent Cash Payment by Buyers good faith
reasonable estimate of the maximum aggregate amount of Loss and Expense exposure of the Buyer Group
Member to matters reflected in all such unresolved Claim Notices, pending final determination of
such matters. If it is finally determined that the Buyer Group Members were not entitled to the
full amount of the indemnification reflected in such Claim Notices, Buyer shall promptly thereafter
pay to the Seller Representative the appropriate portion of the applicable Subsequent Cash Payments
that had been withheld together with Interest thereon. Otherwise Buyer shall retain such amount. Section 5.2 Indemnification by Buyer. (a) Buyer agrees to indemnify and hold harmless each Seller Group Member from and against any
and all Losses and Expenses incurred by such Seller Group Member in connection with or arising
from: (i) Any breach, or alleged breach, by Buyer of, or other failure of Buyer to perform,
any of its covenants, agreements or obligations in this Agreement or in any other agreement
executed and delivered by or on behalf of Buyer pursuant to this Agreement; or (ii) Any breach, or alleged breach, of any warranty or the inaccuracy, or alleged
inaccuracy, of any representation of Buyer contained or referred to in this Agreement or in
any certificate or other document delivered by or on behalf of Buyer pursuant hereto. provided, however, without in any way limiting Buyer indemnification obligations under clause (i)
of Section 5.2(a) or under clause (ii) of Section 5.2(a) with respect to the Buyer
Designated Representations (as hereinafter defined), (i) the Buyer shall indemnify the Seller Group
Members under clause (ii) of Section 5.2(a) (other than with respect to the Buyer
Designated Representation as to which no such limitation shall apply) only in the event that the
aggregate amount (without duplication) of Loss and Expense borne by the Seller Group Members with
respect thereto exceeds $150,000 but if in excess of such amount, then for the amount of such
excess, and (ii) Buyers aggregate indemnification liability under clause (ii) of Section
5.2 (other than with respect to the Buyer Designated Representation as to which no such
limitation shall apply) shall be an amount equal to twenty five percent (25%) of the Purchase
Price. 42




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(b) The indemnification provided for in clause (ii) of Section 5.2 shall terminate on
June 30, 2006 (and no claims shall be made by the Sellers under clause (ii) of Section 5.2
thereafter), except that the indemnification by Buyer shall continue in any event as to: (i) any breach, or alleged breach, of any warranty or the inaccuracy, or alleged
inaccuracy, of any representation of Buyer set forth in Sections 3.1 and 3.3
(the Buyer Designated Representations), as to which no time limitation shall
apply; and (ii) any Loss or Expense of which the Seller Representative has notified Buyer in
accordance with the requirements of Section 5.3 on or prior to the date such
indemnification would otherwise terminate in accordance with this Section 5.2, as to
which the obligation of Buyer shall continue until the liability of Buyer shall have been
determined pursuant to this Article V, and Buyer shall have reimbursed the Sellers
for the full amount of such Loss and Expense in accordance with this Article V. Section 5.3 Notice and Determination of Claims and Forfeiture Events. (a) Any Buyer Group Member or Seller Group Member (the Claiming Party) seeking
indemnification hereunder shall give to the party obligated to provide indemnification to such
Claiming Party (the Indemnifying Party) and, in the case of any Buyer Group Member, the
Escrow Agent, a notice (a Claim Notice) describing in reasonable detail the facts giving
rise to any claim for indemnification hereunder and shall include in such Claim Notice (if then
known) the amount or the method of computation of the amount of such claim, and a reference to the
provision of this Agreement or any other agreement, document or instrument executed hereunder or in
connection herewith upon which such claim is based; provided, that a Claim Notice in respect of any
action at law or suit in equity by or against a third Person as to which indemnification will be
sought shall be given promptly after the action or suit is commenced; provided further that failure
to give such notice shall not relieve the Indemnifying Party of its obligations hereunder except to
the extent it shall have been prejudiced by such failure. If the Claiming Party is a Buyer Group
Member but is not Buyer, the Claim Notice must be accompanied by a certificate from Buyer
confirming that the such Claiming Party is a Buyer Group Member. (b) In the event of Claim Notice by a Buyer Group Member, unless the Seller Representative
shall have delivered an Objection in accordance with Section 5.3(c), the Escrow Agent
shall, on the twentieth day (or such earlier day as the Seller Representative shall authorize in
writing to the Escrow Agent) after receipt of a Claim Notice with respect to indemnification for a
specified amount, deliver to Buyer, for its account or for the account of each Buyer Group Member
named in the Claim Notice, such portion of the Cash Escrow Fund, valued in accordance with the
Escrow Agreement, with a value equal to the specified amount. (c) Until the twentieth day following delivery of a Claim Notice, the Seller Representative
may deliver to the Escrow Agent a written objection (an Objection) to the claim made in
such Claim Notice. At the time of delivery of any Objection to the Escrow Agent, a duplicate copy
of such Objection shall be delivered to the Claiming Party. 43




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(d) Upon receipt of an Objection properly made to a Claim Notice, the Escrow Agent shall (i)
deliver to Buyer, for its account or for the account of each Buyer Group Member named in the Claim
Notice, such portion of the Cash Escrow Fund, valued in accordance with the Escrow Agreement, with
a value equal to that portion of the amount subject to the Claim Notice, if any, which is not
disputed by the Seller Representative and (ii) designate and segregate out of the assets of the
Cash Escrow Fund a portion thereof, valued in accordance with the Escrow Agreement, with a value
equal to the amount subject to the Claim Notice which is disputed by the Seller Representative.
Thereafter, the Escrow Agent shall not dispose of such segregated portion of the Cash Escrow Fund
until the Escrow Agent shall have received a certified copy of the final decision of the
arbitrators as contemplated by Section 5.4, or the Escrow Agent shall have received a copy
of the written agreement between the Claiming Party and the Seller Representative resolving such
dispute and setting forth the amount, if any, which such Claiming Party is entitled to receive.
The Escrow Agent will deliver to Buyer, for its account or for the account of each Buyer Group
Member entitled to payment, such portion of the Cash Escrow Fund, valued in accordance with the
Escrow Agreement, with a value equal to the amount that the Claiming Party is entitled to receive
as set forth in the arbitration decision after the expiration of ten (10) business days from the
receipt of such decision or, in the event that the amount to which the Claiming Party is entitled
is established pursuant to an agreement between the Claiming Party and the Seller Representative,
promptly after the Escrow Agents receipt of such agreement. Section 5.4 Resolution of Conflicts; Arbitration. (a) The Claiming Party shall deliver a written response to the Seller Representative in
respect of any Objection properly delivered by the Seller Representative. If after twenty (20)
days following delivery of such response there remains a dispute as to any claims, the Seller
Representative and the Claiming Party, shall attempt in good faith for sixty (60) days to agree
upon the rights of the respective parties with respect to each of such claims or forfeiture. If
the Seller Representative and the Claiming Party, should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both and shall be furnished to the Escrow Agent. The
Escrow Agent shall be entitled to rely on any such memorandum and shall distribute the assets from
the Cash Escrow Fund in accordance with the terms thereof. (b) If no such agreement is reached within such sixty (60) days period, either the Claiming
Party, or the Seller Representative may, by written notice to the other, demand arbitration of the
matter unless the amount of the Loss or Expense is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within fifteen (15) days after such written notice is sent, Buyer
and the Seller Representative shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator. The decision of the arbitrators as to the validity and amount of
any claim in the related Claim Notice shall be binding, and conclusive, and notwithstanding
anything in this Section 5.4, the Escrow Agent shall be entitled to act in accordance with
such decision and make or withhold payments out of the Cash Escrow Fund in accordance therewith. (c) Judgment upon any award rendered by the arbitrators may be entered in 44




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any court having jurisdiction. Any such arbitration shall be held in Chicago, Illinois under
the CPR rules for non-administered arbitrations then in effect of the American Arbitration
Association. The non-prevailing party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative fee of the CPR, and the expenses, including without limitation,
attorneys fees and costs, reasonably incurred by the other party to the arbitration. (d) Nothing contained in this Section 5.4 shall limit Buyers rights under Section
4.1 or otherwise obtain equitable or injunctive relief for any breach of this Agreement. Section 5.5 Seller Representative. The Seller Representative under the
Share Escrow Agreement and Power of Attorney and the Option Escrow Agreement and Power of Attorney
shall be Asghar Mostafa. Section 5.6 [Intentionally Omitted.] Section 5.7 Third Party Claims. (a) Subject to paragraph (b) of this Section 5.7, the Claiming Party shall have the
right to conduct and control, through counsel of its choosing, any third party claim, action or
suit, and the Claiming Party may compromise or settle the same; provided, that the Claiming Party
shall give the Indemnifying Party advance notice of any proposed compromise or settlement. The
Claiming Party shall permit the Indemnifying Party to participate in the defense of any such action
or suit through counsel chosen by it, provided that the fees and expenses of such counsel shall be
borne by the Indemnifying Party. Subject to paragraph (b) of this Section 5.7, any
compromise or settlement with respect to a claim for money damages effected after the Indemnifying
Party by notice to the Claiming Party shall have disapproved such compromise or settlement shall
discharge the Indemnifying Party from liability with respect to the subject matter thereof, and no
amount in respect thereof shall be claimed as Losses or Expenses under this Article V;
provided, however, that approval of such compromise or settlement shall not be unreasonably
withheld. (b) If the remedy sought in any action or suit referred to in paragraph (a) of this
Section 5.7 is solely money damages and will have no continuing effect on the business of
the Claiming Party, the Indemnifying Party shall have 30 business days after receipt of the notice
referred to in Section 5.3(a) to notify the Claiming Party that it elects to conduct and
control such action or suit. If the Indemnifying Party does not give the foregoing notice, the
Claiming Party shall have the right to defend, contest, settle or compromise such action or suit in
the exercise of its reasonable discretion, and the Indemnifying Party shall, upon request from the
Claiming Party, promptly pay to such Claiming Party in accordance with the other terms of this
Article V the amount of any Loss and Expense for which indemnification is provided
hereunder. If the Indemnifying Party gives the foregoing notice, the Indemnifying Party shall have
the right to undertake, conduct and control, through counsel of its own choosing and at the sole
expense of the Indemnifying Party, the conduct and settlement of such action or suit, and the
Claiming Party shall cooperate with the Indemnifying Party in connection therewith; provided that
(i) the Indemnifying Party shall not thereby permit to exist any Encumbrance upon any asset of the
Claiming Party; (ii) the Indemnifying Party shall not consent to any settlement that does not
include as an unconditional term thereof the giving of a complete release from liability with 45




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respect to such action or suit to the Claiming Party; (iii) the Indemnifying Party shall
permit the Claiming Party to participate in such conduct or settlement through counsel chosen by
the Indemnified Party, but the fees and expenses of such counsel shall be borne by the Claiming
Party except as provided in clause (iv) below; and (iv) the Indemnifying Party shall agree promptly
to reimburse the Claiming Party for the full amount of any Loss resulting from such action or suit
and all related Expenses incurred by the Claiming Party, including fees and expenses of counsel for
the Claiming Party incurred after giving the foregoing notice to the Indemnifying Party and prior
to the assumption of the conduct and control of such action or suit by the Indemnifying Party but
excluding fees and expenses of counsel for the Claiming Party incurred after the assumption of the
conduct and control of such action or suit by the Indemnifying Party. So long as the Indemnifying
Party is contesting any such action or suit in good faith, the Claiming Party shall not pay or
settle any such action or suit. Notwithstanding the foregoing, the Claiming Party shall have the
right to pay or settle any such action or suit; provided, that in such event the Claiming Party
shall waive any right to indemnity therefore by the Indemnifying Party, and no amount in respect
thereof shall be claimed as Losses or Expenses under this Article V. Section 5.8 Subsequent Dispositions. Buyers right to indemnification hereunder shall
not be affected by any subsequent disposition of any of the assets of the Company or any of the
Shares. Section 5.9 No Contribution. Each of the Sellers hereby agrees that such Seller shall
have no right, and hereby waives any such rights, to contribution or any other right of recovery
from the Company, its successors or assigns in respect of any payments made by such Seller pursuant
to the provisions of this Article V or otherwise hereunder. From and after the Closing,
the obligations of Seller hereunder are absolute. Section 5.10 Certain Conflicts. If there shall be any conflicts between the
provisions of this Article V and Section 4.2(c) (relating to Tax contests), the
provisions of Section 4.2(c) shall control with respect to Tax contests. Section 5.11 Treatments of Payments. Any payment by Buyer or Seller under this
Article V shall be treated as an adjustment to the Purchase Price to the extent permitted
under applicable provisions of law, and will be computed on an After-Tax Basis. Section 5.12 Exclusive Remedies. The remedies provided for in this Agreement and the
Escrow Agreement shall be the sole and exclusive remedies of the parties hereto and their assigns
for any breach of or inaccuracy in any representation, warranty or covenant contained in this
Agreement or any certificate delivered at Closing; provided, however, that nothing herein
is intended to waive any claims for fraud or willful misconduct or waive any equitable remedies to
which a party may be entitled. Section 5.13 No Double Recovery. Notwithstanding anything herein to the contrary, no
Buyer Group Member or Seller Group Member shall be entitled to indemnification or reimbursement
under any provision of this Agreement for any Loss or Expense to the extent such Buyer Group Member
or other Seller Group Member, as the case may be, has been fully indemnified or reimbursed for such
Loss or Expense under any other provision of this 46




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Agreement or the Escrow Agreement. ARTICLE VI
FORFEITURE EVENTS Section 6.1 Notice And Determination Of Forfeiture Events. (a) If Buyer wishes to assert that an Individual Forfeiture Event has occurred, it shall give
the Escrow Agent and the Sellers Representative a notice (an Individual Forfeiture
Notice), describing in reasonable detail the facts giving rise to the Individual Forfeiture
Event and identifying the Subaccount under which the Escrow Shares are subject to forfeiture. If
Buyer wishes to assert that a Total Forfeiture Event (together with any Individual Forfeiture
Event, a Forfeiture Event) has occurred, it shall give the Escrow Agent and the Sellers
Representative a notice (a Total Forfeiture Notice and together with any Individual
Forfeiture Event, Forfeiture Notice), describing in reasonable detail the facts giving
rise to the Total Forfeiture Event. (b) In the case of a Forfeiture Notice, unless the Seller Representative shall have delivered
a Forfeiture Objection in accordance with Section 6.1(c), the Escrow Agent shall, on the
twentieth day (or such earlier day as the Seller Representative shall authorize in writing to the
Escrow Agent) after receipt of a Forfeiture Notice, deliver to Buyer (i) the certificate or
certificates representing the Escrow Shares subject to forfeiture, (ii) any dividends and
distributions in respect of the Escrow Shares subject to forfeiture, whether in cash, additional
Buyer Shares or other property, received by the Escrow Agent and (iii) all cash proceeds resulting
from the sale of any Escrow Shares that would have been otherwise subject to forfeiture, in each
case as set forth in the Forfeiture Notice. The certificates representing the Escrow Shares to be
delivered in accordance with the Forfeiture Notice shall be duly endorsed by the Escrow Agent in
blank or accompanied by stock powers duly executed by the Escrow Agent in blank, in each case, in
form satisfactory to Buyer. (c) Until the twentieth day following delivery of a Forfeiture Notice, the Seller
Representative may deliver to the Escrow Agent a written objection (an Forfeiture
Objection) to the claim made in such Forfeiture Notice. At the time of delivery of any
Forfeiture Objection to the Escrow Agent, a duplicate copy of such Forfeiture Objection shall be
delivered to the Buyer. (d) Upon receipt of a Forfeiture Objection properly made to a Forfeiture Notice, the Escrow
Agent shall (i) deliver to Buyer, for its account, such portion of the Share Escrow Fund, if any,
which is not disputed by the Seller Representative and (ii) designate and segregate out of the
Share Escrow Fund a portion thereof which is disputed by the Seller Representative. Thereafter,
the Escrow Agent shall not dispose of such segregated portion of the Share Escrow fund until the
Escrow Agent shall have received a certified copy of the final decision of the arbitrators as
contemplated by Section 6.1(e), or the Escrow Agent shall have received a copy of the
written agreement between the Buyer and the Seller Representative resolving such dispute and
setting forth the amount, if any, which Buyer is entitled to receive. The Escrow Agent will
deliver to Buyer, for its account, such portion of the Share Escrow Fund that the Buyer is entitled
to receive as set forth in the arbitration decision after the expiration of 47




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ten (10) business days from the receipt of such decision or, in the event that the amount to
which the Buyer is entitled is established pursuant to an agreement between the Buyer and the
Seller Representative, promptly after the Escrow Agents receipt of such agreement. (e) In the event the Buyer and the Seller Representative are unable to agree as contemplated
by Section 6.1(d), (i) the Buyer shall deliver a written response to the Seller Representative in respect
of any Forfeiture Objection properly delivered by the Seller Representative. If after
twenty (20) days following delivery of such response there remains a dispute as to any
claims, the Seller Representative and the Buyer shall attempt in good faith for sixty (60)
days to agree upon the rights of the respective parties with respect to such forfeiture. If
the Seller Representative and the Buyer should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall distribute the
portion of the Share Escrow Fund in accordance with terms thereof; (ii) if no such agreement is reached within such sixty (60) days period, either the
Buyer or the Seller Representative may, by written notice to the other, demand arbitration
of the matter; and in such event the matter shall be settled by arbitration conducted by
three arbitrators. Within fifteen (15) days after such written notice is sent, Buyer and
the Seller Representative shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as to the
validity and amount of any claim in the related Forfeiture Notice shall be binding, and
conclusive, and notwithstanding anything in this Section 6.1, the Escrow Agent shall
be entitled to act in accordance with such decision and make or withhold payments out of the
Share Escrow Fund in accordance therewith; and (iii) judgment upon any award rendered by the arbitrators may be entered in any court
having jurisdiction. Any such arbitration shall be held in Chicago, Illinois under the CPR
rules for non-administered arbitrations then in effect of the American Arbitration
Association. The non-prevailing party to any arbitration shall pay its own expenses, the
fees of each arbitrator, the administrative fee of the CPR, and the expenses, including
without limitation, attorneys fees and costs, reasonably incurred by the other party to the
arbitration. (f) Nothing contained in this Section 6.1 shall limit Buyers rights under Section
4.1 or to otherwise obtain equitable or injunctive relief for any breach of this Agreement. ARTICLE VII
GENERAL PROVISIONS Section 7.1 Survival. All representations, warranties, covenants, agreements and
obligations contained in this Agreement shall survive the consummation of the transactions
contemplated by this Agreement; provided, however, that, except as otherwise provided in
Article V, the representations and warranties contained in Article II and
III shall terminate on June 30, 2006. Except as otherwise provided herein, no claim shall
be made for the breach of 48




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any representation or warranty contained in Article II or III under this
Agreement after the date on which such representations and warranties terminate as set forth in
this Section 7.1. Except as otherwise provided in Article V, nothing contained in
this Agreement shall be construed to terminate or otherwise limit any Claiming Partys right to
indemnification under Article V. Section 7.2 Confidential Nature of Information. Each party agrees that it will treat
in confidence all documents, materials and other information which it shall have obtained regarding
the other party during the course of the negotiations leading to the consummation of the
transactions contemplated hereby (whether obtained before or after the date of this Agreement), the
investigation provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be consummated, each
party will return to the other party all copies of nonpublic documents and materials which have
been furnished in connection therewith. The obligation of each party to treat such documents,
materials and other information in confidence shall not apply to any information which (a) such
party can demonstrate was already lawfully in its possession prior to the disclosure thereof by the
other party, (b) is known to the public and did not become so known through any violation of a
legal obligation, (c) became known to the public through no fault of such party, (d) is later
lawfully acquired by such party from other sources or (e) such party is required to disclose
pursuant to judicial order or, in the opinion of counsel, pursuant to applicable law or the rules
of any national securities association. Without limiting the right of either party to pursue all
other legal and equitable rights available to it for violation of this Section 7.2 by the
other party, it is agreed that other remedies cannot fully compensate the aggrieved party for such
a violation of this Section 7.2 and that the aggrieved party shall be entitled to
injunctive relief to prevent a violation or continuing violation hereof. Section 7.3 Governing Law; Venue. THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE
CONFLICT OF LAW PROVISIONS) OF THE STATE OF DELAWARE. Section 7.4 Notices. All notices, consents, deliveries, demands, requests or other
communications required or permitted hereunder shall be in writing and shall be deemed given or
delivered when delivered personally or by messenger or 72 hours after having been sent by
registered or certified mail or by private courier or by facsimile transmission addressed as
follows: If to Buyer to: Tellabs, Inc.
One Tellabs Center
1415 West Diehl Road
Naperville, Illinois 60563
Attention: General Counsel
Facsimile No.: (630) 798-3231 49




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with a copy to: Sidley Austin Brown & Wood LLP
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: Imad I. Qasim
Facsimile No.: (312) 853-7036 If to the Sellers or the Seller Representative, to Vinci Systems, Inc.
8330 Boone Blvd., Suite 500
Vienna, VA 22182
Attention: Asghar Mostafa
Facsimile No.: (703) 448-3799 with a copy to: Holland & Knight LLP
1600 Tysons Boulevard, Suite 700
McLean, VA 22102
Attention: Michael M. Mannix
Facsimile No.: (703) 720-8610 or to such other address (i) as Buyer may indicate to the Seller Representative, or (ii) as the
Seller Representative may indicate to Buyer (in the case of the Sellers or the Seller
Representatives address), in each case by notice delivered in accordance herewith. Section 7.5 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their legal heirs, legal representatives, successors and
permitted assigns. The Sellers may not assign any of their rights or obligations under this
Agreement. Nothing in this Agreement, expressed or implied, is intended or shall be construed to
confer upon any person other than the parties and their legal heirs, legal representatives,
successors and assigns permitted by this Section 7.5 any right, remedy or claim under or by
reason of this Agreement. Section 7.6 Access to Records after Closing. (a) For a period of five years after the Closing Date, the Seller Representative shall have
reasonable access to all of the books and records of the Company relating to periods prior to the
Closing Date to the extent that such access may reasonably be required by the Sellers in connection
with their obligations hereunder or the preparation of their federal or state income tax returns,
amended returns, any claim for refund or any audit or contest of such returns or claims. Such
access shall be afforded by the Company upon receipt of reasonable advance notice and during normal
business hours. The Sellers shall be solely responsible for any costs or 50




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expenses incurred by them pursuant to this Section 7.6(a). If the Company shall
desire to dispose of any of such books and records prior to the expiration of such five-year
period, the Company shall, prior to such disposition, give the Seller Representative thirty days,
at their expense, to segregate and remove such books and records as they may select. (b) For a period of five years after the Closing Date, Buyer and its representatives shall
have reasonable access to all of the books and records of the Sellers relating in any respect to
the Company to the extent such access may reasonably be required by Buyer in connection with its
ownership or operation of the Company, including any tax matters relating thereto. Such access
shall be afforded by the Sellers upon receipt of reasonable advance notice and during normal
business hours. Buyer shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 7.6(b). If the Sellers shall desire to dispose of any of such
books and records prior to the expiration of such five-year period, the Sellers shall, prior to
such disposition, give Buyer thirty days, at Buyers expense, to segregate and remove such books
and records as Buyer may select. Section 7.7 Entire Agreement; Amendments. This Agreement, the Annexes and the
Exhibits and Schedules referred to herein and the documents delivered pursuant hereto contain the
entire understanding of the parties hereto with regard to the subject matter contained herein or
therein, and supersede all prior agreements, understandings or intents between or among any of the
parties hereto. The parties hereto, by mutual agreement in writing, may amend, modify and
supplement this Agreement. Section 7.8 Interpretation. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be
construed with and as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. Section 7.9 Waivers. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to the exclusive benefit
thereof. The failure of any party hereto to enforce at any time any provision of this Agreement
shall not be construed to be a waiver of such provision, nor in any way to affect the validity of
this Agreement or any part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach. Section 7.10 Expenses; Attorneys Fees. Each party hereto will pay all of his or its
own costs and expenses incident to his or its negotiation and preparation of this Agreement and to
his or its performance and compliance with all agreements and conditions contained herein on his or
its part to be performed or complied with, including the fees, expenses and disbursements of his or
its counsel and accountants. Without limitation of any partys rights and obligations under
Article V, in the event of any dispute, claim, arbitration or litigation with regard to
this Agreement, each party hereto will pay all of his or its own costs, fees and expenses of
counsel incurred in connection with such dispute, claim, arbitration or litigation. Section 7.11 Partial Invalidity. Wherever possible, each provision hereof shall 51




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be interpreted in such manner as to be effective and valid under applicable law, but in case
any one or more of the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been contained herein unless
the deletion of such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable. Section 7.12 Execution in Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original instrument, but all of which shall be
considered one and the same agreement, and shall become binding when one or more counterparts have
been signed by each of the parties and delivered to each of the Company, the Sellers and Buyer. Section 7.13 Definitions. As used in this Agreement, the following terms have the
meanings specified or referred to in this Section 7.13: 611 ONThas the meaning specified in Section 1.4(d)(i). Accounts Receivablehas the meaning specified in Section 2.34. Accrued Pre-Closing Taxeshas the meaning specified in Section 4.2(a)(i). Affiliatehas the meaning specified in Section 2.17. After-Tax Basisshall mean, with respect to any amount which is to be paid hereunder
on an After-Tax Basis, an amount which, after subtraction of the amount of all federal, state and
foreign Taxes payable by the recipient thereof as a result of the receipt or accrual of such
payment, and after taking into account (i) the increase in federal, state and foreign Taxes
(including estimated Taxes) payable by such recipient for all affected taxable years as a result of
the event or occurrence giving rise to such payment (the Indemnified Event), and (ii) the
reduction in federal, state and foreign Taxes (including estimated Taxes) payable by the recipient
for all taxable years ending on or before the end of the taxable year in which such payment is
made, shall be sufficient as of the date of payment to compensate the recipient for such
Indemnified Event. Agreementmeans this Stock Purchase Agreement dated as of December 30, 2004 among
Buyer and the Sellers. Annual Financial Statementshas the meaning specified in Section 2.6. Balance Sheethas the meaning specified in Section 2.6. Balance Sheet Datehas the meaning specified in Section 2.6. Bank Payoff Lettermeans the payoff letter from Branch Banking and Trust Company of
VA to the Company in the form attached hereto as Exhibit I. 52




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Base Share Cash Pricehas the meaning specified in Section 1.3(c). BOM Expenseshas the meaning specified in Section 1.4(c)(i). Businesshas the meaning specified in the second recital to this Agreement. Buyerhas the meaning specified in the first paragraph of this Agreement. Buyer Ancillary Agreementshas the meaning specified in Section 3.2(a). Buyer Common Stockmeans the common stock of Buyer, par value $0.01. Buyer Designated Representationshas the meaning specified in Section
5.2(b)(i). Buyer Group Membersmeans Buyer and its Affiliates (including, after the Closing,
the Company), directors, officers, employees, agents and their respective successors and assigns. Buyer Preferred Stockhas the meaning specified in Section 3.3. Buyer SEC Documentshas the meaning specified in Section 3.4. Buyer Shareshas the meaning specified in Section 1.3(a)(ii). Buyer Preferred Stockhas the meaning specified in Section 3.3. Buyer Stock Planshas the meaning specified in Section 3.3. Cash Escrow Amounthas the meaning specified in Section 1.4(a)(ii). Cash Escrow Fundshall have the meaning set forth in Section 1.8(b). Cash Paymentshas the meaning specified in Section 1.3(a)(vi). Causemeans an employees (i) commission of an act of fraud, embezzlement,
misappropriation, theft, dishonesty or a criminal act constituting a felony under federal or state
law, (ii) breach of its obligations under Sections 4.1 or 7.2 of this Agreement,
(iii) breach of or willful failure to perform any material covenants under the Proprietary
Information and Inventions Agreement with Buyer, (iv) repeated refusal to perform the duties
assigned by Buyer or the Company, provided such duties are reasonably consistent with the
employees employment position, (v) gross negligence or willful misconduct resulting in a loss to
Buyer or the Company, or damage to the reputation of Buyer or the Company, (vi) material violation
of the employment policies of Buyer or any of its Affiliates or (vii) violation of any statutory or
common law duty of loyalty to Buyer or the Company. 53




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Claim Noticehas the meaning specified in Section 5.3(a). Claiming Partyhas the meaning specified in Section 5.3(a). Class A Shareshas the meaning specified in the first recital of this Agreement. Class B Shareshas the meaning specified in the first recital of this Agreement. Closinghas the meaning specified in Section 1.2. Closing Datehas the meaning specified in Section 1.2. Codemeans the Internal Revenue Code of 1986, as amended. Companyhas the meaning specified in the first recital to this Agreement. Company Agreementshas the meaning specified in Section 2.23. Company Business Personnelhas the meaning specified in Section 2.15. Company Employment Agreementshas the meaning specified in Section 2.13(d). Company Grouphas the meaning specified in Section 2.10. Company Intellectual Propertyhas the meaning specified in Section
2.16(a)(i). Company Permitshas the meaning specified in Section 2.9. Company Planhas the meaning specified in Section 2.13(c). Company Proprietary Information Agreementhas the meaning specified in Section
2.16(h). Company Registered Intellectual Property Rightshas the meaning specified in
Section 2.16(b). Copyrightshas the meaning specified in Section 2.16(a)(iii)(3). Defined Liabilitieshas the meaning specified in Section 1.3(c). Encumbrancemeans any lien, claim, charge, security interest, mortgage, pledge,
easement, conditional sale or other title retention agreement, defect in title, community 54




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property right, covenant, option, rights of first refusal, limitations on voting rights or other
encumbrances of any nature whatsoever. ERISAhas the meaning specified in Section 2.13(a). ERISA Affiliatehas the meaning specified in Section 2.13(c). Escrow Accounthas the meaning specified in Section 1.8. Escrow Agenthas the meaning specified in Section 1.8. Escrow Agreementhas the meaning specified in Section 1.8. Escrow Shareshas the meaning specified in the Escrow Agreement. Exchange Actmeans the Securities Exchange Act of 1934, as amended. Exercise Factorhas the meaning specified in Section 1.3(c). Expensemeans any and all expenses incurred in connection with investigating,
preparing, defending, bringing or prosecuting any claim, action, suit or proceeding (including,
without limitation, court filing fees, court costs, arbitration fees or costs, witness fees, and
reasonable fees and disbursements of legal counsel, investigators, expert witnesses, accountants
and other professionals). Fifth Cash Paymenthas the meaning specified in Section 1.3(a)(vi). First Cash Paymenthas the meaning specified in Section 1.3(a)(i). Financial Statementshas the meaning specified in Section 2.6. Forfeiture Eventhas the meaning specified in Section 6.1(a). Forfeiture Noticehas the meaning specified in Section 6.1(a). Fourth Cash Paymenthas the meaning specified in Section 1.3(a)(v). GAAPhas the meaning specified in Section 3.4. Governmental Bodymeans any court, government (federal, state, local or foreign),
department, commission, board, bureau, agency, official or other regulatory, administrative or
governmental authority. Governmental Entitymeans any domestic (federal and state), foreign or supranational
court, commission, governmental body, regulatory agency, authority or tribunal. 55




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Guaranteemeans the guarantee of Asghar Mostafa in the form attached hereto as
Exhibit G. Indemnifying Partyhas the meaning specified in Section 5.3(a). Individual Forfeiture Eventhas the meaning specified in Section 1.4(b). Individual Forfeiture Noticehas the meaning specified in Section 6.1(a). Intellectual Property Rightshas the meaning specified in Section
2.16(a)(iii). Interestmeans simple interest at the rate of 3.75% per annum. Interim Balance Sheetmeans the unaudited balance sheet of the Company as of
November 30, 2004 included in Schedule 2.6. Interim Financial Statementshas the meaning specified in Section 2.6. IRShas the meaning specified in Section 2.13(a). Knowledge of the Companyhas the meaning specified in Section 2.11(c). Lossesmeans any and all losses, costs, obligations, liabilities, settlement
payments, awards, judgments, fines, penalties, damages, expenses, Taxes, deficiencies or other
charges, but shall not include Expenses. Maskworkshas the meaning specified in Section 2.16(a)(iii)(4). Material Adverse Changeor Material Adverse Effectmeans, when used with
respect to Buyer or the Company, as the case may be, any event, change or effect that individually
or when taken together with all other such events, changes or effects is or could reasonably be
expected to be materially adverse to the business, prospects, assets, liabilities, financial
condition or results of operations of Buyer and its Subsidiaries, taken as a single entity, or the
Company, as the case may be. Note Payoff Lettermeans the payoff letter from Mostafa Venture Fund I, LLC to the
Company, in the form attached hereto as Exhibit J. Objectionhas the meaning specified in Section 5.3(c). Open Source Materialshas the meaning specified in Section 2.16(x). Optionshas the meaning specified in the third recital of this Agreement. Option Escrow Agreement and Power of Attorneyhas the meaning specified in
Section 1.10(b). 56




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Optionholdershas the meaning specified in the third recital to this Agreement. Patentshas the meaning specified in Section 2.16(a)(iii)(1). Payment Accounthas the meaning specified in Section 1.4(a)(i). Permitted Encumbrancehas the meaning specified in Section 2.7(c)(vii). Personhas the meaning specified in Section 2.17. Performance Conditionshas the meaning specified in Section 1.4. Performance Periodhas the meaning specified in Section 1.4. Per Share Cash Pricehas the meaning specified in Section 1.3(c). Per Share Stock Pricehas the meaning specified in Section 1.3(c). Productshas the meaning specified in Section 2.16(a)(ii). Proprietary Information and Inventions Agreementmeans the Proprietary Information
and Inventions Agreement in the form attached hereto as Exhibit H. PTOhas the meaning specified in Section 2.16(b). Purchase Pricehas the meaning specified in Section 1.3(a). Registered Intellectual Property Rightshas the meaning specified in Section
2.16(a)(iv). Releasemeans any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment or
into or out of any facility of any contaminant, including the movement of Contaminants through or
in the air, soil, surface water, groundwater or Facility. Requirements of Lawhas the meaning specified in Section 2.11(c). Restricted Personshas the meaning specified in Section 4.1. Schedule or Schedulesmeans the numbered schedules referred to in this Agreement. SEChas the meaning specified in Section 3.4. Second Cash Paymenthas the meaning specified in Section 1.3(a)(iii). 57




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Securities Actmeans the Securities Act of 1933, as amended. Seller Ancillary Agreementshas the meaning specified in Section 2.5. Seller Designated Representationshas the meaning specified in Section
5.1(b)(i). Seller Group Membermeans the Sellers, their Affiliates, employees, agents,
attorneys, accountants and consultants and their respective successors and assigns. Seller Representativehas the meaning specified in Section 5.5. Sellershas the meaning specified in the fifth recital to this Agreement. Share Escrow Agreement and Power of Attorneyhas the meaning specified in
Section 1.10(a). Share Escrow Fundhas the meaning specified in the Escrow Agreement. Shareshas the meaning specified in the first recital to this Agreement. Stock Option Planhas the meaning specified in Section 2.4(b). Stock Paymenthas the meaning specified in Section 1.3(a)(ii). Stockholdershas the meaning specified in the first recital to this Agreement. Straddle Periodshall mean any taxable year or period beginning before and ending
after the Closing Date. Subsequent Cash Paymenthas the meaning specified in Section 1.3(a)(vi). Subsidiarymeans any corporation, partnership, limited liability company, joint
venture, trust, association or other entity of which Buyer or the Company, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly or indirectly, 50%
or more of the stock or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other entity. Tax or Taxeshas the meaning specified in Section 2.10. Tax Returnhas the meaning specified in Section 2.10. Tax Sharing Arrangementhas the meaning specified in Section 2.10. 58




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Third Cash Paymenthas the meaning specified in Section 1.3(a)(iv). Technologyhas the meaning specified in Section 2.16(a)(v). Total Forfeiture Eventhas the meaning specified in Section
1.4(b). Total Forfeiture Noticehas the meaning specified in Section
6.1(a). Trademarkshas the meaning specified in Section 2.16(a)(iii)(6). Trade Secretshas the meaning specified in Section 2.16(a)(iii)(2). Verizon Delayhas the meaning specified in Section 1.4. Voluntary Departuremeans an employees voluntary termination of his or her
employment with Buyer for any reason other than (i) a material adverse change by Buyer in such
employees job responsibilities or (ii) a relocation by Buyer of such employees principal office
by more than 25 miles (other than a relocation to Buyers facilities in Ashburn, Virginia), which
in either case is without the employees consent, is described in a written termination notice
which the employee provides to Buyer within 30 days after the occurrence of such event and is not
corrected by Buyer within 30 days after Buyers receipt of such termination notice. Section 7.14 No Public Announcement. No party hereto shall, without the approval of
the other parties hereto, make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that any such party shall
be so obligated by law or the rules of any stock exchange, in which case the other party shall be
advised and the parties shall use their best efforts to cause a mutually agreeable release or
announcement to be issued; provided that the foregoing shall not preclude communications or
disclosures necessary to implement the provisions of this Agreement or to comply with the
accounting and Securities and Exchange Commission disclosure obligations. Section 7.15 Jurisdiction and Venue; Service of Process. (a) Buyer and each of the Sellers hereby irrevocably submits in any suit, action or proceeding
arising out of or related to this Agreement, or any of the other agreements or instruments
contemplated by this Agreement, or any of the transactions contemplated by this Agreement, to the
jurisdiction of the courts of the United States of America located in the State of Illinois and the
jurisdiction of the courts of the State of Illinois, said court to be determined by the Person
bringing such suit, action or proceedings, and waive any and all objections to jurisdiction that it
or he or she may have under the laws of the State of Illinois or the United States. Buyer and each
of the Sellers hereby irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any such suit, action or proceeding, in the State of Illinois and further
irrevocably waives any claim that the State of Illinois is not a convenient forum for any such
suit, action or proceeding. (b) Each Seller hereby irrevocably designates, appoints and empowers Seller Representative as
its agent to receive, for and on behalf of such Seller, service of process in any 59




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suit, action or proceeding arising out of or related to this Agreement, or any of the other
agreements or instruments contemplated by this Agreement, or any of the transactions contemplated
by this Agreement (which service shall be deemed completed ten (10) days after delivery thereof to
such party served). In addition, service of process on any Seller in any such suit, action or
proceeding shall be effective if mailed by certified first class mail, postage prepaid, to the
Seller Representative at the address referred to in Section 7.4 with respect to it. (c) Each Seller undertakes to enter an unconditional appearance within thirty (30) days after
the completion of service as provided for herein or under applicable law if not so provided.
Nothing herein shall affect the right to serve process in any other manner permitted by law. * * * * * * * * 60




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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of
the day and year first above written. TELLABS, INC.,a Delaware corporationBy:Name:Title:
 STOCKHOLDERSMostafa Group, LLCBy:Name:
    
    Asghar MostafaTitle:
    
    President and Chief Executive Officer
 Joseph KralowetzJyoti AthavaleDouglas OrtegaMichael GiovannoniJohn RidgwayDouglas AtkinstonDyanna GerberTara Greenwood
 Signature Page 1




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John BurchOPTIONHOLDERSCharles RothrauffBrendan MannixGananathan SureshHwa-Wei (David) LiuKeth BenningtonGovernor W. GrantAdam SwanberyScott BurkEmerson DeitzPeter RandallJoseph RoeschJames BurkeJohn Milroth
 Signature Page 2




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Wen-Bing ShiuJeff RosenwaldMichael AngeDavid P. FredricksonJeffrey NoelJohn BurchGuy MerrittCharles RylandKevin Gemp
 Asghar Mostafa hereby agrees to be bound by Section 4.1, and agrees to be bound by
Article VII as if he was a Seller. Asghar Mostafa Signature Page 3




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Form of notarization for limited liability companies: State of
    
    
    ))
    
    
    SS.:County of
    
    
    )
 On this            day of December 2004, before me, the undersigned, a Notary Public of said State, duly commissioned and sworn, personally appeared                     , known to me, who,
being by me duly sworn, did dispose and say that he is the                     
of                      , the limited liability company described in and that executed the within instrument, and
that he signed his name thereto by order of the managers and/or the members of said limited
liability company. Notary PublicMy Commission Expires:




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Form of notarization for individuals:State of
    
    
    ))
    
    SS.:County of
    
    
    )
 On this            day of December 2004, before me, the undersigned, a Notary Public of said State, duly commissioned and sworn, personally appeared , known to me to be the person described in and who executed the within instrument, and
acknowledged to me that he executed the same and swore to the same. Notary PublicMy Commission Expires




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ANNEX A See Attached. Annex A-1




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ANNEX B See Attached. Annex B-1




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Exhibit A BUYER SHARES See Attached. Exhibit A-1




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Exhibit B OPINION OF COUNSEL FOR THE COMPANY
AND
SPECIAL COUNSEL TO ASGHAR MOSTAFA See Attached. Exhibit B-1




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Exhibit C RELEASE AND WAIVER See Attached. Exhibit C-1




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Exhibit D ESCROW AGREEMENT See Attached. Exhibit D-1




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Exhibit E SHARE ESCROW AGREEMENT
AND
POWER OF ATTORNEY See Attached. Exhibit E-1




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Exhibit F OPTION ESCROW AGREEMENT
AND
POWER OF ATTORNEY See Attached. Exhibit F-1




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Exhibit G GUARANTEE See Attached. Exhibit G-1




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Exhibit H PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT See Attached. Exhibit H-1




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Exhibit I BANK PAYOFF LETTER See Attached. Exhibit I-1




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Exhibit J NOTE PAYOFF LETTER See Attached. Exhibit J-1