Document:

EX-10.4

 

EXHIBIT 10.4

Execution Copy

 

AGREEMENT AND PLAN OF MERGER

among

IPC SYSTEMS, INC.,

WHITEHALL MERGER CORPORATION,

and

WESTCOM HOLDING CORP.

Dated as of March 26, 2007

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I. DEFINITIONS
	 	 	1	 
	Section 1.1. Certain Definitions
	 	 	1	 
	Section 1.2. Terms Generally
	 	 	11	 
	 
	 	 	 	 
	ARTICLE II. Merger
	 	 	11	 
	Section 2.1. The Merger
	 	 	11	 
	Section 2.2. Closing
	 	 	12	 
	Section 2.3. Effective Time of the Merger
	 	 	12	 
	Section 2.4. Effect of Merger
	 	 	12	 
	Section 2.5. Further Actions
	 	 	12	 
	 
	 	 	 	 
	ARTICLE III. THE SURVIVING CORPORATION
	 	 	13	 
	Section 3.1. Certificate of Incorporation
	 	 	13	 
	Section 3.2. Bylaws
	 	 	13	 
	Section 3.3. Directors
	 	 	13	 
	Section 3.4. Officers
	 	 	13	 
	 
	 	 	 	 
	ARTICLE IV. CONVERSION OF SHARES
	 	 	13	 
	Section 4.1. Merger Consideration
	 	 	13	 
	Section 4.2. Merger Consideration Adjustments
	 	 	15	 
	Section 4.3. Escrow Funds
	 	 	18	 
	Section 4.4. Stockholder Allocable Expenses
	 	 	18	 
	Section 4.5. Payment
	 	 	18	 
	Section 4.6. No Further Rights
	 	 	20	 
	Section 4.7. Closing of the Company’s Transfer Books
	 	 	20	 
	Section 4.8. Closing Deliveries
	 	 	20	 
	Section 4.9. Transfer Taxes
	 	 	21	 
	 
	 	 	 	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY GROUP
	 	 	21	 
	Section 5.1. Organization of the Company and the Company Group
	 	 	21	 
	Section 5.2. Authorization
	 	 	22	 
	Section 5.3. Non-contravention
	 	 	22	 
	Section 5.4. Capitalization
	 	 	22	 
	Section 5.5. Subsidiaries of the Company
	 	 	23	 
	Section 5.6. Government Authorizations
	 	 	24	 
	Section 5.7. Financial Statements
	 	 	24	 
	Section 5.8. Absence of Certain Changes
	 	 	25	 
	Section 5.9. Tax Matters
	 	 	25	 
	Section 5.10. Property
	 	 	26	 
	Section 5.11. Intellectual Property
	 	 	27	 
	Section 5.12. Environmental Matters
	 	 	28	 
	Section 5.13. Contracts
	 	 	29	 
	Section 5.14. Insurance
	 	 	30	 

i

 

	 	 	 	 	 
	 	 	Page
	Section 5.15. Litigation
	 	 	31	 
	Section 5.16. Employee Matters
	 	 	31	 
	Section 5.17. Labor Matters
	 	 	33	 
	Section 5.18. Legal Compliance
	 	 	33	 
	Section 5.19. Brokers’ Fees
	 	 	33	 
	Section 5.20. Permits
	 	 	33	 
	Section 5.21. Customers and Suppliers
	 	 	34	 
	Section 5.22. Antitakeover Statutes
	 	 	34	 
	Section 5.23. No Additional Representations and Warranties
	 	 	34	 
	 
	 	 	 	 
	ARTICLE VI. REPRESENTATIONS AND WARRANTIES REGARDING BUYER AND MERGER SUB
	 	 	34	 
	Section 6.1. Organization
	 	 	34	 
	Section 6.2. Authorization
	 	 	34	 
	Section 6.3. Non-contravention
	 	 	35	 
	Section 6.4. Government Authorizations
	 	 	35	 
	Section 6.5. Financial Capacity
	 	 	35	 
	Section 6.6. Litigation
	 	 	36	 
	Section 6.7. Brokers’ Fees
	 	 	36	 
	Section 6.8. Information
	 	 	36	 
	 
	 	 	 	 
	ARTICLE VII. COVENANTS
	 	 	37	 
	Section 7.1. Conduct of the Company
	 	 	37	 
	Section 7.2. Access to Information; Confidentiality
	 	 	39	 
	Section 7.3. Commercially Reasonable Efforts
	 	 	40	 
	Section 7.4. Government Approvals
	 	 	41	 
	Section 7.5. Public Announcements
	 	 	41	 
	Section 7.6. Notification of Certain Matters
	 	 	41	 
	Section 7.7. Financing
	 	 	42	 
	Section 7.8. Director and Officer Indemnification
	 	 	44	 
	Section 7.9. Employee Benefit Arrangements
	 	 	44	 
	Section 7.10. Post-Closing Access; Preservation of Records
	 	 	45	 
	Section 7.11. Termination of Affiliate Contracts
	 	 	46	 
	Section 7.12. No Solicitation; Other Offers
	 	 	46	 
	Section 7.13. Non-Solicitation
	 	 	46	 
	Section 7.14. Preparation of Financial Statements
	 	 	46	 
	Section 7.15. Further Assurances
	 	 	47	 
	Section 7.16. Stockholder Approval
	 	 	47	 
	 
	 	 	 	 
	ARTICLE VIII. TAX MATTERS
	 	 	47	 
	Section 8.1. Tax Proceedings
	 	 	47	 
	Section 8.2. Allocation of Taxes (Straddle Period)
	 	 	48	 
	 
	 	 	 	 
	ARTICLE IX. CONDITIONS TO CLOSING
	 	 	48	 
	Section 9.1. Conditions Precedent to Obligations of Buyer, Merger Sub and the Company
	 	 	48	 
	Section 9.2. Conditions Precedent to Obligation of the Company
	 	 	49	 

ii

 

	 	 	 	 	 
	 	 	Page
	Section 9.3. Conditions Precedent to Obligations of Buyer and Merger Sub
	 	 	50	 
	 
	 	 	 	 
	ARTICLE X. LIMITATIONS
	 	 	51	 
	Section 10.1. Waiver of Damages
	 	 	51	 
	Section 10.2. No Consequential Damages
	 	 	51	 
	 
	 	 	 	 
	ARTICLE XI. INDEMNIFICATION
	 	 	51	 
	Section 11.1. General Indemnification for Buyer
	 	 	51	 
	Section 11.2. General Indemnification for the Stockholder Group
	 	 	52	 
	Section 11.3. Certain Limitations
	 	 	53	 
	Section 11.4. Indemnification Procedures
	 	 	55	 
	Section 11.5. Exclusive Remedy
	 	 	57	 
	Section 11.6. Mitigation
	 	 	57	 
	 
	 	 	 	 
	ARTICLE XII. TERMINATION
	 	 	57	 
	Section 12.1. Termination Events
	 	 	57	 
	Section 12.2. Effect of Termination
	 	 	58	 
	 
	 	 	 	 
	ARTICLE XIII. STOCKHOLDER REPRESENTATIVE
	 	 	58	 
	Section 13.1. Stockholder Representative
	 	 	58	 
	Section 13.2. Authority and Rights
	 	 	58	 
	Section 13.3. Limitations on Liability
	 	 	58	 
	 
	 	 	 	 
	ARTICLE XIV. MISCELLANEOUS
	 	 	59	 
	Section 14.1. Parties in Interest
	 	 	59	 
	Section 14.2. Assignment
	 	 	59	 
	Section 14.3. Notices
	 	 	59	 
	Section 14.4. Amendments and Waivers
	 	 	60	 
	Section 14.5. Exhibits and Disclosure Schedule
	 	 	60	 
	Section 14.6. Headings
	 	 	61	 
	Section 14.7. Construction
	 	 	61	 
	Section 14.8. No Other Representations or Warranties
	 	 	61	 
	Section 14.9. Entire Agreement
	 	 	62	 
	Section 14.10. Severability; Specific Performance
	 	 	62	 
	Section 14.11. Expenses
	 	 	62	 
	Section 14.12. Governing Law
	 	 	62	 
	Section 14.13. Consent to Jurisdiction; Waiver of Jury Trial
	 	 	63	 
	Section 14.14. Counterparts
	 	 	63	 

SCHEDULES

Disclosure Schedule

EXHIBITS

Exhibit A Escrow Agreement

 Exhibit B  Commitment Letters

Exhibit C Olivier Report

iii

 

AGREEMENT AND PLAN OF MERGER

     Agreement and Plan of Merger, dated as of March 26, 2007 (including the Schedules and Exhibits
hereto, this “Agreement”), is by and among IPC Systems, Inc., a Delaware corporation
(“Buyer”), Whitehall Merger Corporation, a Delaware corporation and a wholly-owned
subsidiary of Buyer (“Merger Sub”), Westcom Holding Corp., a Delaware corporation (the
“Company”) and One Equity Partners LLC, solely in its capacity as Stockholder
Representative. Buyer, Merger Sub, the Company and stockholders of the Company listed as
signatories to this Agreement (the “Principal Stockholders”) are referred to collectively
herein as the “Parties” and each individually as a “Party.”

W I T N E S S E T H:

     WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with
the General Corporation Law of the State of Delaware (the “DGCL”), Buyer and the Company
will enter into a business combination transaction pursuant to which Merger Sub, an entity
organized for the sole purpose of entering into the transactions contemplated hereby, will merge
with and into the Company with the Company as the surviving corporation and a wholly-owned
subsidiary of Buyer (the “Merger”);

     WHEREAS, the respective Boards of Directors of Buyer, Merger Sub and the Company have approved
this Agreement, the Merger and the related transactions contemplated hereby, and have determined
that the Merger is advisable to, and in the best interests of, the respective companies and their
respective stockholders and have resolved to recommend that their respective stockholders consent
to and approve this Agreement, the Merger and the related transactions contemplated hereby upon the
terms and subject to the conditions set forth herein; and

     WHEREAS, concurrently with the execution of this Agreement, the Principal Stockholders who
hold, in the aggregate, a number of Shares entitling the Principal Stockholders to cast votes in
excess of that number of votes necessary for the adoption and approval of this Agreement and the
transactions contemplated hereby by the shareholders of the Company, shall provide evidence
reasonably satisfactory to Buyer that holders of at least a majority of the Shares have irrevocably
adopted and approved this Agreement and the transactions contemplated hereby by written consent, in
accordance with the DGCL, and the Company’s Certificate of Incorporation and Bylaws.

     NOW, THEREFORE, in consideration of the mutual covenants and promises herein made, and in
consideration of the representations and warranties herein contained, and for other good and
valuable consideration the receipt and adequacy of which are hereby acknowledged, the Parties
hereto, intending to become legally bound, hereby agree as follows:

ARTICLE I.

DEFINITIONS

                    Section 1.1. Certain Definitions. As used in this Agreement, the following terms shall have the following meanings:

 

 

     “2006 Audited Financials” has the meaning set forth in Section 7.14.

     “Action” means any action, suit, claim, arbitration, investigation or proceeding by or
before any court or other Governmental Authority.

     “Adjusted Working Capital” means, as of any date of determination for the Company and
its Subsidiaries, the sum of (a) a positive amount equal to the portion of the assets of the
Company and its Subsidiaries, with all such Subsidiaries accounted for on a consolidated basis and
not on an equity or cost accounting basis, that constitutes current assets and (b) a negative
amount equal to the portion of the liabilities of the Company and its Subsidiaries, with all such
Subsidiaries accounted for on a consolidated basis and not on an equity or cost accounting basis,
that constitutes current liabilities, all as determined in accordance with GAAP consistently
applied and calculated in accordance with methodologies set forth in Section 4.2 of the
Disclosure Schedule. Notwithstanding the foregoing, for purposes of calculating Adjusted Working
Capital, (a) current assets and current liabilities shall not include (i) cash and cash
equivalents, (ii) any assets or liabilities related to Taxes, (iii) the current portion of any
Indebtedness of the Company Group, (iv) any amounts payable by the Company Group pursuant to the
Asset Purchase Agreement dated March 2, 2006 between Lexar LLC and WestCom Technologies or the
Stock Purchase Agreement dated March 2, 2006 among Marcus Bateson, Keith Smith, Lexar UK, WestCom
Europe Limited, Lexar LLC and WestCom Corporation (collectively, the “Lexar Purchase
Agreements”), and (v) any Stockholder Allocable Expenses and (b) Adjusted Working Capital shall
be deemed to include the following (regardless of how such items would otherwise be treated under
GAAP): (i) as a liability and not as an asset, the maximum amount due to Jack Barry and Jeffrey
Hug for payments made in consideration for or in connection with the amendment by each of his
employment agreement on August 5, 2006 and (ii) as a liability and not as an asset, any fees or
expenses incurred or to be incurred by or on behalf of the Company Group in connection with the
Merger, the preparation, negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby, to the extent (A) not a Stockholder Allocable Expense and (B)
payable on or after the Closing.

     “Adjustment Amount” means the amount equal to the Adjusted Working Capital
minus the Target Working Capital, which amount may be a positive or negative number.

     “Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated
under the Securities Exchange Act.

     “Affiliate Contract” means any Contract between or among a member of the Company
Group, on the one hand, and any of its Affiliates (and any members or partners of such Affiliates)
(other than a member of the Company Group), on the other hand.

     “Agreement” means this Agreement and Plan of Merger, including all Exhibits and
Schedules hereto (including the Disclosure Schedule), as the same may be amended, modified or
supplemented from time to time in accordance with its terms.

     “Applicable Percentage” means with respect to any holder of shares of Common Stock or
Options, a ratio (expressed as a percentage) equal to the aggregate Per Share Merger

2

 

Consideration
to which such holder is entitled hereunder, divided by the aggregate amount of Per Share Merger
Consideration paid to all such holders.

     “Balance Sheet” has the meaning set forth in Section 5.7(a)(i).

     “Balance Sheet Date” means December 31, 2006.

     “Base Merger Consideration” means Five Hundred Fifteen Million Dollars ($515,000,000).

     “Business” means the business conducted by the Company Group as of the date of this
Agreement.

     “Business Day” means any day other than Saturday, Sunday or any other day on which
banking institutions in New York are not open for the transaction of normal banking business.

     “Buyer” has the meaning set forth in the preamble to this Agreement.

     “Buyer Group” has the meaning set forth in Section 11.1.

     “Certificates” has the meaning set forth in Section 4.5(b).

     “Closing” has the meaning set forth in Section 2.2.

     “Closing Balance Sheet” has the meaning set forth in Section 4.2(b).

     “Closing Date” means the date the Closing occurs pursuant to Section 2.2.

     “Closing Date Schedule Supplement” has the meaning set forth in Section
14.5(c).

     “Closing Working Capital Statement” has the meaning set forth in Section
4.2(b).

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Commitment Letters” has the meaning set forth in Section 6.5.

     “Common Stock” has the meaning set forth in Section 4.1(a).

     “Company” has the meaning set forth in the preamble to this Agreement.

     “Company Employees” has the meaning set forth in Section 7.9(a).

     “Company Financial Statements” has the meaning set forth in Section 5.7(a).

     “Company Group” means the Company and the Company’s Subsidiaries.

     “Company IP” has the meaning set forth in Section 5.11(a)(i).

3

 

     “Company Plans” has the meaning set forth in Section 5.16(a).

     “Confidentiality Agreement” means the Confidentiality Agreement, dated as of January
17, 2007, between the Company and Silver Lake Management Company, L.L.C.

     “Consents” means consents, orders, approvals, exemptions, waivers, authorizations,
filings, registrations and notifications.

     “Contract” means any binding contract, obligation, plan, undertaking, arrangement,
agreement, commitment, indenture, note, bond, mortgage, loan, instrument, lease, consent or
license.

     “Controlled Group” has the meaning set forth in Section 5.16(d).

     “Damages” means all losses, claims, damages, payments, Taxes, costs and expenses
(including costs and expenses of Actions, amounts paid in connection with any assessments,
judgments or settlements relating thereto, interest and penalties recovered by a third party with
respect thereto and out-of pocket expenses and reasonable attorneys’ fees and expenses reasonably
incurred in defending against any such Actions or in enforcing a Party’s rights hereunder).

     “Debt Commitment Letters” has the meaning set forth in Section 6.5(a).

     “DGCL” has the meaning set forth in the recitals to this Agreement.

     “Disclosure Schedule” means the disclosure schedule delivered by the Principal
Stockholders to Buyer on the date hereof, as may be supplemented in accordance with the terms
hereof.

     “Dissenting Shares” has the meaning set forth in Section 4.1(e).

     “Effective Time” has the meaning set forth in Section 2.3.

     “Environmental Law” means any Law relating to pollution or protection of the
environment or natural resources; provided further, that the term “Environmental Law” shall include
any Law relating to occupational safety and health or the protection of human health, to the extent
relating to exposure to any hazardous or deleterious substance.

     “Equity Commitment Letter” has the meaning set forth in Section 6.5(b).

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “Escrow Accounts” has the meaning set forth in Section 4.3.

     “Escrow Agent” has the meaning set forth in Section 4.3.

     “Escrow Agreement” has the meaning set forth in Section 4.3.

4

 

     “Escrow Funds” has the meaning set forth in Section 4.3.

     “Estimated Adjustment Amount” means the Principal Stockholders’ good faith estimate of
the Adjustment Amount as derived from the Estimated Working Capital Statement and the calculation
of Adjusted Working Capital thereon.

     “Estimated Balance Sheet” means the estimated unaudited balance sheet of the Company
and its Subsidiaries, with all such Subsidiaries accounted for on a consolidated basis and not on
an equity or cost accounting basis, as of the close of business on the day prior to the Closing
Date prior to any purchase accounting adjustments and prepared in accordance with the methodologies
set forth in Section 4.2(b).

     “Estimated Working Capital Statement” means a statement prepared in good faith by the
Principal Stockholders setting forth in reasonable detail (a) Adjusted Working Capital that would
be calculated under Section 4.2 if the Estimated Balance Sheet was deemed to be the Closing
Balance Sheet (assuming no disputes with respect thereto) and (b) a good faith calculation of the
Estimated Adjustment Amount.

     “Excess Payment” has the meaning set forth in Section 4.2(e)(i)(B).

     “FCC” has the meaning set forth in Section 9.1(c).

     “Final Settlement Date” has the meaning set forth in Section 4.2(c).

     “Final Working Capital Statement” has the meaning set forth in Section 4.2(d).

     “Foreign Benefit Plans” has the meaning set forth in Section 5.16(h).

     “Fully-Diluted Common Shares” means the shares of Common Stock issued and outstanding
immediately prior to the Effective Time, assuming the exercise of all of the Options (as defined
below) outstanding immediately prior to the Effective Time and the issuance of all of the shares of
Common Stock issuable in respect thereof.

     “GAAP” means United States generally accepted accounting principles.

     “Governmental Authority” means any domestic, foreign or multinational federal, state
or local government, court of competent jurisdiction, administrative agency or commission or other
governmental or regulatory authority or instrumentality or arbitral or similar forum.

     “Hazardous Materials” means (a) asbestos, polychlorinated biphenyls, petroleum,
petroleum derived substances, by-products or wastes, (b) any substance that is defined, listed or
identified as a “hazardous waste,” “hazardous substance,” “solid waste,” “pollutant,” or
“contaminant” or (c) any substance that is toxic, explosive, corrosive, flammable, radioactive, or
otherwise hazardous and is defined, regulated or listed as such, or any other term of similar
import, under any applicable Environmental Law or that could otherwise reasonably be expected to
result in the imposition of Liability under any applicable Environmental Law.

     “Hirtenstein Group” has the meaning set forth in Section 7.11.

5

 

     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     “Indebtedness” means, without duplication, the sum of (a) all obligations of the
Company Group for borrowed money or issued in substitution for or exchange of indebtedness for
borrowed money, (b) other indebtedness of the Group evidenced by notes, bonds, debentures or other
debt securities, (c) indebtedness of the types described in clauses (a) and (b) guaranteed,
directly or indirectly, in any manner by the Company Group through an agreement, contingent or
otherwise, to supply funds to, or in any other manner, invest in, the debtor, or to purchase
indebtedness, primarily for the purpose of enabling the debtor to make payment of the indebtedness
or to insure the owners of indebtedness against loss, (d) indebtedness for the deferred purchase
price of property or services with respect to which the Company Group is liable, other than
ordinary course trade payables, (e) all obligations of the Company Group as lessee or lessees under
capital leases in accordance with GAAP, (f) all payment obligations under any interest rate swap
agreements or interest rate hedge agreements to which the Company Group is party, (g) any interest
owed with respect to the indebtedness referred to above and prepayment premiums or fees related
thereto and (h) any amounts not to exceed $1,200,000 payable or which could become payable
(assuming all conditions to earnout or other future payments are satisfied) by the Company Group
pursuant to the Lexar Purchase Agreements.  For the avoidance of doubt, Indebtedness shall not
include any (a) guarantees by the Company Group of indebtedness of the types described in clauses
(a) and (b) above of any wholly-owned Subsidiary of the Company or (b) intercompany accounts,
payables or loans of any kind or nature.

     “Indemnification Escrow Account” has the meaning set forth in Section 4.3.

     “Indemnification Escrow Funds” has the meaning set forth in Section 4.3.

     “Indemnified Claim” has the meaning set forth in Section 11.4(f).

     “Indemnified Officers” has the meaning set forth in Section 7.8.

     “Indemnified Party” has the meaning set forth in Section 11.2.

     “Indemnifying Party” has the meaning set forth in Section 11.2.

     “Indemnity Reduction Amounts” has the meaning set forth in Section 11.3(c).

     “Injunction” has the meaning set forth in Section 7.3.

     “Intellectual Property” means all United States and foreign intellectual and
industrial property rights, including (a) all patents, patent applications and patent disclosures,
(b) all trademarks, service marks, trade dress, logos, trade names, domain names and corporate
names, and other source indicators, and all applications, registrations and renewals in connection
therewith, and the goodwill of any business symbolized by the foregoing, (c) all copyrightable
works, all copyrights (including all computer programs, compilations, code, databases, computer
software, systems, networks and related documentation (together, “Software”) and
website content) and all applications, registrations and renewals in connection therewith and (d)
all trade

6

 

secrets and confidential or proprietary business information (including research and
development, know-how, compositions, manufacturing and production processes, inventions,
discoveries, technology, technical data, designs, specifications and business and marketing plans
and proposals).

     “Knowledge” means (a) with respect to the Company, the actual knowledge of any
individual set forth on Schedule A1, (b) with respect to the Principal Stockholders, the
actual knowledge of any individual set forth on Schedule A2 and (c) with respect to Buyer
or Merger Sub, the actual knowledge of any individual set forth on Schedule A3.

     “Laws” means all applicable laws, statutes, constitutions, rules, regulations,
judgments, rulings, orders, decrees and injunctions of Governmental Authorities.

     “Leased Real Property” has the meaning set forth in Section 5.10(b).

     “Leases” has the meaning set forth in Section 5.10(b)(i).

     “Lexar Purchase Agreements” has the meaning set forth in the definition of Adjusted
Working Capital.

     “Liability” means any 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), including any liability for Taxes.

     “Lien” means any mortgage, pledge, hypothecation, preference, security agreement,
easement, covenant, restriction, lien, charge, security interest or other encumbrance of any kind
or nature whatsoever.

     “Liquidation Preference” has the meaning set forth in Section 4.1(b).

     “Material Adverse Effect” means (a) with respect to the Company Group, any change,
effect, circumstance or state of facts that, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on the business, operations, assets or
financial condition of the Company Group, taken as a whole, excluding, in each case, any such
effect resulting from or arising out of or in connection with (i) the engagement by any country in
hostilities, whether commenced before or after the date hereof, and whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or terrorist attack,
(ii) general economic, industry or market events, occurrences, developments, circumstances or
conditions, in each case that do not have a disproportionate effect on the Company Group relative
to other Persons in the industry, (iii) changes in applicable Laws or accounting standards,
principles or interpretations, in each case that do not have a disproportionate effect on the
Company Group relative to other Persons in the industry, (iv)  the public announcement or the
pendency of this Agreement or any of the transactions contemplated herein or any actions taken or
not taken at the request or with the consent of Buyer or Merger Sub, (b) with respect to Buyer or
Merger Sub, a material adverse effect on
the ability of Buyer or Merger Sub to perform its
obligations under, or to consummate the transactions contemplated by,
this Agreement and (c) with respect to the Principal Stockholders, a material adverse effect
on

7

 

the ability of the Principal Stockholders to perform their respective obligations under, or to
consummate the transactions contemplated by, this Agreement.

     “Material Contracts” has the meaning set forth in Section 5.13(a).

     “Merger” has the meaning set forth in the recitals to this Agreement.

     “Merger Consent” has the meaning set forth in Section 7.16(a).

     “Merger Consideration” has the meaning set forth in Section 4.1(c).

     “Merger Sub” has the meaning set forth in the preamble to this Agreement.

     “Notice of Disagreement” has the meaning set forth in Section 4.2(c).

     “Olivier Report” means the study conducted by Olivier and Associates which is
currently in draft form and is entitled, “The WestCom Corporation Multi-State Sales-Use Action Tax
Review” and is attached hereto as Exhibit C.

     “OpCo Group” means, collectively, WestCom Corporation, WestCom Europe Limited, WestCom
Dedicated Private Lines, Inc., WestCom Latin America Limited, WestCom Global Networks ULC and
WestCom Dedicated Private Lines, Inc.

     “Option Cancellation Payment” has the meaning set forth in Section 4.1(d).

     “Option Holder” has the meaning set forth in Section 4.1(d).

     “Option Shares” has the meaning set forth in Section 4.1(h).

     “Options” means each unexercised option to purchase shares of Common Stock that is
outstanding immediately prior to the Effective Time.

     “Other Parties” has the meaning set forth in Section 5.13(b).

     “Parties” has the meaning set forth in the preamble to this Agreement.

     “Per Share Merger Consideration” has the meaning set forth in Section 4.1(c).

     “Permits” means written permits, licenses, franchises, registrations, variances and
approvals obtained from any Governmental Authority.

     “Permitted Liens” means any (a) mechanic’s, materialmen’s, laborer’s, workmen’s,
repairmen’s, carrier’s and similar Liens, including all statutory Liens, arising or incurred in the
ordinary course of business, (b) Liens for Taxes, assessments and other governmental charges not
yet due and payable or, if due, (i) not delinquent or (ii) being contested in good faith through
appropriate proceedings and as to which appropriate reserves have been established in accordance
with GAAP, (c) purchase money Liens and Liens securing rental payments under capital lease
arrangements, (d) pledges or deposits under workers’ compensation
legislation, unemployment insurance Laws or similar Laws, (e) good faith deposits in
connection

8

 

with bids, tenders, leases, contracts or other agreements, including rent security
deposits, (f) pledges or deposits to secure public or statutory obligations or appeal bonds, (g) in
the case of property owned or held by the Company Group, easements, covenants and other
restrictions which do not materially impair the current use, occupancy or value of the property
subject thereto and (h) Liens that do not materially detract from the value or materially interfere
with the present or proposed use of the properties they affect.

     “Person” means any individual, partnership, limited liability partnership,
corporation, limited liability company, association, joint stock company, trust, estate, joint
venture, unincorporated organization or governmental entity (or any department, agency or political
subdivision thereof).

     “Post-Closing Tax Period” means a taxable period or portion thereof beginning after
the Closing Date.

     “Pre-Closing Tax Period” means a taxable period or portion thereof ending on or before
the Closing Date.

     “Preferred Stock” has the meaning set forth in Section 4.1(a).

     “Preliminary Merger Consideration” means the Base Merger Consideration, plus
the Estimated Adjustment Amount (which shall be a deduct to the extent the Estimated Adjustment
Amount is a negative number), minus the Escrow Funds, minus Stockholder Allocable
Expenses, minus the amount of outstanding Indebtedness at Closing and plus any
unrestricted cash and cash equivalents (net of any repatriation costs assuming distribution of such
cash and cash equivalents to the Company on the Closing Date (but immediately prior to the
Closing)) held by the Company Group on the Closing Date (but immediately prior to the Closing).

     “Principal Stockholders” has the meaning set forth in the preamble to this Agreement.

     “Remedies Exception” means (a) applicable bankruptcy, insolvency, reorganization,
moratorium and other Laws of general application, heretofore or hereafter enacted or in effect,
affecting the rights and remedies of creditors generally and (b) the exercise of judicial or
administrative discretion in accordance with general equitable principles, particularly as to the
availability of the remedy of specific performance or other injunctive relief.

     “Required Telecommunications Approvals” has the meaning set forth in Section
9.1(c).

     “Right” means any option, warrant, convertible or exchangeable security or other
right, however denominated, to subscribe for, purchase or otherwise acquire any equity interest or
other security of any class, with or without payment of additional consideration in cash or
property, either immediately or upon the occurrence of a specified date or a specified event or the
satisfaction or happening of any other condition or contingency.

     “Securities Act” means the Securities Act of 1933, as amended.

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     “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Shares” has the meaning set forth in Section 4.1(a).

     “Shortfall Reduction” has the meaning set forth in Section 4.2(e)(i)(A).

     “Stockholder Allocable Expenses” has the meaning set forth in Section 4.4.

     “Stockholder Group” has the meaning set forth in Section 11.2.

     “Stockholder Representative” has the meaning set forth in Section 13.1.

     “Straddle Period” means a taxable period beginning before and ending after the Closing
Date.

     “Subsidiary” when used with respect to any Person, means any other Person of which
(a) in the case of a corporation, at least (i) a majority of the equity or (ii) a majority of the
voting interests are owned or controlled, directly or indirectly, by such first Person, by any one
or more of such first person’s Subsidiaries, or by such first Person and one or more of such first
person’s Subsidiaries or (b) in the case of any Person other than a corporation, such first Person,
one or more of such first person’s Subsidiaries, or such first Person and one or more of such first
person’s Subsidiaries (i) owns a majority of the equity interests thereof or (ii) has the power to
elect or direct the election of a majority of the members of the governing body thereof.

     “Substitute Financing” has the meaning set forth in Section 7.7(c).

     “Surviving Corporate Group” has the meaning set forth in Section 7.8.

     “Surviving Corporation” has the meaning set forth in Section 2.1.

     “Surviving Covenants” has the meaning set forth in Section 11.3(d).

     “Target Working Capital” means $2,798,553.

     “Tax” means any federal, state, local or foreign tax, charge, duty, fee, levy or other
similar assessment, including income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar), unemployment, disability,
property, personal property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax, imposed by any taxing authority, or imposed by any regulatory or
administrative authority with respect to the provision of telecommunications services of the type,
or comparable to the type, referred to in the Olivier Report, and including any interest, penalty
or addition thereto.

     “Tax Return” means any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof, required to be filed with any taxing authority.

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     “Third Party Claim” has the meaning set forth in Section 11.4(a).

     “Transaction Documents” means this Agreement, the Escrow Agreement, the Commitment
Letters and all other documents delivered at Closing or required to be delivered by any Party
pursuant to this Agreement.

     “Transfer Taxes” means all transfer Taxes (excluding Taxes measured by net income),
including sales, real property, use, excise, stock, stamp, documentary, filing, recording, permit,
license, authorization and similar Taxes, filing fees and similar charges.

     “Voluntary Disclosure Agreement” includes any agreement, compromise, managed audit,
administrative determination or similar proceeding whereby a United States state or local
Governmental Authority responsible for the collection of sales and use Taxes, or Taxes of the type,
or comparable to the type, referred to in the Olivier Report, agrees to allow a settlement amount
pursuant to a voluntary compliance program with respect to such Taxes.

     “Working Capital Escrow Account” has the meaning set forth in Section 4.3.

     “Working Capital Escrow Funds” has the meaning set forth in Section 4.3.

     “Working Capital Statement Arbitrator” has the meaning set forth in Section
4.2(d).

                    Section 1.2. Terms Generally. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The
words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without
limitation.” The words “herein”, “hereof” and “hereunder” and words of similar import refer to
this Agreement (including the Exhibits to this Agreement and the Disclosure Schedule) in its
entirety and not to any part hereof unless the context shall otherwise require. All references
herein to Articles, Sections, Exhibits and the Disclosure Schedule shall be deemed references to
Articles and Sections of, and Exhibits and the Disclosure Schedule to, this Agreement unless the
context shall otherwise require. Unless the context shall otherwise require, any references to any
agreement or other instrument or statute or regulation are to it as amended and supplemented from
time to time (and, in the case of a statute or regulation, to any successor provisions). Any
reference to any federal, state, local or foreign statute or Law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires otherwise. Any
reference in this Agreement to a “day” or a number of “days” (without explicit reference to
“Business Days”) shall be interpreted as a reference to a calendar day or number of calendar days.
If any action is to be taken or given on or by a particular calendar day, and such calendar day is
not a Business Day, then such action may be deferred until the next Business Day.

ARTICLE II.

MERGER

                    Section 2.1. The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 2.3), Merger Sub shall be merged with and

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into the
Company and the separate existence of Merger Sub shall thereupon cease, and the Company shall
continue as the surviving corporation in the Merger (the “Surviving Corporation”) in
accordance with the DGCL.

                    Section 2.2. Closing. Unless this Agreement shall have been terminated pursuant to
Article XII and subject to the satisfaction or, when permissible, waiver of the conditions
set forth in Article IX, the closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place (a) at the offices of Latham & Watkins LLP, 885 Third
Avenue, New York, New York 10022, commencing at 10:00 a.m. local time on the day which is two (2)
Business Days after the date on which the last of the conditions set forth in Article IX
(other than any such conditions which by their terms are not capable of being satisfied until the
Closing Date) is satisfied or, when permissible, waived or (b) on such other date and/or at such
other time and/or place as the Parties may mutually determine (the “Closing Date”);
provided, that Buyer, at its option shall be permitted to defer the Closing Date for until the
latest of 15 Business Days (x) following satisfaction of the condition set forth in Sections
9.1(b); (y) after public notice of any filings required to be made with the FCC as contemplated
by Section 9.1(c) and (z) after receipt of notice of the scheduled date of the meeting of
the New York Public Services Commission to approve any filings made with such commission as
contemplated by Section 9.1(c).

                    Section 2.3. Effective Time of the Merger. The Merger shall become effective upon the
filing of the certificate of merger with the Secretary of State of the State of Delaware in
accordance with the provisions of the DGCL, or at such other time as Merger Sub and the Company
shall agree should be specified in the certificate of merger, which filing shall be made as soon as
practicable on the Closing Date. When used in this Merger Agreement, the term “Effective
Time” shall mean the time at which such certificate is accepted for filing by the Secretary of
State of the State of Delaware or such time as otherwise specified in the certificate of merger.

                    Section 2.4. Effect of Merger. The Merger shall, from and after the Effective Time,
have all the effects provided herein, in the certificate of merger and in the applicable provisions
of the DGCL.

                    Section 2.5. Further Actions. The parties hereto shall execute and deliver such
certificates and other documents and take such other actions as may be necessary or appropriate in
order to effect the Merger, including, but not limited to, making filings, recordings or
publications required under
the DGCL. If at any time after the Effective Time any further action is necessary to vest in
the Surviving Corporation the title to all property or rights of Merger Sub or the Company, the
authorized officers and directors of the Surviving Corporation are fully authorized in the name of
Merger Sub or the Company, as the case may be, to take, and shall take, any and all such lawful
action.

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ARTICLE III.

THE SURVIVING CORPORATION

                    Section 3.1. Certificate of Incorporation. The Certificate of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, until thereafter changed or
amended as provided therein or by applicable Law (subject to Section 7.8 hereof).

                    Section 3.2. Bylaws. The Bylaws of the Company as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable Law (subject to Section 7.8 hereof).

                    Section 3.3. Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are duly elected and
qualified, in any case in the manner provided in the Certificate of Incorporation and Bylaws of the
Surviving Corporation and in accordance with applicable Law.

                    Section 3.4. Officers. The officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and qualified, in any
case in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation and in accordance with applicable Law.

ARTICLE IV.

CONVERSION OF SHARES

                    Section 4.1. Merger Consideration. As of the Effective Time, by virtue of the Merger and without any further action on the
part of any shareholder of the Company or Merger Sub:

     (a) All shares of common stock, par value $0.01 per share, of the Company (“Common
Stock”) and all shares of Series A Preferred Stock, par value $0.01 per share, of the
Company (“Preferred Stock,” and together with the Common Stock, the
“Shares”) which are held by the Company as treasury stock or otherwise shall be
canceled and retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor. Any shares of Common Stock or Preferred Stock that are owned by Buyer or
Merger Sub shall be automatically canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor. Any shares of Common Stock or
Preferred Stock that are owned by Subsidiaries of the Company shall remain outstanding.

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     (b) Each share of Preferred Stock issued and outstanding immediately prior to the
Effective Time, other than those to which Section 4.1(a) applies and other than any
Dissenting Shares, shall be converted into and represent the right to receive an amount in
cash equal to the liquidation preference required to be paid for such share, plus an
amount equal to a prorated dividend for the period from the Dividend Payment Date (as
defined in the Amended and Restated Certificate of Incorporation of the Company) immediately
prior to the Closing Date pursuant to the Preferred Stock designations set forth in the
Amended and Restated Certificate of Incorporation of the Company (such amount in cash being
referred to herein as the “Liquidation Preference”).

     (c) Each share of Common Stock issued and outstanding immediately prior to the
Effective Time, other than those to which Section 4.1(a) applies and other than any
Dissenting Shares, shall be converted into and represent the right to receive an amount in
cash (such amount in cash being referred to herein as the “Per Share Merger
Consideration”) equal to the Preliminary Merger Consideration, which amount shall be
adjusted after the Closing in accordance with Section 4.2 (as so adjusted, the
“Merger Consideration”), plus the aggregate exercise price of the Options
which are “in-the-money Options”, minus the aggregate Liquidation Preference to be
paid with respect to the Preferred Stock divided by the total number of
Fully-Diluted Common Shares. Options are “in-the-money Options” only if the exercise price
in respect of the shares of Common Stock issuable upon exercise thereof is less than the Per
Share Merger Consideration.

     (d) Each Option granted to any current or former employee of the Company or any
Subsidiary thereof or any other Person (each grantee an “Option Holder”) that is
outstanding immediately prior to the Effective Time shall be canceled and, in exchange
therefor, each Option Holder shall be entitled to a cash payment (the “Option
Cancellation Payment”) in respect of each such canceled Option equal to the (i) the
number of shares of Common Stock covered by such Option immediately prior to the Effective
Time multiplied by (ii) the excess of the Per Share Merger Consideration over the per share
exercise price under such Option. The Option Cancellation Payments shall be subject to all
applicable withholding and employment taxes and shall be paid to the Option Holders as soon
as practicable following the Effective Time.

     (e) Notwithstanding anything to the contrary herein, Shares issued and outstanding
immediately prior to the Effective Time and held by a shareholder who is entitled to and has
properly complied with the provisions of Section 262 of the DGCL (collectively, the
“Dissenting Shares”) shall not be converted as of the Effective Time into a right to
receive the Per Share Merger Consideration, but instead shall have such rights as may be
available under the DGCL; provided, however, that if any such shareholder shall fail to
perfect or shall effectively withdraw or lose his or her right to appraisal and payment
under the DGCL, such shareholder’s shares of Common Stock and/or Preferred Stock shall
thereupon be deemed to have been converted as of the Effective Time into the right to
receive the Per Share Merger Consideration or applicable Liquidation Preference and such
 shares of Common Stock and/or Preferred Stock shall no longer be Dissenting Shares.
Promptly and in any event within 10 Business Days following the date of this Agreement, the
Company shall, in accordance with Section

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262(d) of the DGCL, notify the holders of Shares
of their right to seek appraisal pursuant to such Section. The Company will give Buyer
reasonable notice of all written notices received by the Company pursuant to Section 262 of
the DGCL. Without the prior written consent of Buyer, the Company shall not voluntarily
make any payment with respect to, or settle or offer to settle, any such demand for payment.
From and after the Effective Time, no shareholder who has properly exercised and perfected
appraisal rights pursuant to Section 262 of the DGCL shall be entitled to vote his or her
 shares for any purpose or receive payment of dividends or other distributions with respect
to his or her shares (except dividends and distributions payable to shareholders of record
at a date which is prior to the Effective Time).

     (f) Each issued and outstanding share of common stock, $0.01 par value, of Merger Sub
shall be converted into and become one fully paid and non-assessable share of common stock,
$0.01 par value, of the Surviving Corporation.

     (g) Notwithstanding anything to the contrary herein, upon surrender of any certificate
representing fractional shares of Common Stock or Preferred Stock, the holder thereof will
be paid the cash value of such fraction, which shall be equal to such fraction multiplied by
the Per Share Merger Consideration or applicable Liquidation Preference.

     (h) If, between the date of this Agreement and the Effective Time, the outstanding
 shares of Common Stock, Preferred Stock and/or Options or the shares of Common Stock and/or
Preferred Stock issued or issuable upon exercise of Options (“Option Shares”) are
changed into a different number or class of shares by means of any stock split, division or
subdivision of shares, stock dividend, reverse stock split, consolidation of shares,
reclassification, recapitalization or other similar transaction, then the Merger
Consideration shall be appropriately adjusted; provided that, for the avoidance of doubt, no
adjustment shall be made under this Section 4.1(h) if the number of outstanding
 shares of Common Stock or Preferred Stock increases as a result of the exercise of Options.

                    Section 4.2. Merger Consideration Adjustments.

     (a) Estimated Balance Sheets and Estimated Working Capital Statement. The Stockholder
Representative shall deliver to Buyer and Merger Sub, no later than three (3) Business Days prior
to the Closing, its good faith Estimated Balance Sheet and the Estimated Working Capital Statement.

     (b) Closing Balance Sheets and Closing Working Capital Statement. Within ninety (90)
days following the Closing, the Company shall prepare and deliver to the Stockholder Representative
an unaudited balance sheet of the Company and its Subsidiaries, with all such Subsidiaries
accounted for on a consolidated basis and not on an equity or cost accounting basis as of the close
of business on the day prior to the Closing Date prior to any purchase accounting adjustments (the
“Closing Balance Sheet”), together with a statement (the “Closing Working Capital
Statement”) setting forth the Adjusted Working Capital as reflected on and derived from the
Closing Balance Sheet. The Closing Balance Sheet shall be prepared in accordance with GAAP using
the same applicable accounting methods, accounting practices,

15

 

assumptions, policies and
methodologies as were used in preparing the Company Financial Statements, except as set forth in
Section 4.2 of the Disclosure Schedule. Section 4.2 of the Disclosure Schedule
sets forth a calculation of how the Adjusted Working Capital was reflected on and derived from the
Company Financial Statements. Adjusted Working Capital set forth in the Closing Working Capital
Statement shall be derived from the Closing Balance Sheets using the same applicable accounting
methods, accounting practices, assumptions, policies and methodologies as were used in the
calculation set forth in Section 4.2 of the Disclosure Schedule. Buyer and the Stockholder
Representative shall provide to each other such data and information as the other Party may
reasonably request in connection with the preparation and review of the Closing Balance Sheet and
the Closing Working Capital Statement.

     (c) Notice of Disagreement. The Closing Working Capital Statement shall become final
and binding upon the Parties on the date (the “Final Settlement Date”) that is thirty (30)
days following receipt thereof by the Stockholder Representative unless the Stockholder
Representative gives written notice of its disagreement (“Notice of Disagreement”) to Buyer
prior to such date. Any Notice of Disagreement shall specify in reasonable detail the dollar
amount, nature and basis of any disagreement so asserted. If a Notice of Disagreement is received
by Buyer in a timely manner, then the Closing Working Capital Statement (as revised in accordance
with paragraph (d) below, if applicable) shall become final and binding on the Parties on, and the
Final Settlement Date shall be, the earlier of (i) the date upon which the Stockholder
Representative and Buyer agree in writing with respect to all matters specified in the Notice of
Disagreement and (ii) the date upon which the Final Working Capital Statement is issued by the
Working Capital Statement Arbitrator.

     (d) Final Working Capital Statement. During the first twenty (20) days following the
date upon which Buyer receives a Notice of Disagreement, the Stockholder Representative and Buyer
shall attempt in good faith to resolve in writing any differences that they may have with respect
to all matters specified in the Notice of Disagreement. If at the end of such twenty (20) day
period (or earlier by mutual agreement to arbitrate) Buyer and the Stockholder Representative have
not reached agreement on such matters, the matters that remain in dispute may be submitted to an
arbitrator (the “Working Capital Statement Arbitrator”) by either Party for review and
resolution. The Working Capital Statement Arbitrator shall be a nationally recognized independent
public accounting firm agreed upon by Buyer and the
Stockholder Representative in writing. The hearing date will be scheduled by the Working
Capital Statement Arbitrator as soon as reasonably practicable, and shall be conducted on a
confidential basis. Each Party shall, not later than seven (7) days prior to the hearing date set
by the Working Capital Statement Arbitrator, submit a brief (to include such Party’s calculations
with regard to amounts in dispute on the Closing Working Capital Statement) for settlement of any
amounts set forth in the Notice of Disagreement that remain in dispute. The Working Capital
Statement Arbitrator shall render a decision resolving the matters in dispute on the basis of the
standards set forth in this Section 4.2 (which decision shall include a written statement
of findings and conclusions) within ten (10) Business Days after the conclusion of the hearing,
unless the Parties reach agreement prior thereto and withdraw the dispute from arbitration. The
Working Capital Statement Arbitrator shall provide to the Parties explanations in writing of the
reasons for its decisions regarding the Adjusted Working Capital and shall issue the Final Working
Capital Statement reflecting such decisions. The decision of the

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Working Capital Statement
Arbitrator shall be final and binding on the Parties. The fees and expenses of the Working Capital
Statement Arbitrator pursuant to this Section 4.2(d) shall be borne equally by Buyer and
the Stockholder Representative. The fees and disbursements of the Company’s independent auditors
incurred in connection with the procedures performed with respect to the Closing Balance Sheets and
the Closing Working Capital Statement shall be borne by the Company and the fees and disbursements
of the Stockholder Representative’s independent auditors incurred in connection with their
preparation of the Notice of Disagreement shall be borne by the Stockholder Representative. As
used in this Agreement, the term “Final Working Capital Statement” shall mean the Closing
Working Capital Statement described in Section 4.2(b), as prepared by the Company and, if
applicable, as subsequently adjusted to reflect any subsequent written agreement between the
Parties with respect thereto, or if submitted to the Working Capital Statement Arbitrator, the
Closing Working Capital Statement issued by the Working Capital Statement Arbitrator.

                    (e) Final Settlement and Adjustment to Merger Consideration; Payment.

                         (i) (A) If the Adjustment Amount as derived from the Final Working Capital Statement is
less than the Estimated Adjustment Amount, the Preliminary Merger Consideration shall be
decreased by an amount, not to exceed the amount of the Escrow Funds, equal to such excess
of the Estimated Adjustment Amount over the Adjustment Amount as derived from Final Working
Capital Statement (“Shortfall Reduction”) and (B) if the Adjustment Amount as
derived from the Final Working Capital Statement is greater than the Estimated Adjustment
Amount, the Preliminary Merger Consideration shall be increased by an amount, not to exceed
an aggregate amount equal to the amount of the Escrow Funds, equal to such excess of the
Adjustment Amount as derived from the Final Working Capital Statement over the Estimated
Adjustment Amount (“Excess Payment”).

                         (ii) Any Shortfall Reduction or Excess Payment described in clause (A) or (B) in
Section 4.2(e)(i) shall be paid to Buyer or the Stockholder Representative, as the
case may be, not later than three (3) Business Days after the Final Settlement Date by wire
transfer of immediately available funds to an account or accounts specified by Buyer or the
Stockholder Representative, as applicable. The amount of any Shortfall Reduction or Excess
Payment to be made after the Closing Date pursuant to this Section 
4.2(e)(ii) shall bear interest from and including the Closing Date to but
excluding the date of payment to Buyer or the Stockholder Representative, as the case may
be, at a rate per annum equal to the prime rate as published in the Wall Street Journal,
Eastern Edition, in effect on the Closing Date. Such interest shall be payable at the same
time as the payment to which it relates and shall be calculated daily on the basis of a year
of 365 days and the actual number of days elapsed. Any payment to be made by the
Stockholder Representative pursuant to this Section 4.2(e) should be made first with
the Working Capital Escrow Funds and, to the extent such Working Capital Escrow Funds are
insufficient to make the required payments, then from the Indemnification Escrow Funds, in
each case in accordance with the Escrow Agreement. The Stockholder Representative shall in
turn pay to the other holders of shares of Common Stock and Options entitled to receive Per
Share Merger Consideration such appropriate portion of the Excess Payment pro rata in
accordance with such other holder’s Applicable Percentage.

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                    Section 4.3. Escrow Funds. At the Closing, Buyer shall pay $10,000,000 (the
“Working Capital Escrow Funds”) and $51,500,000 (the “Indemnification Escrow
Funds,” and together with the Working Capital Escrow Funds, the “Escrow Funds”) to an
escrow agent mutually agreeable to Buyer and the Company (the “Escrow Agent”) to be held
and delivered by the Escrow Agent in accordance with the terms and provisions of a certain escrow
agreement that shall be executed and delivered by Buyer, the Company, the Stockholder
Representative and the Escrow Agent at the Closing substantially in the form attached hereto as
Exhibit A (the “Escrow Agreement”). The Working Capital Escrow Funds and the
Indemnification Escrow Funds shall each be placed in a separate escrow account (the “Working
Capital Escrow Account” and the “Indemnification Escrow Account,” respectively, and
together, the “Escrow Accounts”). The Indemnification Escrow Funds shall be established
solely to secure (x) the indemnification obligations of the shareholders of the Company, as set
forth in Section 11.1 hereof, and (y) any Shortfall Reduction in excess of $10,000,000.
The Working Capital Escrow Funds shall be established solely to secure any Shortfall Reduction, as
set forth in Section 4.2(e)(i)(A) hereof. In the event that any payment is to be made out
of the Escrow Funds pursuant to this Agreement, each of the Parties agrees to take all actions
reasonably necessary to cause such payment to be made pursuant to the Escrow Agreement, including
by delivering written instructions to the Escrow Agent to make such payment.

                    Section 4.4. Stockholder Allocable Expenses. On or prior to the Closing Date, the
Stockholder Representative will provide to Buyer an estimate (which estimate may include such
reserves as the Stockholder Representative determines in good faith to be appropriate for any
Stockholder Allocable Expenses that are not then known and determinable) of all of the following
fees and expenses incurred or to be incurred by the Company or by the Stockholder Representative on
behalf of the Company and the holders of the Common Stock, Preferred Stock and/or Options in
connection with the preparation, negotiation and execution of this Agreement and the consummation
of the transactions contemplated hereby and the related process to sell the Company, including:
(a) the fees and disbursements of outside counsel to the Company and/or the Stockholder
Representative incurred in connection with such transactions, (b) the fees and expenses of any
other agents,
advisors, consultants and experts employed by the Company and/or the Stockholder
Representative in connection with such transactions, (c) if necessary, one-half of the fees and
expenses of the Working Capital Statement Arbitrator, (d) one half of any applicable Transfer Taxes
payable in connection with this Agreement, the transactions contemplated by this Agreement or the
documents giving effect to such transactions and (e) the expenses of the Stockholder Representative
incurred in such capacity (the “Stockholder Allocable Expenses”). In no event will Buyer,
the Company or the Stockholder Representative be responsible for payment of Stockholder Allocable
Expenses in excess of the cash amounts paid to the Stockholder Representative by Buyer under this
Section 4.4. All Stockholder Allocable Expenses shall be paid by the Stockholder
Representative. Immediately prior to the Effective Time of the Merger and concurrently with the
payment to the Stockholder Representative of the Preliminary Merger Consideration in accordance
with Section 4.5 hereof, Buyer shall pay to the Stockholder Representative by wire transfer
of immediately available funds an amount equal to the Stockholder Allocable Expenses.

                    Section 4.5. Payment.

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          (a) Immediately prior to the Effective Time, Buyer shall pay to the Stockholder
Representative, for the benefit of the holders of shares of Common Stock, Preferred Stock and
Options Holders entitled to amounts pursuant to Sections 4.1(b), 4.1(c) and
4.1(d), an amount in cash equal to the Preliminary Merger Consideration.

          (b) Promptly after the Effective Time, the Stockholder Representative shall send a notice and
a letter of transmittal in a form reasonably satisfactory to Buyer and the Company to each holder
of certificates formerly evidencing (i) shares of Common Stock or Preferred Stock (other than
certificates representing shares of Common Stock or Preferred Stock to be canceled pursuant to
Section 4.1(a) and certificates representing Dissenting Shares) and (ii) Options to be
cancelled pursuant to Section 4.1(d) (collectively, the “Certificates”) advising
holders of such Certificates of the effectiveness of the Merger and the procedure for surrendering
to the Stockholder Representative such Certificates for exchange into the Liquidation Preference,
the Per Share Merger Consideration or the Option Cancellation Payment, as the case may be, and that
delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery to the
Stockholder Representative of the Certificates and a duly executed letter of transmittal and any
other required documents of transfer. Each holder of the Certificates, upon surrender thereof to
the Stockholder Representative together with such letter of transmittal (duly executed) and any
other required documents of transfer, shall be entitled to receive in exchange therefor the
Liquidation Preference, the Per Share Merger Consideration or the Option Cancellation Payment, as
the case may be. Upon such surrender, the Stockholder Representative shall promptly deliver the
applicable consideration due pursuant to Sections 4.1(b), 4.1(c) and 4.1(d)
(less all applicable withholding and employment taxes) in accordance with the instructions set
forth in the related letter of transmittal, and the Certificates so surrendered shall promptly be
canceled. Until surrendered, the Certificates (other than those evidencing Dissenting Shares)
shall be deemed for all purposes to evidence only the right to receive the consideration due
pursuant to Sections 4.1(b), 4.1(c) and 4.1(d), or, in the case of
Dissenting Shares, the fair value of such Dissenting Shares in accordance with the DGCL. No
interest shall accrue or be paid on any cash payable
upon the surrender of the Certificates (other than Dissenting Shares to the extent required by
the DGCL).

          (c) If the consideration due pursuant to Sections 4.1(b), 4.1(c) and
4.1(d) is to be delivered to a person other than the person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the payment of such
consideration that the Certificates so surrendered shall be properly endorsed or accompanied by
appropriate powers and otherwise in proper form for transfer, that such transfer otherwise be
proper and that the person requesting such transfer pay to the Stockholder Representative any
transfer or other Taxes payable by reason of the foregoing or establish to the satisfaction of the
Stockholder Representative that such Taxes have been paid or are not required to be paid.

          (d) Unless required otherwise by applicable Law, any amount held by the Stockholder
Representative that remains undistributed to holders of the Certificates 180 days after the
Effective Time shall be delivered to, or as directed by, Buyer and any Certificate holder who has
not theretofore complied with the provisions of this Article IV shall thereafter look only
to the Surviving Corporation for payment of any consideration due pursuant to Sections
4.1(b), 4.1(c) and 4.1(d) to which he is entitled pursuant to this Article
IV. Neither Buyer nor the Stockholder Representative shall be liable to any such Certificate
holder for any amounts

19

 

delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law.

          (e) Each holder of Certificates, upon surrender thereof to the Stockholder Representative at
the Effective Time together with a letter of transmittal (duly executed) and any other required
documents of transfer, shall be entitled to receive, at such date or as promptly as practicable
thereafter, the consideration due pursuant to Sections 4.1(b), 4.1(c) and
4.1(d) (less all applicable withholding and employment taxes).

          (f) Each of Buyer and the Surviving Corporation shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of shares of Common
Stock, Preferred Stock and Options such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any other applicable state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving Corporation or Buyer,
as the case may be, such withheld amounts (i) shall be remitted by Buyer or the Surviving
Corporation, as the case may be, to the applicable Governmental Entity and (ii) shall be treated
for all purposes of this Agreement as having been paid to the applicable holders of the shares of
Common Stock, Preferred Stock and Options in respect of which such deduction and withholding was
made by the Surviving Corporation or Buyer, as the case may be.

                    Section 4.6. No Further Rights. From and after the Effective Time, holders of
Certificates theretofore evidencing shares of Common Stock, Preferred Stock or Options shall cease
to have any rights as shareholders of the Company, except as provided herein or by applicable Law.
All consideration paid pursuant to Section 4.5 upon the surrender of Certificates in
accordance with the terms
hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the
Common Stock, Preferred Stock, Options and Option Shares.

                    Section 4.7. Closing of the Company’s Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of Common Stock,
Preferred Stock, Options and Option Shares shall be made thereafter. If after the Effective Time
Certificates are presented to Buyer or the Surviving Corporation, they shall be canceled and
exchanged as provided in this Article IV.

                    Section 4.8. Closing Deliveries.

          (a) At the Closing, the Company shall deliver or cause to be delivered to Buyer the following:

          (i) resignations of the directors of each member of the Company Group from his or her
position as director effective as of the Closing;

          (ii) the certificates referred to in Sections 9.3(a) and 9.3(b);

          (iii) a properly executed statement that the Company is not a “United States real
property holding corporation” as defined in Section 897 of the Code in compliance with
Treas. Reg. Sections 1.897-2(h) and 1.1445-2(c)(3);

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          (iv) evidence of termination of the Securities Holders Agreement, dated as of December
17, 2004, among the Company’s shareholders and the Company;

          (v) evidence of termination of the Management Services Agreement, dated as of December
17, 2004 among One Equity Partners LLC, the Company, WestCom Acquisition Corp. and WestCom
Corporation;

          (vi) a copy of the Escrow Agreement duly executed by the Company and the Stockholder
Representative; and

          (vii) all other documents required to be delivered by the Company or the Stockholder
Representative to Buyer at the Closing pursuant to this Agreement.

          (b) At the Closing, Buyer shall deliver or cause to be delivered the following:

          (i) the Preliminary Merger Consideration in immediately available funds to the
Stockholder Representative as provided in Section 4.5;

          (ii) the Stockholder Allocable Expenses in immediately available funds to the
Stockholder Representative as provided in Section 4.4;

          (iii) the certificates referred to in Sections 9.2(a) and 9.2(b);

          (iv) a copy of the Escrow Agreement duly executed by Buyer and the Escrow Funds in
immediately available funds to the Escrow Agent; and

          (v) all other documents required to be delivered by Buyer and Merger Sub to the Company
and Stockholder Representative at the Closing pursuant to this Agreement.

                    Section 4.9. Transfer Taxes. All applicable Transfer Taxes payable in connection with
this Agreement, the transactions contemplated by this Agreement or the documents giving effect to
such transactions shall be borne and will be paid 50% by Buyer and 50% by the Stockholder
Representative (as Stockholder Allocable Expenses in accordance with Section 4.4).

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

REGARDING THE COMPANY GROUP

          The Company represents and warrants to Buyer, except as set forth in the Disclosure Schedule,
as follows:

                    Section 5.1. Organization of the Company and the Company Group. The Company is a
corporation, duly organized, validly existing and in good standing under the laws of Delaware, and
the Company has all requisite corporate power and authority to carry on its business as it is
currently conducted and to own, lease, license, occupy rate its properties where such
properties are now owned, leased, licensed, occupied or operated. Each other member of the Company
Group (a) is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and (b) has all requisite organizational power and authority to
carry on its respective business as it is currently conducted and to own, lease, license, occupy
and operate its

21

 

properties where such properties are now owned, leased, licensed, occupied or
operated, except in all cases where any failures of the representations in this sentence to be true
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company Group. Each member of the Company Group is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such qualification or license
necessary, except in such jurisdictions where the failure to be so duly qualified or licensed or in
good standing would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company Group.

                    Section 5.2. Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the other Transaction Documents to which it is
or will be party and to perform its obligations hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and the other Transaction Documents to which the
Company is or
will be a Party and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Company’s Board of Directors and the Company shall, through its Board
of Directors, recommend to the Company’s shareholders that such shareholders vote in favor of this
Agreement. Subject only to the adoption of this Agreement of the holders of a majority of the
Shares, no other corporate or shareholder proceedings on the part of the Company are necessary to
authorize this Agreement, such Transaction Documents or the consummation of the transactions
contemplated hereby or thereby. This Agreement has been duly and validly executed and delivered by
the Company and (assuming this Agreement constitutes a legal, valid and binding obligation of Buyer
and Merger Sub) constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the Remedies Exception.

                    Section 5.3. Non-contravention. Neither the execution and delivery of this Agreement
or any Transaction Document to which it is or will be party by the Company, nor the consummation of
the transactions contemplated hereby or thereby will (a) conflict with any provision of the
Articles of Incorporation or Bylaws of the Company, (b) violate or result in a breach of or give
rise to any right of termination, modification or acceleration under, or result in the loss of any
material right, under any material Contract, except as provided in Section 5.3 of the
Disclosure Schedule, (c) subject to the Consents of Governmental Authorities described in
Section 5.6, violate any Law to which any member of the Company Group or any of their
assets is subject or (d) other than Permitted Liens, create or impose any Lien on the assets of the
Company Group, except, in the case of clauses (b) and (c), for such violations or breaches which
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company Group.

                    Section 5.4. Capitalization. Section 5.4 of the Disclosure Schedule sets
forth a true, correct and complete list of (a) all the outstanding Common Stock, including the
names of the holders thereof, (b) all the outstanding Preferred Stock, including the names of the
holders thereof, (c) all Options or warrants to purchase Common Stock, including the names of

22

 

the
holders thereof and, to the extent applicable, the exercise price or purchase price thereof, the
number of Common Stock subject thereto, the governing agreement or arrangement with respect thereto
and the expiration date thereof and (d) all outstanding options or warrants to purchase Preferred
Stock, including the names of the holders thereof and, to the extent applicable, the exercise price
or purchase price thereof, the number of Preferred Stock subject thereto, the governing agreement
or arrangement with respect thereto and the expiration date thereof. All of the Shares are duly
authorized and validly issued and outstanding and are fully paid and non-assessable and were not
issued in violation of any preemptive rights. Other than the Shares and Options set forth on
Section 5.4 of the Disclosure Schedule, there are no outstanding voting or non-voting
securities of the Company, stock appreciation rights, phantom stock units, performance units, or
similar equity-based rights with respect to the Company, securities of the Company convertible into
or exchangeable for voting or non-voting securities, or options, warrants, or rights exercisable or
exchangeable for or convertible into any other voting or non-voting securities of the Company, and
no authorization therefor has been given. Other than the Shares, no shares of capital stock of
the Company are or may become required to be issued by reason of any options, warrants, rights
to subscribe to, calls or commitments of any character, relating to, or securities or rights
convertible into or exchangeable or exercisable for, shares of any capital stock of the Company,
and there are no contracts, commitments, understandings or arrangements by which the Company is or
may be bound to issue, redeem, purchase or sell additional shares of capital stock of the Company,
securities convertible into or exchangeable for any capital stock of the Company or other
securities of the Company. There are no outstanding bonds, debentures, notes or other indebtedness
having the right to vote on any matters which shareholders of any member of the Company Group may
vote or any other limitations on such voting rights.

                    Section 5.5. Subsidiaries of the Company. Section 5.5 of the Disclosure
Schedule sets forth for each of the Company’s Subsidiaries (a) its name and jurisdiction of
organization, (b) its form of organization and (c) the capital stock, membership interests or units
held by the Company, directly or indirectly, in such Subsidiary. The Company is the direct or
indirect beneficial and record owner of all of the issued and outstanding shares of capital stock
or other interests in the Company’s Subsidiaries, free and clear of all Liens, except (a) as may be
created by this Agreement, (b) as may be expressly set forth in any certificate of formation,
limited liability company agreement, limited partnership agreement, Certificate of Incorporation or
Bylaws, or similar governing documents of such Subsidiary of the Company, copies of which have been
made available to Buyer prior to the date hereof, (c) for any restrictions on sales of securities
under the Securities Act or other applicable securities Laws, (d) for Permitted Liens and as set
forth in Section 5.5 of the Disclosure Schedule. There are no outstanding warrants, rights
to subscribe to, calls or commitments of any character, relating to, or securities or rights
convertible into or exchangeable or exercisable for, shares of any capital stock of the Company’s
Subsidiaries, or other agreements or commitments obligating any member of the Company Group to
issue, transfer, sell, purchase or redeem any securities of any of the Company’s Subsidiaries. None
of the Company Subsidiaries own any Common Stock or Preferred Stock. Except for its Subsidiaries,
the Company does not directly or indirectly own any interest in any other corporation, partnership,
joint venture or other business association or entity. The Company has prior to the date hereof
provided to Buyer a complete and correct copy of the organizational documents for each member of
the Company Group as currently in effect.

23

 

                    Section 5.6. Government Authorizations. Except for (a) compliance with the HSR Act
and the regulations thereunder or any other antitrust or merger notification or control Laws, (b)
compliance with any applicable requirements of the Securities Act or, any other applicable
securities Laws, (c) the Required Telecommunications Approvals and (d) Consents that, if not
obtained or made would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company Group, no Consent of, with or to any Governmental Authority
is required to be obtained or made by the Company in connection with the execution and delivery of
this Agreement and the other Transaction Documents to which it is or will be party or the
consummation of the transactions contemplated hereby and thereby, other than any such requirement
that is applicable as a result of the specific legal or regulatory status of Buyer, Merger Sub or
any of their Affiliates or as a result of any other facts that specifically relate to the
business or activities in which Buyer, Merger Sub or any of their Affiliates is or proposes to
be engaged, other than the business conducted by the Company Group as of the date hereof.

                    Section 5.7. Financial Statements.

     (a) Set forth in Section 5.7(a) of the Disclosure Schedule are (i) the audited
consolidated balance sheet of the OpCo Group as of December 31, 2005 (the “Balance Sheet”)
and the related consolidated statements of income, changes in shareholders equity and cash flows
for the fiscal year then ended; (ii) the unaudited consolidated balance sheet of the OpCo Group as
of December 31, 2006 and the related consolidated statements of income, changes in shareholders
equity and cash flows for the fiscal year then ended; and (iii) the unaudited consolidated balance
sheet of the Company Group as of December 31, 2005 and the related consolidated statements of
income, changes in shareholders equity and cash flows for the fiscal year then ended and the
unaudited consolidated balance sheet of the Company Group as of December 31, 2006 and the related
consolidated statements of income for the year then ended (collectively, the “Company
Financial Statements”). Except as set forth therein, the Company Financial Statements present
fairly, in all material respects, respectively, the consolidated financial position, statements of
operations and cash flows of the OpCo Group or Company Group, as applicable, at the respective
dates set forth therein and for the respective periods covered thereby, and were prepared in
accordance with GAAP, consistently applied, except as otherwise noted therein. The Company has
provided or made available to Buyer copies of all material documentation relating to the internal
controls or other accounting practices of the Company Group.

     (b) Except as set forth in the Balance Sheet or in Section 5.7(b) of the Disclosure
Schedule, no member of the Company Group has any Liabilities, except for Liabilities incurred since
the date of the Balance Sheet in the ordinary course of business consistent with past practice
which would not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

     (c) The 2006 Audited Financials shall, when delivered to Buyer and Merger Sub, present fairly,
in all material respects, the consolidated financial condition, statements of operations, cash
flows and equity of the OpCo Group in accordance with GAAP consistently applied, at December 31,
2006 and for the year then ended.

24

 

     (d) The Company is in possession of, and, to the extent required, has reflected in its books
and records, all information (financial or otherwise) necessary for the preparation and completion
of the Company Group Audits.

                    Section 5.8. Absence of Certain Changes.

     (a) Since the Balance Sheet Date, there has not been any change, condition, circumstance,
event or development that has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company Group; and

     (b) Since the Balance Sheet Date and through the date hereof, except as expressly contemplated
by this Agreement, each member of the Company Group has conducted its business only in the ordinary
course consistent with past practice, and there has not been action taken by the Company Group that
would have been prohibited without Buyer consent by subsections (b)(ii), (b)(iii),
(b)(iv), (b)(vi), (b)(vii), (b)(viii)(A), (b)(viii)(C) or
(b)(x) of Section 7.1 if such action had been taken by any member of the Company
Group after the date hereof.

                    Section 5.9. Tax Matters. Except as set forth in Section 5.9 of the
Disclosure Schedule or as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company Group:

     (a) Each member of the Company Group has (i) filed, or caused to be filed, all Tax Returns
that it was required to file on or before the date hereof and (ii) paid or caused to be paid all
Taxes due and payable. All such Tax Returns were correct and complete in all respects. There are
no Liens for Taxes on any of the assets of any member of the Company Group other than Permitted
Liens.

     (b) As of the date of this Agreement, there is no outstanding dispute or claim concerning any
Liability for Taxes of any member of the Company Group that has been claimed or raised by any
taxing authority in writing. No Tax Return of any member of the Company Group is currently the
subject of an audit by any taxing authority and no written notice of such an audit has been
received by any such entity.

     (c) Neither the Company nor any of its Subsidiaries is participating or has participated in a
listed transaction within the meaning of Treasury Regulation Section 1.6011-4.

     (d) No member of the Company Group has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or deficiency which extension
is still in effect.

     (e) No member of the Company Group has within the past two (2) years been a party to a
transaction intended to qualify under Section 355 of the Code or under so much of Section 356 of
the Code as relates to Section 355 of the Code.

     (f) No closing agreement pursuant to Section 7121 of the Code (or any similar provision of any
state, local or foreign law) has been entered into by or with respect to any member of the Company
Group.

25

 

     (g) All Taxes required to be withheld, collected or deposited by or with respect to any member
of the Company Group have been timely withheld, collected or deposited as the case may be, and to
the extent required, have been paid to the relevant taxing authority.

     (h) No member of the Company Group is a party to, or bound by, or has any obligation under,
any Tax allocation, Tax indemnity or Tax sharing agreement or similar contract or arrangement or
any agreement (other than between or among members of the Company Group) that obligates it to make
any payment computed by reference to the Taxes, taxable
income or taxable losses of any other Person (other than pursuant to customary commercial
Contracts not primarily related to Taxes and entered into in the ordinary course of business).

     (i) No member of the Company Group will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of accounting for a taxable
period ending on or prior to the Closing Date, (ii) intercompany transactions or any excess loss
account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or
similar provision of state or local income Tax law), (iii) installment sale or open transaction
disposition made on or prior to the Closing Date or (iv) prepaid amount received on or prior to the
Closing Date.

     (j) No member of the Company Group is liable for the Taxes of any other Person under Treasury
Regulation Section 1.1502-6 (or similar provision of any state, local or foreign law) (other than
members of any combined, consolidated or unitary group the parent of which is the Company) as a
transferee or successor, by Contract or otherwise.

     (k) Each member of the Company Group has complete and accurate financial data to support
Voluntary Disclosure Agreement proceedings in the appropriate United States state and local
jurisdictions for which any member of the Company Group is subject to sales and use Taxes, and
Taxes of the type, or comparable to the type, referred to in the Olivier Report. To the Company’s
Knowledge, no member of the Company Group is prohibited in any United States state or local
jurisdiction from initiating Voluntary Disclosure Agreement proceedings.

     (l) The representations and warranties made in this Section 5.9 (other than
Section 5.9(h), Section 5.9(f) and Section 5.9(i)) refer only to the past
activities of the Company Group and are not intended to serve as a representation to, or a
guarantee of, nor can they be relied upon with respect to Taxes attributable to any Tax periods (or
portions thereof) beginning after the Closing Date.

                    Section 5.10. Property.

     (a) No member of the Company Group owns any real property.

     (b) Section 5.10(b) of the Disclosure Schedule lists the street address of each parcel
of real property currently leased, subleased, licensed or occupied by any member of the Company
Group (the “Leased Real Property”) and the identity of the lessor, lessee and current
occupant (if different from lessee) of each such parcel of Leased Real Property. Except as
described in Section 5.10(b) of the Disclosure Schedule, (i) true and complete copies of
the leases, subleases, licenses or occupancy agreements in effect on the date hereof (together with
all

26

 

amendments, modifications or supplements thereto collectively, the “Leases” and each
individually the “Lease”) relating to the Leased Real Property have been made available to
Buyer and Merger Sub and (ii) there has not been any assignment entered into by any member of the
Company Group in respect of the Leases relating to the Leased Real Property. With respect to each
Lease, except as set forth in Section 5.10(b) of the Disclosure Schedule, each Lease is a
valid and subsisting agreement of the member of the Company Group party thereto in full force
and effect and is enforceable against the member of the Company Group party thereto and, to
the Company’s Knowledge, is the legal, valid and binding agreement of the other parties thereto,
subject to the Remedies Exception. The members of the Company Group have good and valid title to
the leasehold estate in the Leased Real Property for the full terms of the Leases, free and clear
of any Liens, other than the Permitted Liens.

     (c) To the Company’s Knowledge, (i) no member of the Company Group is in default in any
material respect under any of the Leases and (ii) no lessor is in default in any material respect
under any of the Leases and no member of the Company Group or a lessor has received notice from any
other party to such Leases of the termination of the Leases thereof. Neither the execution,
delivery or performance of this Agreement by the Company does or will conflict with or result in a
breach of or default under any Lease referred to in Section 5.10(b) of the Disclosure
Schedule.

                    Section 5.11. Intellectual Property.

     (a) Section 5.11(a) of the Disclosure Schedule sets out all Intellectual Property
registrations and applications and all material unregistered trademarks, service marks, trade names
and copyrights owned or exclusively licensed by any member of the Company Group. Except as would
not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company Group, (i) a member of the Company Group owns, or is licensing or otherwise possesses
sufficient legally enforceable rights to use, all Intellectual Property that is necessary for or
currently used by the Company Group in the operation of the Business (“Company IP”) free of
all Liens other than Permitted Liens, (ii) all registered Intellectual Property owned by a member
of the Company Group has not expired or been abandoned, and the Company has not received any
written notice challenging the validity or enforceability of such Intellectual Property, (iii) the
conduct of the Company Group’s business and operations do not infringe or violate the Intellectual
Property of third parties and (iv) no Actions are pending or, to the Company’s Knowledge,
threatened (including receipt of cease and desist letters or requests for a license) against any
member of the Company Group by any Person alleging that such member of the Company Group has
infringed or violated the Intellectual Property rights of any Person.

     (b) To the Company’s Knowledge, except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company Group, no third party is
infringing upon or violating any Intellectual Property owned by any member of the Company Group.

     (c) Except as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company Group, the Company and its Subsidiaries (i) take reasonable
actions to protect and maintain (A) the security and integrity of their Software

27

 

and (B) the
Intellectual Property that they own; and (ii) to the Company’s Knowledge, require all Persons who
contribute to their material proprietary Intellectual Property to assign to the Company or one of
its Subsidiaries all of such Person’s rights therein.

     (d) The Software and related systems of the Company Group which relate to material products
and services provided by the Company Group are fully operational and perform in conformance with
their intended purpose, in each case, in all material respects, and accompanying documentation are
free of material bugs, defects, errors, viruses or other corruptants.

                    Section 5.12. Environmental Matters. Notwithstanding anything else in this Agreement
to the contrary, this Section 5.12 shall constitute the sole representations and warranties
of the Company with respect to environmental matters. Except as would not reasonably be expected
to be, individually or in the aggregate, material to the Company Group:

     (a) no member of the Company Group is or during the previous three years has been in
violation of any Environmental Law applicable to such member of the Company Group and no
member of the Company Group has received any written notice from any Governmental Authority
or any other Person, which remains uncured or unresolved, alleging that any member of the
Company Group is or was in violation of any Environmental Law;

     (b) no member of the Company Group is (i) subject to any outstanding Action, consent
decree, compliance order or administrative order issued by any Governmental Authority
pursuant to or relating to any Environmental Law and to the Company’s Knowledge, no such
Action, consent decree, compliance order or administrative order is threatened or (ii) in
receipt of any written notice, complaint or claim alleging, asserting or seeking to impose
any Liability under or relating to any Environmental Law of or against any member of the
Company Group and to the Company’s Knowledge, no such notice, complaint or claim is
threatened;

     (c) to the Company’s Knowledge, no Hazardous Material has been released or is
threatened to be released into soil or groundwater at any Leased Real Property or from any
Leased Real Property into soil or groundwater at any other location, that would reasonably
be expected to result in any Liability under or relating to any Environmental Law to any
member of the Company Group;

     (d) to the Company’s Knowledge, no member of the Company Group has released, or
arranged for the disposal of, any Hazardous Material at any location in a manner that would
reasonably be expected to result in Liability under or relating to any Environmental Law;

     (e) to the Company’s Knowledge, Hazardous Materials are not present at any property or
facility currently or formerly owned, leased or operated by any member of the Company Group
in amount or condition that would reasonably be expected to result in Liability under or
relating to any Environmental Law; and

28

 

     (f) no member of the Company Group has assumed, retained, or provided indemnity against
any Liability under or relating to any Environmental Laws.

     Section 5.13. Contracts.

     (a) Section 5.13(a) of the Disclosure Schedule sets forth a true and complete list of
the following Contracts (or a description thereof, in the case of oral Contracts) to which a member
of the Company Group is a party or by which any of them or their assets are bound and which are in
effect on the date hereof, other than any lease agreements for Leased Real Property or Company
Plans (which are addressed in Sections 5.10 and 5.16, respectively):

     (i) any Contract that is or is reasonably likely to require expenditures (including
capital expenditures) or payments to or from a member of the Company Group in excess of
$500,000 in any calendar year, other than those that can be terminated without premium or
penalty of less than $150,000 by such member of the Company Group upon not more than ninety
(90) days’ notice;

     (ii) any Contract under which a member of the Company Group is obligated to sell or
lease as lessor real or personal property having a value in excess of $150,000 in any single
given annual period;

     (iii) any Contract that contains a covenant not to compete applicable to a member of
the Company Group or any of its Affiliates by virtue of such Affiliation or that binds a
member of the Company Group to any exclusive business arrangements or licenses restricting
the operation of such member of the Company Group’s business;

     (iv) any Contract granting a customer of the Company Group “most favored nation” or
similar terms (whether in respect of pricing or otherwise);

     (v) any Contract under which a member of the Company Group has (A) created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) (1) indebtedness for
borrowed money or (2) other Indebtedness which, individually or in the aggregate exceeds
$100,000, (B) granted a Lien on its assets, whether tangible or intangible, to secure such
indebtedness for borrowed money or (C) extended credit to any Person, in each case of
clauses (A), (B) or (C), in an amount in excess of $100,000;

     (vi) any Affiliate Contract;

     (vii) any collective bargaining, labor or similar Contracts;

     (viii) any Contract pursuant to which a member of the Company Group licenses (as
licensee or licensor) any material Intellectual Property (other than commercially available
off-the-shelf software with a replacement value of less than $100,000 but including all
“open source” or similar third party licenses pursuant to which material Software products
or services of the Company or its Subsidiaries are licensed or distributed) or other
contract or agreement concerning material Company IP;

29

 

     (ix) any stock purchase, asset purchase and other acquisition or divestiture agreements
relating to the acquisition, lease or disposition by a member of the
Company Group of assets (other than in the ordinary course of business), properties or
any capital stock or other equity interests or other securities of any Person (A) providing
for any material indemnification, guaranty or surety obligation of a member of the Company
Group or (B) with a fair market value in excess of $100,000 under which there are continuing
obligations;

     (x) any Contract with the 15 largest customers and 15 largest suppliers of the Company
Group for the year ended December 31, 2006 listed in Section 5.21 of the Disclosure
Schedule;

     (xi) any stockholders’ or similar Contracts, or Contract relating to the establishment,
management or control of any joint venture or strategic alliance; and

     (xii) any Contract (A) the termination of which would reasonably be expected to have a
Material Adverse Effect on the Company Group or (B) that is material to the ongoing business
of the Company Group.

All contracts and agreements set forth in Section 5.13(a) of the Disclosure Schedule are
referred to herein as “Material Contracts.”

     (b) Except as set forth in Section 5.13(b) of the Disclosure Schedule, (i) each
Material Contract is in full force and effect and is the legal, valid and binding obligation of a
member of the Company Group thereof which is a party to such Material Contract, and is enforceable
against the member of the Company Group party thereto in accordance with its terms, subject to the
Remedies Exception and, to the Company’s Knowledge, is the legal, valid and binding obligation of
the other parties thereto (the “Other Parties”), subject to the Remedies Exception and
(ii) no member of the Company Group or, to the Company’s Knowledge, any of the Other Parties to any
Material Contract is in breach, violation or default, and, to the Company’s Knowledge, no event has
occurred which with notice or lapse of time or both would constitute a breach, violation or default
by any such party, or permit termination, modification or acceleration by the Other Parties, under
such Material Contract, except for breaches, violations or defaults which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on the Company Group.
No member of the Company Group has waived any right it may have under any Material Contract,
except for such waivers that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

     Section 5.14. Insurance. Section 5.14 of the Disclosure Schedule sets forth a
list of all material insurance policies providing insurance coverage for the Company Group
(including their assets, employees, directors and officers). Each of such policies have been
issued in favor of the Company Group. Each of such policies is valid and binding and in full force
and effect and no premiums due thereunder have not been paid and no member of the Company Group is
in default thereunder in any material respect. Except as set forth in Section 5.14 of the
Disclosure Schedule, (a) no member of the Company Group has received any notice from any insurer
under any insurance policy applicable to such member disclaiming coverage, reserving rights with
respect to a particular claim or such policy in general or

30

 

canceling or materially amending any
such policy and (b) there is no Action or other matter currently pending in respect of which a
member of the Company Group has received such a notice.

                    Section 5.15. Litigation. Except as set forth in Section 5.15 of the
Disclosure Schedule, (a) there are no Actions pending or outstanding or, to the Company’s
Knowledge, threatened in law or in equity or before any Governmental Authority by or against any
member of the Company Group or any Person that any member of the Company Group has agreed to defend
or indemnify in respect thereof or by which any of their properties are bound which (i) challenges
the validity or enforceability of this Agreement or seeks to enjoin or prohibit the consummation of
the transactions contemplated hereby or (ii) are reasonably likely to involve, individually or in
the aggregate, an award of injunctive relief or damages in excess of $250,000 or expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company Group and (b) there are
no pending or outstanding or, to the Company’s Knowledge, threatened injunctions, judgments,
orders, decrees, rulings, settlements, stipulations or charges to which any member of the Company
Group is a party or by which it or its properties is bound, or with any Governmental Authority that
is material, individually or in the aggregate, to the Company Group.

                    Section 5.16. Employee Matters.

     (a) Section 5.16(a) of the Disclosure Schedule contains a complete and accurate list
of all material, written “employee benefit plans,” within the meaning of section 3(3) of ERISA,
maintained by any member of the Company Group as of the date hereof, and all material written
bonus, incentive or deferred compensation, pension, retirement, profit-sharing, savings, stock
option or other equity-based, severance, and other material, written fringe benefit plans and
arrangements maintained by any member of the Company Group as of the date hereof (collectively, the
“Company Plans”).

     (b) Each Company Plan has been operated and administered in accordance with its terms and with
applicable Law, including ERISA and the Code, except for any failure to so operate and administer
any Company Plan that would not, individually or in the aggregate, have a Material Adverse Effect
on the Company Group.

     (c) Each Company Plan which is an “employee pension benefit plan” within the meaning of
section 3(2) of ERISA and which is intended to be qualified under section 401(a) of the Code has,
to the extent applicable, received a determination or opinion letter from the Internal Revenue
Service, and, to the Company’s Knowledge, nothing has occurred whether by action or failure to act,
that would reasonably be expected to cause the loss of such qualification.

     (d) There is no pending or, to the Company’s Knowledge, threatened legal action, suit or claim
relating to the Company Plans (other than routine claims for benefits) that would, individually or
in the aggregate, have a Material Adverse Effect on the Company Group. No event has occurred and,
except as would not, individually or in the aggregate, have a Material Adverse Effect, no condition
exists that would subject the Company or its Subsidiaries, by
reason of their affiliation with any member of their “Controlled Group” (defined as
any organization which is a member of a controlled group of organizations within the meaning of

31

 

Sections 414(b), (c), (m) or (o) of the Code), to any tax, fine, lien, penalty or other liability
imposed by ERISA, the Code or other applicable laws, rules and regulations.

     (e) No Company Plan is subject to section 302 of ERISA or section 412 of the Code. No Company
Plan is a “multiemployer plan” within the meaning of section 3(37) of ERISA, and no member of the
Company Group has at any time sponsored or contributed to, or has or had any liability or
obligation in respect of, any multiemployer plan.

     (f) With respect to each Company Plan, true and complete copies of the following documents
have been provided or made available to Buyer and Merger Sub, to the extent applicable: (i) the
most recent plan documents and all amendments thereto; (ii) the most recent trust instruments and
insurance contracts; (iii) for the three most recent years, Forms 5500 filed with the Internal
Revenue Service, audited financial statements and actuarial valuation reports; (iv) the most recent
summary plan description; (v) the most recent determination or opinion letter issued by the
Internal Revenue Service; and (vi) a summary of any proposed amendments or changes anticipated to
be made to such Company Plan at any time within the twelve months immediately following the date
hereof that has been communicated in writing to any employees of the Company Group. Except as may
be necessary or appropriate to comply with applicable Law, there is no present intention that such
Company Plan be materially amended, suspended or terminated, or otherwise modified to change
benefits (or the levels thereof) under such Company Plan at any time within the twelve months
immediately following the date hereof.

     (g) No Company Plan exists that, as a result of the execution of this Agreement, shareholder
approval of this Agreement, or the transactions contemplated by this Agreement (whether alone or in
connection with any subsequent event(s)), will entitle any Company Employee to: (i) severance pay
or any increase in severance pay upon any termination of employment after the date of this
Agreement; (ii) accelerate the time of payment or vesting or result in any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under, increase the amount
payable or result in any other material obligation pursuant to, any of the Company Plans; (iii)
limit or restrict the right of the Company to merge, amend or terminate any of the Company Plans;
or (iv) payments under any of the Company Plans which would not be deductible under Section 280G of
the Code. For purposes of this Section 5.16(g), “Company Plan” shall be deemed to
include any transaction, retention or similar bonus established by the Company Group in connection
with the Merger and the transactions contemplated hereby.

     (h) Section 5.16(h) of the Disclosure Schedule sets forth a list of each Company Plan
that is maintained outside the jurisdiction of the United States, or covers any employee residing
or working outside the United States (any such Company Plan set forth in Section 5.16(h) of
the Disclosure Schedule, “Foreign Benefit Plans”). With respect to any Foreign Benefit
Plans: (i) all Foreign Benefit Plans have been established, maintained and administered in
material compliance with their terms and all applicable statutes, laws, ordinances, rules, orders,
decrees, judgments, writs and regulations of any controlling governmental authority or
instrumentality; (ii) all Foreign Benefit Plans that are required by
applicable Law or applicable accounting practice to be funded or book reserved are funded or
book reserved, as applicable, consistent with such Law or accounting practice; and (iii) no

32

 

material liability or obligation of the Company or its Subsidiaries exists with respect to such
Foreign Benefit Plans that has not been disclosed in Section 5.16(h) of the Disclosure
Schedule.

                    Section 5.17. Labor Matters.

     (a) No member of the Company Group is or has ever been a party to or is bound by any
collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. To the Company’s Knowledge, there
are no labor unions or other organizations purporting or attempting to represent any employees
employed by any member of the Company Group.

     (b) To the Company’s Knowledge, individuals who are performing consulting or other services
for the Company Group are or were correctly classified by the Company Group as either “independent
contractors” or “employees” as the case may be.

     (c) (i) There is no material labor strike, labor dispute, or concerted work stoppage pending
or, to the Company’s Knowledge, threatened and (ii) except as would not reasonably be expected to
be material to the Company Group, since January 1, 2005, (A) no member of the Company Group has
experienced any labor strike or material concerted labor dispute and (B) each member of the Company
Group has complied with all applicable labor Laws in connection with the employment of its
employees.

                    Section 5.18. Legal Compliance. No member of the Company Group is, or since January
1, 2004 has been, in violation of any Law applicable to such Person or its business, assets or
operations, except for violations and failures to comply that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company Group.

                    Section 5.19. Brokers’ Fees. No member of the Company Group has entered into any
Contract (written or oral, express or implied) with any Person which may result in the obligation
of Buyer, Merger Sub or any of their Affiliates to pay any fees or commissions to any broker or
finder as a result of the execution and delivery of this Agreement or the consummation of the
transactions contemplated by this Agreement. Except as set forth in Section 5.19 of the
Disclosure Schedule, no Person has acted, directly or indirectly, as a broker, finder or financial
advisor for the Company Group in connection with the transactions contemplated by this Agreement,
and no Person is entitled to any fee or commission or like payment in respect thereof.

                    Section 5.20. Permits. Except as set forth in Section 5.20 of the Disclosure
Schedule, the Company Group has all Permits required to own and operate its business as currently
conducted and
operated, except for such Permits the failure of which to have or obtain would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company
Group. Each such Permit is valid and in full force and effect and the applicable member of the
Company Group is in compliance in all respects with respect thereto, except for such failure to be
valid or in full force and effect or such non-compliance as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company Group. There are
no Actions pending or, to the

33

 

Company’s Knowledge, threatened which might reasonably be expected to
result in the revocation or termination of any material Permit of the Company Group.

                    Section 5.21. Customers and Suppliers. Section 5.21 of the Disclosure
Schedule lists the 15 largest customers and 15 largest suppliers of the Company Group, as measured
by revenue, in the case of customers and expense, in the case of suppliers, for the year ended
December 31, 2006. As of the date hereof, none of such customers or suppliers has given written
notice, or to the Knowledge of the Company oral notice, that, and the Company has no Knowledge
that, any such customer or suppliers intends to materially reduce its purchases or sales (as the
case may be) of goods or services from or to the Company Group.

                    Section 5.22. Antitakeover Statutes. The Company has taken all action necessary to
exempt the Merger, this Agreement and the transactions contemplated hereby from Section 203 of the
DGCL, and, accordingly, neither such Section nor any other antitakeover or similar statute or
regulation applies or purports to apply to any such transactions.

                    Section 5.23. No Additional Representations and Warranties. Except for the Company’s
representations and warranties provided in this Article V or in any certificate or other
writing delivered pursuant hereto, none of the Company or any of its Affiliates, or any of their
respective directors, officers, employees, stockholders, partners, members or representatives has
made, or is making, any representation or warranty whatsoever to Buyer, Merger Sub or any of their
Affiliates with respect to the Company Group.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES REGARDING BUYER AND MERGER SUB

     Buyer and Merger Sub jointly and severally represent and warrant to the Company as follows:

                    Section 6.1. Organization. Each of Buyer and Merger Sub is duly organized, validly
existing and in good standing under the laws of Delaware. Buyer has all requisite power and
authority to carry on its business as it is currently conducted and to own, lease and operate its
properties where such properties are now owned, leased or operated. Each of Buyer and Merger Sub
is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it makes such
qualification or license necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed or in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on Buyer or Merger Sub.

                    Section 6.2. Authorization. Each of Buyer and Merger Sub has all requisite power and
authority to execute and deliver this Agreement and the other Transaction Documents to which it is
or will be party and to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and performance by Buyer and
Merger Sub of this Agreement and the other Transaction Documents to which Buyer and/or Merger Sub
is or will be a Party and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite

34

 

proceedings of Buyer and Merger Sub and no other proceedings
on the part of Buyer or Merger Sub are necessary to authorize this Agreement, such Transaction
Documents or the consummation of the transactions contemplated hereby or thereby. This Agreement
has been duly executed and delivered by Buyer and Merger Sub and (assuming this Agreement
constitutes a legal, valid and binding obligation of the Company and the Principal Stockholders)
constitutes a legal, valid and binding obligation of each of Buyer and Merger Sub, enforceable
against each of them in accordance with its terms, subject to the Remedies Exception.

                    Section 6.3. Non-contravention. Neither the execution and delivery of this Agreement
by Buyer and Merger Sub, nor the consummation by Buyer and Merger Sub of the transactions
contemplated hereby will (a) conflict with any provision of the organizational documents of Buyer
or Merger Sub, (b) violate or result in a breach of or give rise to any right of termination,
modification or acceleration under, or result in the loss of any material right, under any Contract
to which Buyer, Merger Sub or any of their Affiliates is a party or by which any of their assets
are subject or (c) subject to the Consents of Governmental Authorities described in Section
6.4, violate any Law to which Buyer, Merger Sub or any of their Subsidiaries is subject,
except, in the case of clauses (b) and (c), (i) as disclosed in Section 6.3 of the
Disclosure Schedule or (ii) for such violations or breaches which would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Buyer or Merger Sub.

                    Section 6.4. Government Authorizations. Except for (a) compliance with the HSR Act
and the regulations thereunder or any other antitrust or merger notification or control laws,
(b) compliance with any applicable requirements of the Securities Act or other applicable
securities Laws, (c) the Required Telecommunications Approvals, (d) Consents that, if not obtained
or made, would not, individually or in the aggregate, have a Material Adverse Effect on Buyer or
Merger Sub and (e) Consents not required to be made or given until after the Closing, no Consent
of, with or to any Governmental Authority is required to be obtained or made by or with respect to
Buyer, Merger Sub or any of their Subsidiaries or Affiliates in connection with the execution and
delivery of
this Agreement and the other Transaction Documents to which Buyer, Merger Sub or any of their
Subsidiaries or Affiliates is a party or the consummation by Buyer or Merger Sub of the
transactions contemplated hereby and thereby, other than any such requirement that is applicable as
a result of any facts that specifically relate to the business or activities in which the Company
Group or any of their Affiliates is or proposes to be engaged, other than the business conducted by
Buyer as of the date hereof.

                    Section 6.5. Financial Capacity. At or prior to the Closing, Buyer will have,
pursuant to the Commitment Letters and/or any Substitute Financing, sufficient cash, available
lines of credit or other sources of immediately available funds to pay in cash the Merger
Consideration in accordance with the terms of Article IV and any other amounts to be paid
by it hereunder. Attached hereto as Exhibit B are true, correct and complete signed
counterpart(s) of (a) the commitment letter(s), dated as of the date hereof, providing for debt
financing in respect of the transactions contemplated by this Agreement (the “Debt Commitment
Letters”) and (b) the commitment letter(s), dated as of the date hereof, pursuant to which
Affiliates of Buyer have agreed with the parent company of Buyer to make an equity investment in
such parent company in connection with the transactions contemplated hereby (the “Equity
Commitment Letter” and together with the Debt Commitment Letters, the “Commitment
Letters”), which debt financing contemplated by the Debt Commitment Letters, when taken

35

 

together with the amount of equity capital to be provided pursuant to the Equity Commitment Letter,
will be sufficient to pay the Merger Consideration, all other amounts to be paid by Buyer hereunder
and all expenses of Buyer incurred in connection with the consummation of the transactions
contemplated hereby. As of the date hereof, the Commitment Letters are in full force and effect,
are, as of the date hereof, valid and binding obligations of each of the parties thereto and are
not subject to any contingencies or conditions that are not set forth in the copies of the
Commitment Letters attached hereto as Exhibit B. Other than the Commitment Letters, Buyer
and its parent company have not entered into any agreement pursuant to which any Person has the
right to modify or amend the terms of the debt financing or equity investment contemplated by the
Commitment Letters. To Buyer’s Knowledge, as of the date hereof, no event has occurred which, with
or without notice, lapse of time or both, would constitute a default or breach under any term or
condition of the Commitment Letters, and as of the date hereof, Buyer has no reason to believe that
it or any other party thereto will be unable to satisfy on a timely basis any term or condition of
closing to be satisfied pursuant to the Commitment Letters. Buyer or an Affiliate thereof on its
behalf has fully paid any and all commitment or other fees required by the Debt Commitment Letters
to be paid by the date hereof.

                    Section 6.6. Litigation. There are no Actions pending or, to each of Buyer’s and
Merger Sub’s Knowledge, threatened in law or in equity or before any Governmental Authority against
Buyer, Merger Sub or any of their Affiliates which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Buyer or Merger Sub and there are no
outstanding injunctions, judgments, orders, decrees, rulings, or charges to which Buyer, Merger Sub
or any of their Affiliates is a party or by which Buyer, Merger Sub or any of their Affiliates
is bound by, or any Governmental Authority that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Buyer or Merger Sub.

                    Section 6.7. Brokers’ Fees. None of Buyer, Merger Sub or any of their Affiliates has
any contract or other arrangement or understanding (written or oral, express or implied) with any
Person which may result in the obligation of the Company prior to the Closing or the Principal
Stockholders to pay any fees or commissions to any broker or finder as a result of the execution
and delivery of this Agreement or the consummation of the transactions contemplated by this
Agreement.

                    Section 6.8. Information. The Company Group has provided Buyer with access to the
facilities, books, records and personnel of each member of the Company Group and Affiliates in
order for Buyer to investigate the Business and properties of each member of the Company Group and
Affiliates to make an informed investment decision to participate in the Merger and to enter into
this Agreement. Buyer (either alone or together with its advisors) has such knowledge and
experience in financial and business matters so as to be capable of evaluating the merits and risks
of its participation in the Merger and is capable of bearing the economic risks of such
transaction. Buyer agrees to participate in the Merger based upon its own investigation,
examination and determination with respect thereto without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or imputed to any member of the
Company Group, except as expressly set forth in this Agreement.

36

 

ARTICLE VII.

COVENANTS

                    Section 7.1. Conduct of the Company.

          (a) The Company covenants and agrees that, except (i) as otherwise expressly contemplated by
this Agreement (including as described in Section 7.1 of the Disclosure Schedule) and the
other Transaction Documents or (ii) as otherwise approved in writing by Buyer and Merger Sub (which
approval shall not be unreasonably withheld or delayed), during the period commencing on the date
hereof and ending on the Closing Date, the Company Group shall conduct its business and operations
in the ordinary course consistent with past practice (including collecting receivables and paying
payables as the become due and making capital expenditures substantially in accordance with the
2007 plan provided to Buyer prior to the date hereof) and in compliance in all material respects
with applicable Law, and use its commercially reasonable efforts to (A) maintain and preserve
intact the business of the Company Group in all material respects and (B) keep available the
services of the Company Group (it being understood that such efforts will not include any
requirement or obligation to pay any consideration not otherwise required to be paid by the terms
of an existing agreement or offer or grant any financial accommodation or other benefit not
otherwise required to be made by the terms of an existing agreement).

          (b) Without limiting the generality of the foregoing, until the Closing, except (i) as
otherwise expressly contemplated by this Agreement (including as described in Section 7.1
of the Disclosure Schedule) and the other Transaction Documents, (ii) as required by any change in
applicable Law or (iii) as otherwise approved in writing by Buyer and Merger Sub (which approval
shall not be unreasonably withheld or delayed), the Company shall not, and shall cause each other
member of the Company Group not to, take any of the following actions:

          (i) (A) amend its Certificate of Incorporation, Certificate of Formation, Limited
Liability Company Agreement, Certificate of Incorporation or Bylaws, as applicable; or (B)
authorize for issuance, issue, grant, sell, deliver, dispose of, pledge or otherwise
encumber any shares of its capital stock or other equity interests or issue any Rights in
respect thereof;

          (ii) declare, set aside or pay any dividend or distribution or other capital return in
respect of the Shares or redeem, purchase or acquire any Shares, other than the accrual of
dividends pursuant to the terms of the Preferred Stock;

          (iii) except as required by GAAP, change any accounting methods, principles or
practices;

          (iv) change any method of Tax accounting, make or change any Tax election, file any
amended material Tax Return, settle or compromise any material Tax liability, agree to an
extension or waiver of the statute of limitations with respect to the assessment or
determination of material Taxes, enter into any closing agreement with respect to any Tax or
surrender any right to claim a material Tax refund;

37

 

          (v) enter into, terminate or materially modify any Material Contract, lease in respect
of material real property or Contract that would be a Material Contract if in existence on
the date hereof or waive, release or assign any material rights or claims thereunder;
provided that, the foregoing notwithstanding, members of the Company Group shall be
permitted to (x) enter into, terminate or materially modify any Material Contract of the
type described in Section 5.13(a)(i), (ii) and (viii) (but only to
the extent such Contract would not also be a Material Contract of the type described in
Section 5.13(a)(x)) in the ordinary course of business and (y) materially modify any
Contract of the type described in Section 5.13(a)(x) solely to the extent such
modification is in the ordinary course of business and is not materially adverse to the
Company Group or any of its members;

          (vi) sell, transfer, assign, lease, sublease, license or otherwise dispose of or
encumber, in whole or in part, any of the assets, rights or properties of the Company Group
with a value in excess of $100,000 in the aggregate, other than sales of inventory or
equipment to support services in the ordinary course of business;

          (vii) acquire by merger or consolidation with, or purchase substantially all of the
equity interests or assets of, or otherwise acquire, any business, or make any investment
in, any corporation, partnership, association or other business organization or
division thereof with a value, individually, in excess of $100,000 or merge or
consolidate with any Person;

          (viii) (A) increase the compensation or benefits of any present or former director,
officer or employee of the Company Group (except for increases in salary or hourly wage
rates with respect to Company Group Employees who are not officers or directors, in the
ordinary course of business consistent with past practice); (B) take any action with respect
to the grant of any severance or termination pay which will become due and payable on or
after the Closing Date or enter into, renew or amend any employment, consulting, severance,
change of control or separation contracts with any Company Group Employee, except as
otherwise required by applicable Law; (C) make any change in the key management structure of
the Company Group, including, without limitation, the hiring of additional officers; or (D)
adopt, enter into or amend any Company Plan, except (1) as may be required pursuant to any
Contract in effect on the date hereof and disclosed to Buyer prior to the date hereof or (2)
as may be required by applicable Law;

          (ix) (A) create, incur or assume any long-term debt, (B) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or otherwise) for any
material obligations of any Person, (C) make any loans, advances or capital contributions to
or investments in any Person other than any member of the Company Group or (D) voluntarily
mortgage, pledge or subject to any material Lien, other than a Permitted Lien, any of its
material assets;

          (x) settle or compromise, or agree to settle or compromise, any claim (whether or not
commenced prior to the date of this Agreement) other than settlements or compromises of
disputes or claims involving solely money damages not in excess of

38

 

$250,000; provided that
the aggregate amount paid in connection with the settlement or compromise of all such
disputes and claims shall not exceed $500,000;

          (xi) cancel any material third party Indebtedness owed to any member of the Company
Group; or

          (xii) agree with any third party or commit, whether in writing or otherwise, to do any
of the foregoing.

          (c) Notwithstanding anything to the contrary in this Agreement: (i) Buyer and each member of
the Company Group shall, and shall cause their respective officers, agents, representatives and
employees to, proceed in a reasonably prompt manner to seek to obtain Voluntary Disclosure
Agreements in United States jurisdictions where the Company is subject to United States state or
local sales and use Taxes, and Taxes of the type, or comparable to the type, referred to in the
Olivier Report, unless specifically exempted by the appropriate tax or regulatory authority; (ii)
each member of the Company Group shall, and shall use commercially reasonable efforts to cause its
officers, agents, representatives and employees to, cooperate with Buyer to facilitate smooth and
prompt execution of any Voluntary Disclosure Agreements; (iii) the procedures with respect to such
Voluntary Disclosure Agreements shall be governed by Section 8.1(a); and (iv) each member
of the Company Group agrees to provide Buyer with
access to all information reasonably necessary (including making all books, records, employees
and advisors available) to effectively and efficiently resolve jurisdictional inquiries as related
to initiating and executing the Voluntary Disclosure Agreements.

                    Section 7.2. Access to Information; Confidentiality.

          (a) Prior to the Closing Date, or, if earlier, the date this Agreement is terminated pursuant
to Section 12.1, the Stockholder Representative shall, and shall cause each other member of
the Company Group to, permit Buyer and its authorized agents or representatives, including its
independent accountants, other advisors and potential financial sources, to have access to the
properties, Contracts, books and records and personnel of the Company Group and any other
information reasonably requested by Buyer, during normal business hours to review information and
documentation relative to the personnel, properties, books, Contracts, commitments and other
records of the Company Group as Buyer may reasonably request; provided, that such investigation
shall only be upon reasonable notice and shall not unreasonably disrupt personnel and operations of
the business of the Company Group and shall be at Buyer’s sole cost and expense; provided, further,
that neither Buyer, nor any of its Affiliates or representatives, shall conduct any environmental
site assessment, compliance evaluation or investigation involving access to the properties, books
or records of any member of the Company Group with respect to any member of the Company Group
without reasonable prior consultation with the Stockholder Representative and without ongoing
reasonable consultation with the Stockholder Representative with respect to any such activity (it
being understood and agreed that in no event shall any sub-surface investigation or testing of any
environmental media be conducted). All requests for access to the offices, properties, Contracts,
books and records and personnel of the Company Group shall be made to the Stockholder
Representative or such representatives of the Company as the Stockholder Representative shall
designate, who shall be solely responsible for coordinating all such requests and all access

39

 

permitted hereunder. It is further agreed that neither Buyer nor its representatives shall contact
any of the employees, customers, suppliers or joint venture partners of any member of the Company
Group or any of their respective Affiliates to the extent in connection with the transactions
contemplated hereby, whether in person or by telephone, mail (electronic or otherwise) or any other
means of communication, without the specific prior authorization of the Stockholder Representative
(which shall not be unreasonably withheld or delayed). Any access to the offices, properties,
Contracts, books and records and personnel of the Company Group shall be subject to the following
additional limitations: (i) such access shall not violate any Law or otherwise expose any member
of the Company Group to a material risk of Liability; (ii) the Stockholder Representative or a
representative of the Company Group designated by the Stockholder Representative shall have the
right to be present when Buyer or its representatives conducts its or their investigations on the
property of the Company Group; (iii) none of Buyer or its representatives shall willfully or
intentionally damage the property of the Company Group or any portion thereof; and (iv) Buyer shall
use its commercially reasonable efforts to conduct all on-site due diligence reviews and all
communications with any Person on an expeditious and efficient basis.

          (b) Buyer, Merger Sub and all of their Subsidiaries, Affiliates and representatives will hold
in confidence all confidential information obtained from any member of the Company Group or their
respective Affiliates, officers, agents, representatives or employees, in connection with this
Agreement and the transactions contemplated hereby, in accordance with the provisions of the
Confidentiality Agreement which, notwithstanding anything contained therein, shall remain in full
force and effect following the execution of this Agreement and shall survive any termination of
this Agreement but, with respect to information relating to the Company Group, shall terminate
simultaneously with the Closing.

          (c) For three (3) years following the Closing, each of the Principal Stockholders shall, and
shall cause its Affiliates, partners, members, officers, agents, representatives and employees to,
keep confidential all nonpublic information relating to Buyer and its Affiliates (including the
Surviving Corporate Group) of which such Person may be aware, except as required by applicable Law.

                    Section 7.3. Commercially Reasonable Efforts. Subject to the terms and conditions of
this Agreement and applicable Law, each of the Parties hereto shall use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable Laws and regulations or otherwise to
consummate and make effective the transactions contemplated by this Agreement in accordance with
its terms as soon as reasonably practicable, including such actions or things as any other Party
hereto may reasonably request in order to cause any of the conditions to such other Party’s
obligation to consummate such transactions specified in Article IX to be fully satisfied.
Without limiting the generality of the foregoing, the Parties shall (and shall cause their
respective directors, officers and Subsidiaries, and use their commercially reasonable efforts to
cause their respective Affiliates, employees, agents, attorneys, accountants and representatives,
to) consult and fully cooperate with and provide reasonable assistance to each other in
(a) obtaining all necessary Consents, or other permission or action by, and giving all necessary
notices to and making all necessary filings, meetings or appearances with and applications and
submissions to, any Governmental Authority or other Person, including any

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required Consents of (x)
Global Crossing Holdings Limited (“Global Crossing”) to continue the Transaction Services,
dated as of March 25, 2005, between Global Crossing and WestCom Corporation and (y) JP Morgan Chase
Bank, N.A. (“JPM”) to continue the Master Agreement, dated October 1, 2006, between JPM and
WestCom Corporation, (b) lifting any permanent or preliminary injunction or restraining order or
other similar order issued or entered by any court or Governmental Authority (an
“Injunction”) of any type referred to in Sections 9.1(a) and 9.3(d) in
general, consummating and making effective the transactions contemplated hereby. Buyer and Merger
Sub shall, and shall use commercially reasonable efforts to cause its Affiliates to, not enter into
or complete any transactions that could reasonably be expected to delay, hinder or prohibit the
consummation of the transactions contemplated hereby, including causing the failure of the closing
conditions set forth in Article IX to be satisfied.

                    Section 7.4. Government Approvals.

          (a) The Company, Buyer and Merger Sub shall timely and promptly cause to be made all filings
which may be required by each of them and their respective Affiliates in connection with the
consummation of the transactions contemplated by this Agreement in accordance with its terms. Each
Party shall furnish to the other Party such necessary information and assistance as such other
Party may reasonably request in connection with the preparation of any necessary filings or
submissions by it to any Governmental Authority.

          (b) Each of the Parties shall notify and keep the other Party advised as to (i) any material
communication from any other Governmental Authority regarding any of the transactions contemplated
hereby (ii) any Action pending and known to such Party, or to its Knowledge threatened, which
challenges the transactions contemplated hereby. Without in any way limiting the foregoing, the
Parties will also consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any Party in connection with
proceedings under or relating to the HSR Act or the Required Telecommunications Approvals. Subject
to the provisions of Article IX, the Company, Buyer and Merger Sub shall not take any
action inconsistent with their obligations under this Agreement or, without prejudice to Buyer and
Merger Sub’s rights under this Agreement, which would materially hinder or delay the consummation
of the transactions contemplated by this Agreement.

                    Section 7.5. Public Announcements. Prior to the earlier of the Closing or termination
of this Agreement in accordance with its terms, except to the extent otherwise required by
applicable Law (and then only after consultation with Buyer or the Stockholder Representative, as
applicable), none of the Parties will issue any press release or make any other public
announcements concerning the transactions contemplated hereby or the contents of this Agreement
without the prior written consent of the other Parties.

                    Section 7.6. Notification of Certain Matters. Between the date hereof and the Closing
Date, each Party will give prompt written or electronic notice to the other Parties of: (a) any
information that indicates that, to its Knowledge, any of the representations or warranties
contained herein are not true and correct; provided, however, that the failure of a Party to comply
with this Section 7.6 will not subject such Party to any Liability hereunder in

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respect of
any claim asserted after the relevant expiration date for the relevant representation or warranty,
(b) the occurrence or non-occurrence of any event which will result, or has a reasonable prospect
of resulting, in the failure of any condition, covenant or agreement contained in this Agreement to
be complied with or satisfied, (c) any failure of a Party to comply with or satisfy any condition,
covenant or agreement to be complied with or satisfied by it hereunder and (d) any notice or other
communication from any third party alleging that the Consent of such third party is or may be
required in connection with
the transactions contemplated by this Agreement or that such transactions otherwise may
violate the rights of or confer remedies upon such third party. No such notification (or the
knowledge of the underlying facts relating thereto) or failure to provide such notification by any
Party shall affect the remedies or rights of such Party or the representations or warranties of the
other Parties or such other Parties’ obligations (including with respect to indemnification)
hereunder.

                    Section 7.7. Financing.

          (a) Prior to the Closing, the Company shall, and shall cause its Subsidiaries to, and shall
use commercially reasonable efforts to cause its and their respective officers, employees and
representatives to, use commercially reasonable efforts to provide, such cooperation as may
reasonably be requested by Buyer in connection with the closing of the financing contemplated by
the Commitment Letters, including with respect to (i) entering into, as of the Effective Time,
customary financing agreements, including loan agreements and related documents (including pledge
and security documents) as may be reasonably requested by the Buyer, (ii) providing assistance in
the preparation for, and participating in, a reasonable number of meetings, due diligence sessions,
road shows and similar presentations to and with, among others, prospective lenders, investors and
rating agencies, (iii) assisting in preparing of confidential information memoranda rating agency
presentations required in connection with the financing and similar documents, (iv) providing
direct contact between prospective lenders and officers and directors of the Company, (v) executing
and delivering, as of the Effective Time, customary certificates, legal opinions and other
documents reasonably requested by Buyer and required in connection with the financing and otherwise
reasonably facilitating the pledging of collateral contemplated by the Debt Commitment Letter, (vi)
assisting in the preparation of financial statements and other information solely relating to the
Company Group necessary for the satisfaction of the obligations and conditions set forth in the
Debt Commitment Letters within the time period specified in Section 2.2 and (vii) otherwise
providing available documents and information relating to the Company Group including good standing
certificates of each member of the Company Group from the state of its formation and the states in
which it is qualified to do business, in the case of each of clauses (i) through (iv), as may be
reasonably requested by Buyer; provided, that the actions contemplated in the foregoing clauses (i)
through (iv) and by this Section 7.7 generally do not (A) unreasonably interfere with the
ongoing operations of the Company Group, (B) cause any representation or warranty in this Agreement
to be breached, (C) cause any condition to Closing set forth in Article IX to fail to be
satisfied or otherwise cause any breach of this Agreement or any material contract or agreement to
which a member of the Company Group is a party, (D) require any member of the Company Group to pay
any out-of-pocket fee or other out-of-pocket expense prior to the Effective Time that is not
substantially simultaneously reimbursed by Buyer or (E) involve any binding commitment by a member
of the Company Group which commitment is not conditioned on the Closing and does not terminate
without liability to any member of the Company Group upon the termination of this Agreement;

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it
being understood that the Company shall have satisfied its obligations under this Section if the
Company shall have used its commercially reasonable efforts to comply with such obligations whether
or not any applicable requested deliverables are actually obtained or provided. It is understood
and agreed by the Parties that the conditions set forth in Section 9.3(b), as applied to
the Company’s obligations under this Section 7.7(a), shall be deemed to be satisfied unless
the
financing contemplated by the Commitment Letters has not been obtained as a direct result of
the Company’s willful and material breach of its obligations under this Section 7.7(a).
Buyer will indemnify and hold harmless the Company and its Subsidiaries and their respective
officers, employees and representatives from and against any and all Damages suffered or incurred
in connection with the arrangement of the financing contemplated by the Commitment Letters and any
information utilized in connection therewith. Nothing contained in this Section 7.7 or
otherwise shall require any member of the Company Group to be a borrower, guarantor, grantor,
pledgor or other obligor with respect to the financing prior to the Closing.

          (b) Without limiting the generality of Section 7.7(a), for each month and fiscal
quarter ending between the date of this Agreement and the Closing Date, the Company will deliver to
Buyer:

          (i) unaudited monthly consolidated financial statements for the Company Group on or
before the seventh day following the end of each month; and

          (ii) unaudited quarterly consolidated financial statements for the Company Group within
30 days after the end of each fiscal quarter.

          (c) Buyer shall and shall cause its Affiliates to use all commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done all things necessary to
consummate the financings on the terms and conditions described in the Commitment Letters as
promptly as possible following the date hereof including without limitation, (i) negotiating
definitive agreements with respect to the debt financing contemplated by the Debt Commitment
Letters including the terms and conditions contained in the Debt Commitment Letters, (ii)
satisfying all the conditions to the financing (and complying with all the obligations)
contemplated by the Debt Commitment Letters to the extent such conditions (and obligations) are in
Buyer’s or any Affiliate of Buyer’s control, (iii) accepting to the fullest extent all “flex”
contemplated in the Debt Commitment Letters (including the fee letter relating thereto) and (iv)
causing the funding of the facilities under the Debt Commitment Letters as soon as practicable
following the date hereof within the time period specified in Section 2.2. Buyer will give
Seller prompt notice of (1) any material breach of the Commitment Letters by any party thereto, (2)
and copies of any other commitment letters executed by the Buyer Group and (3) at the Company’s
request, the status of the financing. Neither Buyer nor its Affiliates will materially amend,
modify, terminate, assign or agree to any waiver under the Commitment Letters without the prior
written approval of the Company. If funds in the amounts set forth in the Commitment Letters, or
any portion thereof, become unavailable, or it becomes reasonably likely that such funds may become
unavailable, to Buyer on the terms and conditions set forth therein, Buyer shall and shall cause
its Affiliates to use all commercially reasonable efforts to obtain substitute financing on terms
no less favorable to Buyer sufficient to enable Buyer to consummate the transactions contemplated
by this Agreement in accordance with its terms (“Substitute Financing”), including causing
its Affiliates to contribute additional equity or

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otherwise make capital contributions to Buyer, up
to the maximum amount specified in the Equity Commitment Letter. Notwithstanding anything to the
contrary in this Section 7.7(c), nothing in this Section 7.7(c) shall be construed
in any event to require Buyer to obtain equity financing in excess of the maximum amount specified
in the Equity Commitment Letter. In the event that all conditions to the Commitment Letters have
been satisfied, the Buyer shall use its
commercially reasonable efforts to cause the lenders to fund the financing required to
consummate the Merger on the Closing Date (including taking enforcement actions to cause such
lenders to provide such financing).

                    Section 7.8. Director and Officer Indemnification. For six (6) years from and after
the Closing Date, to the fullest extent permitted by applicable Law, Buyer shall, and Buyer shall
cause the Surviving Corporation and any of the Surviving Corporation’s Subsidiaries (the
“Surviving Corporate Group”) to, indemnify and hold harmless the officers and directors of
any member of the Surviving Corporate Group who held any such position at any time on or prior to
the Closing (collectively, “Indemnified Officers”) in respect of acts or omission occurring
prior to the Closing based in whole or in part out of the fact that such person is or was a
director or officer of the Surviving Corporate Group (other than with respect to acts of fraud),
and Buyer shall cause the applicable member of the Surviving Corporate Group to, maintain, for six
(6) years from and after the Closing, indemnification provisions in its organizational documents
that are no less favorable to the Indemnified Officers than those in effect with respect to such
member of the Company Group immediately prior to the Closing. Buyer shall cause the Surviving
Corporate Group to obtain and maintain in effect, for a period of six (6) years after the Closing,
policies of directors’ and officers’ liability insurance protecting the Indemnified Officers with
coverage and containing terms and conditions (including with respect to deductible, amount and
payment of attorneys’ fees) that are no less favorable than those in policies existing at or prior
to the Closing; provided, however, that in no event shall Buyer or the Surviving Corporate
Group be obligated to pay annual premiums in excess of 300% of the annual premiums currently paid
for such insurance. The Company shall have the right, but not the obligation, to acquire a six (6)
year tail policy for the persons currently covered by the Company’s directors’ and officers’
liability insurance policy that is consistent with the preceding sentence (including the proviso
thereto). Notwithstanding any other provision of this Agreement to the contrary, each of the
Parties agrees that from and after the Closing Date each Indemnified Officer shall be a third party
beneficiary under this Agreement for purposes of enforcing this Section 7.8.

                    Section 7.9. Employee Benefit Arrangements.

          (a) For purposes of determining eligibility to participate, vesting and entitlement to
benefits where length of service is relevant under any benefit plan or arrangement of the Surviving
Corporate Group after the Closing, each of the officers and employees (including those officers and
employees who are full-time, part-time, temporary, on vacation or on a paid or unpaid leave of
absence) of the Company Group as of the Closing (collectively, the “Company Employees”)
shall receive service credit for service with Surviving Corporate Group to the same extent such
service credit was granted under the Company Plans, subject to offsets for previously accrued
benefits and determined in a manner so as not to create any duplication of benefits. Buyer shall
cause the Surviving Corporate Group to (i) waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage

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requirements applicable
to Company Employees under any welfare benefit plans that such employees may be eligible to
participate in after the Closing, other than limitations or waiting
periods that are already in effect with respect to such employees and that have not been
satisfied as of the Closing under any welfare benefit plan maintained for Company Employees
immediately prior to the Closing and (ii) provide each Company Employee with credit for any
co-payments and deductibles paid prior to the Closing in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are eligible to participate
in after the Closing. Buyer shall cause the Surviving Corporate Group to honor all vacation,
personal and sick days accrued by Company Employees under the plans, policies, programs and
arrangements of the Company Group immediately prior to the Closing.

          (b) From and after the Closing, Buyer shall cause the Surviving Corporate Group to assume and
honor in accordance with their terms all employment, severance and termination plans and agreements
(including change of control provisions) of employees or independent contractors of the Surviving
Corporate Group set forth in Section 5.16(a) of the Disclosure Schedule. Notwithstanding
the foregoing, nothing herein shall be deemed or construed to prevent Buyer from exercising any
power, authority or right that the Company would have had prior to the Closing with respect to any
of the Company Plans, including the power to amend, terminate or suspend any such Company Plan, in
its sole and absolute discretion, or otherwise to take such action as is necessary to comply with
applicable Law. 

          (c) This Agreement shall inure exclusively to the benefit of and be binding upon the
Parties hereto and their respective successors, assigns, executors and legal
representatives. Nothing in this Section 7.9(c), express or implied, is intended
to confer on any Person other than the Parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.

                    Section 7.10. Post-Closing Access; Preservation of Records. From and after the Closing, Buyer will make or cause to be made available to the Principal
Stockholders, subject to reasonably and appropriate confidentiality protections, all books,
records, Tax Returns and documents of the Company Group (and the reasonable assistance of employees
responsible for such books, records and documents) during regular business hours and with
reasonable advance notice as may be reasonably necessary for (a) investigating, settling, preparing
for the defense or prosecution of or defending or prosecuting any Action, (b) preparing reports to
stockholders and Governmental Authorities or (c) such other purposes for which access to such
documents is believed by such stockholders of the Company to be reasonably necessary, including
preparing and delivering any accounting or other statement provided for under this Agreement or
otherwise or responding to or disputing any Tax audit; provided, however, that access to such
books, records, documents and employees will not interfere with the normal operations of the
Surviving Corporate Group and the reasonable out-of-pocket expenses of the Surviving Corporate
Group incurred in connection therewith will be paid by such shareholders of the Company. Buyer
will use commercially reasonable efforts to cause the Surviving Corporate Group to maintain and
preserve all such Tax Returns, books, records and other documents for the greater of (i) seven (7)
years after the Closing Date or (ii) any applicable statutory or regulatory retention period, as
the same may be extended.

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                    Section 7.11. Termination of Affiliate Contracts. Except for (a) this Agreement and the Transaction Documents and (b) those Contracts set
forth in Section 7.11 of the Disclosure Schedule, each member of the Company Group shall,
and shall cause any other parties thereto to, terminate all Affiliate Contracts as of or prior to
the Closing without any liability or obligation having been incurred or satisfied by the Company
Group; provided that, notwithstanding the foregoing, in no event shall the Company Group or the
Stockholder Representative or any of their respective partners, members, officers, directors,
employees, or agents amend, waive, consent to or otherwise modify any of the agreements or other
Contracts with Michael Hirtenstein or any of his Affiliates (including any estate, trust or other
Tax planning vehicle established by or on behalf of him or his immediate family) (collectively, the
“Hirtenstein Group”) with any members of the Company Group or to take any action or fail to
take any action that would operate as a waiver, partial waiver, compromise or settlement with
respect to any of the Company Group’s rights with respect to indemnification from any member of the
Hirtenstein Group.

                    Section 7.12. No Solicitation; Other Offers. From the date hereof until the
termination hereof, each member of the Company Group and each Principal Stockholder shall not, and
each will use their commercially reasonable efforts to cause their respective Subsidiaries,
Affiliates, partners, members, officers, directors, employees, agents and advisors not to, directly
or indirectly, (a) solicit, initiate or knowingly encourage the submission of any proposal or offer
from any other Person (other than Buyer and its Affiliates and their respective representatives or
pursuant to an existing Company Plan) relating to the acquisition of any shares or equity interests
or Rights in respect thereof of any member of the Company Group, (b) solicit, initiate or knowingly
encourage the submission of any proposal or offer from any such Person relating to the acquisition
of any material portions of the assets of the Company Group or (c) participate in any discussions
or negotiations with any such Person regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any such Person to do or
seek, any of the foregoing. Each member of the Company Group, the Stockholder Representative and
each Principal Stockholder, as applicable, will notify Buyer immediately if any such Person makes
any proposal, offer or bona fide inquiry with respect to any of the foregoing, and provide the
material terms of such proposal, offer or bona fide inquiry. Each Principal Stockholder agrees not
to transfer any Shares to any other Person prior to Closing.

                    Section 7.13. Non-Solicitation. Until the first anniversary of the Closing Date, each
of the Principal Stockholders shall not, and each shall not cause or permit their respective
Subsidiaries to and shall not cause their controlled Affiliates to, directly or indirectly solicit
for employment any employee of the Company Group; provided that the following circumstances shall
not constitute “solicitation for employment” for purposes of this Section 7.13: (a) such
employee seeks employment on his or her own initiative without any direct contact initiated by any
of the foregoing Persons; or (b) such employee seeks employment with the applicable Person in
response to a general advertisements or similar method not specifically directed at the employee or
the Company Group.

                    Section 7.14. Preparation of Financial Statements. The Company shall, and shall cause the Company’s Subsidiaries and its and their respective
officers, employees, accountants and representatives to use commercially reasonable efforts to
cause to be prepared

46

 

and delivered to Buyer and Merger Sub (i) as promptly as practicable after the
date hereof and prior to the Closing Date, the audited consolidated balance sheet, statement of
operations, statement of equity, statement of cash flows and the related notes thereto for the OpCo
Group as of or for the period ending December 31, 2006, as applicable (the “2006 Audited
Financials”); and (ii) the audited consolidated balance sheet, statement of operations,
statement of equity, statement of cash flows and the related notes thereto for the Company Group as
of and for the periods ending December 31, 2004, 2005 and 2006 (collectively, the “Company
Group Audits”). Without limiting the generality of the foregoing, the Company shall use
commercially reasonable efforts to (a) provide assistance (including with respect to obtaining
representation letters of management) in connection with and (b) obtain the cooperation of BDO
Seidman LLP in the preparation and delivery of, the 2006 Audited Financials and the Company Group
Audits.

                    Section 7.15. Further Assurances. Each Party agrees that from time to time after the
Closing Date, it will execute and deliver or cause its respective Affiliates to execute and deliver
such further instruments, and take or cause their respective Affiliates to take such other action,
as may be reasonably necessary to carry out the purposes and intents of this Agreement and the
other Transaction Documents.

                    Section 7.16. Stockholder Approval.

          (a) Concurrently with the execution of this Agreement, the Principal Stockholders who hold, in
the aggregate, a number of Shares entitling the Principal Stockholders to cast votes in excess of
that number of votes necessary for the adoption and approval of this Agreement and the transactions
contemplated hereby by the shareholders of the Company, shall provide evidence reasonably
satisfactory to Buyer that holders of at least a majority of the Shares have irrevocably adopted
and approved this Agreement and the transactions contemplated hereby by written consent (the
“Merger Consent”), in accordance with the DGCL, and the Company’s Certificate of
Incorporation and Bylaws.

          (b) The Company shall give prompt notice of the taking of the actions described in the Merger
Consent in accordance with Section 228 of the DGCL to all holders of Shares not executing the
Merger Consent, together with an information statement containing (i) a description of the
appraisal rights of holders of all Shares available under Section 262 of the DGCL and (ii) such
information concerning this Agreement and the transactions contemplated hereby as Buyer shall have
previously approved.

ARTICLE VIII.

TAX MATTERS

                    Section 8.1. Tax Proceedings.

          (a) Notwithstanding anything herein to the contrary (including Section 11.4), Buyer
shall control the initiation, defense and settlement of any Voluntary Disclosure Agreement
proceeding; provided however there shall be no settlement or closing or other agreement with
respect thereto without the consent of the Stockholder Representative, which consent will not be

47

 

unreasonably withheld, and the Stockholder Representative shall have the right to participate in
such proceeding.

          (b) Other than with respect to the proceedings described in Section 8.1(a), the
Stockholder Representative shall have the right to represent any member of the Company Group’s
Interest in any Tax audit or administrative or court proceeding that could reasonably be expected
to create a liability covered by Section 11.1 and to employ counsel of its choice; provided
however that if the results of such Tax audit or proceeding could reasonably be expected to
adversely affect Buyer or any member of the Company Group for any Post-Closing Tax Period, then the
Stockholder Representative and Buyer shall jointly control the initiation, defense and settlement
of any such Tax audit or proceeding and each party shall cooperate with the other party at its own
expense and there shall be no settlement or closing or other agreement with respect thereto without
the consent of the other party.

          (c) To the extent the provisions of this Section 8.1 conflict with any provision of
Section 11.4, the provisions of this Section 8.1 shall control.

                    Section 8.2. Allocation of Taxes (Straddle Period). Taxes attributable to a Straddle
Period of any member of the Company Group (including any Taxes resulting from a Tax audit or
administrative or court proceeding) shall be apportioned to the period ending on the Closing Date
and to the period beginning on the day after the Closing Date by means of a closing of the books
and records of a member of the Company Group as of the close of business on the Closing Date and,
to the extent not susceptible to such allocation, by apportionment on the basis of elapsed days
unless such Tax is transaction based (such as sales, transfer and other similar Taxes) in which
case such Tax shall be apportioned to the period in which the related transaction occurred/occurs.

ARTICLE IX.

CONDITIONS TO CLOSING

                    Section 9.1. Conditions Precedent to Obligations of Buyer, Merger Sub and the Company.
The respective obligations of each Party to consummate the transactions contemplated by this
Agreement are subject to the satisfaction (or, where legally permissible, waiver by such Party) at
or prior to the Closing Date of each of the following conditions:

     (a) No Adverse Order. There shall be no Injunction, restraining order or
decree of any nature of any Governmental Authority of competent jurisdiction that is in
effect that restrains or prohibits the consummation of the transactions contemplated hereby.

     (b) Governmental Authorizations. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or been terminated and any other
material competition approvals from any foreign Governmental Authority required

48

 

to be
obtained in connection with the transactions contemplated hereby shall have been obtained.

     (c) Required Telecommunications Approvals. The regulatory approvals of the
Federal Communications Commission of the United States of America (“FCC”) and the
Public Service Commission of the State of New York set forth in Section 9.1(c) of
the Disclosure Schedule (collectively, the “Required Telecommunications Approvals”)
shall have been obtained.

                    Section 9.2. Conditions Precedent to Obligation of the Company. The obligation of the
Company to consummate the transactions contemplated by this Agreement is subject to the
satisfaction (or waiver by the Company) at or prior to the Closing Date of each of the following
additional conditions:

     (a) Accuracy of Buyer and Merger Sub’s Representations and Warranties. The
representations and warranties of Buyer and Merger Sub contained in Article VI,
disregarding all qualifications relating to materiality or Material Adverse Effect, shall be
true and correct when made and on and as of the Closing Date with the same force and effect
as though such representations and warranties had been made on the Closing Date (except for
such representations and warranties which by their express provisions are made as of an
earlier date, in which case they shall be true and correct as of such date), except to the
extent that the failure of such representations and warranties to be true and correct would
not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect on Buyer or Merger Sub; and the Company shall have received a certificate signed by a
duly authorized officer of Buyer and Merger Sub confirming the foregoing as of the Closing
Date.

     (b) Covenants and Agreements of Buyer and Merger Sub. Each of Buyer and Merger
Sub shall have performed and complied with all of its covenants and agreements hereunder in
all material respects through the Closing Date; and the Company shall have received a
certificate signed by a duly authorized officer of Buyer and Merger Sub confirming the
foregoing as of the Closing Date.

     (c) Preliminary Merger Consideration and Stockholder Allocable Expenses. Buyer
shall have delivered or caused to be delivered the Preliminary Merger Consideration and
Stockholder Allocable Expenses to the Stockholder Representative by wire transfer in
immediately available funds pursuant to Article IV.

     (d) Escrow. Buyer shall have deposited the Escrow Funds into the Escrow
Accounts by wire transfer of immediately available funds pursuant to Article IV.

     (e) Escrow Agreement. The Escrow Agreement shall have been duly executed and
delivered by Buyer and the Escrow Agent.

     (f) Closing Documents. On or prior to the Closing Date, Buyer shall have
delivered all agreements, instruments and documents required to be delivered by Buyer and
Merger Sub under Section 4.8(b).

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                    Section 9.3. Conditions Precedent to Obligations of Buyer and Merger Sub. The
obligation of each of Buyer and Merger Sub to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (or waiver by each of Buyer and Merger Sub) at or prior to
the Closing Date of each of the following additional conditions:

     (a) Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company contained in Article V, disregarding
all qualifications contained herein relating to materiality or Material Adverse Effect,
shall be true and correct when made and on and as of the Closing Date with the same force
and effect as though such representations and warranties had been made on the Closing Date
(except for such representations and warranties which by their express provisions are made
as of an earlier date, in which case they shall be true and correct as of such date), except
to the extent that the failure of such representations and warranties to be true and correct
would not, individually or in the aggregate, have a Material Adverse Effect on the Company
Group (provided, that the representations and warranties set forth in Sections
5.1, 5.2, 5.4, 5.13(a)(vi) and 5.19 shall be true and
correct in all material respects and the representations and warranties set forth in Section
5.8(a) shall be true and correct in all respects); and Buyer shall have received a
certificate from the Company signed by a duly authorized officer of the Company confirming
the foregoing as of the Closing Date.

     (b) Covenants and Agreements of the Company and Stockholder Representative.
The Company and Stockholder Representative shall each have performed and complied with all
of its respective covenants and agreements hereunder in all material respects through the
Closing Date; and Buyer shall have received a certificate from the Company and the
Stockholder Representative confirming the foregoing as of the Closing Date.

     (c) Escrow Agreement. The Escrow Agreement shall have been duly executed and
delivered by the Stockholder Representative and the Escrow Agent.

     (d) No Adverse Order. There shall be no Injunction, restraining order or decree
of any nature of any Governmental Authority of competent jurisdiction that is in effect that
permits the consummation of the transactions contemplated hereby subject to any condition or
restriction that would, individually or in the aggregate, have a Material Adverse Effect on
the Company Group.

     (e) 2006 Audited Financials. The Company shall have delivered the 2006 Audited
Financials to Buyer and Merger Sub no later than fifteen (15) Business Days prior to the
anticipated Closing Date.

     (f) Closing Documents. On or prior to the Closing Date, the Company shall have
delivered all agreements, instruments and documents required to be delivered by the Company
under Section 4.8(a).

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ARTICLE X.

LIMITATIONS

                    Section 10.1. Waiver of Damages. Notwithstanding anything to the contrary contained
in this Agreement, each Party agrees that in no event shall any Party have any monetary Liability
to any other Party in respect of Damages arising from a breach of this Agreement or any other
Transaction Document (except as may otherwise expressly be set forth in such other Transaction
Document) or the transactions contemplated hereby or thereby except (a) if there is a Closing, (i)
as expressly provided in Articles X and XI or (ii) resulting from or arising out of
acts of fraud by such Party; and (b) if there is no Closing, for Damages incurred or suffered by
such Party for any breach by the other Party of an obligation or covenant or willful and
intentional breach of a representation or warranty contained in this Agreement or for an act of
fraud by the other Party.

                    Section 10.2. No Consequential Damages. Notwithstanding anything contained herein to
the contrary and in furtherance of and without limiting the foregoing, but subject to Article
XII, no member of the Company Group or the stockholders of the Company and no member of the
Buyer Group will be entitled to any recovery under this Agreement for its own special, exemplary,
punitive, consequential, incidental or indirect damages or lost profits (including any Damages on
account of lost opportunities); provided, however, that nothing herein shall prevent any member of
the Buyer Group or the Company Group from recovering for all components of awards against them in
claims by third parties for which recovery is provided under this Agreement, including special,
exemplary, punitive, consequential, incidental or indirect damages or lost profits components of
such claims.

ARTICLE XI.

INDEMNIFICATION

                    Section 11.1. General Indemnification for Buyer. Following the Closing and subject to
the terms and conditions of Article X and this Article XI, Buyer, its Affiliates
(including the Surviving Corporation after the Closing) and each of their respective employees,
directors, officers, agents, members and partners (collectively, the “Buyer Group”) will be
entitled to indemnification solely (except as provided in the following sentence) from the
Indemnification Escrow Funds for any and all Damages actually incurred by any member of the Buyer
Group following Closing based upon or arising
out of (a) any breach of any Surviving Covenant of the Company contained in this Agreement,
(b) any breach of any of the Company representations and warranties contained in Article V
(determined, other than in the case of the representations and warranties contained in Sections
5.7(b), 5.8(a), 5.11(d) and 5.15, without giving effect to any
materiality (including Material Adverse Effect) qualifiers in such representations and warranties)
or in any certificate delivered pursuant to Sections 4.8(a)(ii) and 4.8(a)(iii),
(c) (i) any Taxes of any member of the Company Group with respect to all Pre-Closing Tax Periods,
(ii) any Taxes of any member of an affiliated, consolidated, combined or unitary group of which any
member of the Company Group was a member on or prior to the Closing Date, including pursuant to
Treasury Regulation Section 1.1502-6 or any analogous or similar state, local, or foreign law or
regulation and (iii) any Taxes of any Person (other than any

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member of the Company Group) imposed
on any member of the Company Group as a transferee or successor, by contract or otherwise, in each
case, as a result of actions taken or failed to be taken or Contracts entered into by any member of
the Company Group on or prior to the Closing Date or (d) any payment (other than any Excess Payment
or payment pursuant to this Article XI or the Escrow Agreement) of consideration in
exchange for any Dissenting Shares pursuant to the DGCL, to the extent such payment is in excess of
the aggregate amount of the Per Share Merger Consideration that was attributable to the Dissenting
Shares, and any Damages incurred by the Buyer Group in connection with any litigation or settlement
relating to treatment of any Dissenting Shares. The Buyer Group will be entitled to
indemnification from the Indemnification Escrow Funds, and thereafter, to the extent the
Indemnification Escrow Funds are unavailable therefor, from each of the Principal Stockholders, pro
rata based on their relative entitlement to Base Merger Consideration as amongst themselves, for
any and all (i) Damages actually incurred by any member of the Buyer Group based upon or arising
out of any breach of the Company representations and warranties contained in Sections 5.1,
5.2, 5.4 and 5.19 (and the certificates referred to above insofar as they
relate to such Sections) and (ii) Damages indemnified pursuant to Section 11.1(a) to the
extent the Surviving Covenant is a covenant which by its terms is to be performed by the Principal
Stockholders or the Stockholder Representative following Closing.

                    Section 11.2. General Indemnification for the Stockholder Group. Following the
Closing and subject to the terms and conditions of Article X and this Article XI,
Buyer and the Surviving Corporation will indemnify, defend and hold harmless the Principal
Stockholders, their respective Affiliates (other than the Company Group) and each of their
respective employees, directors, officers, agents, members and partners (collectively, the
“Stockholder Group”) from and against, any and all Damages actually incurred by any member
of the Stockholder Group based upon or arising out of (a) any breach of any Surviving Covenant of
Buyer or the Surviving Corporation contained in this Agreement, or (b) any breach of Buyer or
Merger Sub’s representations and warranties (without giving effect to any materiality (including
Material Adverse Effect) qualifiers in such representations and warranties) contained in
Article VI or in any certificate delivered pursuant to Section 4.8(b)(iii). Any
party providing indemnification pursuant to this Article XI is referred to herein as an
“Indemnifying Party”, and any member of the Buyer Group or the Stockholder Group seeking
indemnification pursuant to this Article XI is referred to herein as an “Indemnified
Party.”

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                    Section 11.3. Certain Limitations.

          (a) Except with respect to Damages arising out of a breach of the representations and
warranties contained in Sections 5.1, 5.2, 5.4 and 5.19 (and the
certificates referred to above insofar as they relate to such Sections) and Damages indemnified
pursuant to Section 11.1(a) to the extent the Surviving Covenant is a covenant which by its
terms is to be performed by the Principal Stockholders or the Stockholders Representative following
Closing, notwithstanding anything contained herein to the contrary, the maximum aggregate amount of
Damages for which the Buyer Group is entitled to under this Article XI shall be limited to
the amount of the Indemnification Escrow Funds. Following Closing, the maximum aggregate Liability
of any Principal Stockholder arising out of this Agreement and the transactions contemplated
hereby, including pursuant to Section 11.1, shall in no event exceed such Principal
Stockholder’s pro rata portion of the Merger Consideration received by the stockholders of the
Company.

          (b) Except with respect to (i) Damages arising out of (A) a breach of the representations and
warranties contained in Sections 5.1, 5.2, 5.4, 5.9, 5.19,
6.1, 6.2 and 6.7 (and the certificates referred to above insofar as they
relate to such Sections), and (B) a breach of any Surviving Covenant of the Company contained in
this Agreement and (ii) Damages indemnified pursuant to Sections 11.1(c) and
11.1(d) (any Damages referred to in clauses (i) and (ii), the “Non-Deductible
Damages”), notwithstanding anything contained herein to the contrary, no indemnification
payment shall be made to the Buyer Group under this Article XI, unless and until the
aggregate amount of Damages sustained by the Buyer Group exceed on a cumulative basis $5,000,000
(the “Deductible”), and then only to the extent of such excess above such amount. For the
avoidance of doubt, it is understood and agreed among the Parties that Non-Deductible Damages shall
not be taken into account in determining whether the Deductible has been met for purposes of this
Section 11.3(b).

          (c) The amount which an Indemnifying Party is or may be required to pay to an Indemnified
Party in respect of Damages for which indemnification is provided under this Article XI
will be reduced by any amounts actually received (including amounts received under insurance
polices) by or on behalf of the Indemnified Party from third parties, including any insurer and any
member of the Hirtenstein Group (such amounts are referred to herein as “Indemnity Reduction
Amounts”). If any Indemnified Party receives any Indemnity Reduction Amounts in respect of an
Indemnified Claim for which indemnification is provided under this Agreement after the full amount
of such Indemnified Claim has been paid by an Indemnifying Party or after an Indemnifying Party has
made a partial payment of such Indemnified Claim and such Indemnity Reduction Amounts exceed the
remaining unpaid balance of such Indemnified Claim, then the Indemnified Party will promptly remit
to the Indemnifying Party an amount equal to the excess (if any) of (i) the amount theretofore paid
by the Indemnifying Party in respect of such Indemnified Claim, less (ii) the amount of the
indemnity payment that would have been due if such Indemnity Reduction Amounts in respect thereof
had been received before the indemnity payment was made. An insurer or other third party who would
otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect
thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights
with
respect thereto, it being expressly understood and agreed that no insurer or any other third
party shall be entitled to any benefit they would not be entitled to receive in the absence of the

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indemnification provisions by virtue of the indemnification provisions hereof. Each Party will, or
will cause each Indemnified Party to, as appropriate, use its commercially reasonable efforts to
pursue promptly any claims or rights it may have against all third parties which would reduce the
amount of Damages for which indemnification is provided under this Agreement, including all claims
and rights provided by members of the Hirtenstein Group with respect to sales and use Taxes and all
other such matters for which the Company Group has an indemnity from any member of the Hirtenstein
Group (including that Stock Purchase Agreement, dated as of August 9, 2004, as amended, among
Michael Hirtenstein, Westcom Acquisition Corp. and the other signatories thereto); provided that
nothing herein shall be deemed to affect Buyer’s rights to recover from the Escrow Funds while at
the same time Buyer is pursuing such other claims or rights; and provided further that any Damages
incurred in connection with pursuing any claims or rights against third parties shall be deemed to
be Damages subject to indemnification pursuant to Section 11.1.

          (d) Each and every representation and warranty of the Company, Buyer or Merger Sub contained
in this Agreement or in any certificate delivered pursuant to Sections 4.8(a)(ii),
4.8(a)(iii) and 4.8(b)(iii) shall survive the Closing Date solely for purposes of
this Article XI until, and will expire on, the date that is twelve (12) months after the
Closing Date, and no member of the Buyer Group or the Stockholder Group shall have any Liability
whatsoever with respect to any such representations and warranties thereafter, except with respect
to claims made prior to expiration. Notwithstanding the foregoing, the representations and
warranties contained in Sections 5.1, 5.2, 5.4, 5.9, 5.12,
5.19, 6.1, 6.2 and 6.7 (and in the certificates referred to above
insofar as they relate to such Sections) shall survive the Closing Date solely for purposes of this
Article XI until, and will expire on, the date that is the third anniversary of the Closing
Date, except with respect to claims made prior to such expiration (which in the case of Section
5.9, shall be deemed to include the notice and pendency of an audit if it would be reasonably
likely that such audit would result in a claim being made, and for which Buyer has promptly
informed the Stockholder Representative in writing thereof prior to such expiration, pursuant to
Section 11.1). Each and every covenant contained in this Agreement shall expire with the
consummation of the Merger and shall not survive the Closing, and no member of the Stockholder
Group and no member of the Buyer Group shall have any Liability whatsoever with respect to any such
covenant thereafter, except with respect to claims made prior to expiration. Notwithstanding the
foregoing, (i) the covenants which by their terms are to be performed by either of the Parties
following Closing will survive the Closing Date until, and will expire when, in each case, the
applicable statute of limitations has expired and (ii) the covenants set forth in Section
7.1 shall survive the Closing Date until, and will expire on, the date that is twelve (12)
months after the Closing Date (each covenant referred to in clauses (i) and (ii), a “Surviving
Covenant”). The indemnification provided in Section 11.1(c) with respect to Taxes
shall survive until, and will expire on, the date that is the third anniversary of the Closing
Date; provided, however, in the event of a claim having been made or a notice or pendency of an
audit that is reasonably likely to result in a claim being made, and for which Buyer has promptly
informed the Stockholder Representative in writing thereof prior to the third anniversary of the
Closing Date, pursuant to Section 11.1(c), such indemnification provided for in Section
11.1(c) shall survive until completion of such audit and related proceedings or
satisfaction or resolution of such claim. The indemnification provided in Section
11.1(d) shall survive until, and will expire on, the date that is twelve months after the
Closing Date.

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          (e) The obligations of each Party to indemnify, defend and hold harmless the other Party and
other Persons pursuant to this Article XI shall terminate (other than with respect to
claims made prior to expiration) with respect to Sections 11.1 and 11.2 upon the
expiration of the applicable survival periods as set forth in Section 11.3(d).

          (f) Notwithstanding anything contained in this Agreement, any amounts payable pursuant to the
indemnification obligations under Section 7.8 and Article XI shall be paid without
duplication, and in no event shall any Party be indemnified under different provisions of this
Agreement for the same Damages including Damages to the extent Buyer is compensated pursuant to
Section 4.2.

          (g) The Parties agree to treat any payment made pursuant to this Article XI as an
adjustment of the Merger Consideration, unless otherwise required by Law.

                    Section 11.4. Indemnification Procedures.

          (a) If any claim or demand is made against an Indemnified Party with respect to any matter, or
any Indemnified Party shall otherwise learn of an assertion or of a potential claim, by any Person
who is not a Party (or an Affiliate thereof) (a “Third Party Claim”) which may give rise to
a claim for indemnification against an Indemnifying Party under this Agreement, then the
Indemnified Party shall as promptly as practicable send notice in writing and in reasonable detail
of the Third Party Claim (including the factual basis for the Third Party Claim, and, to the extent
known, the amount of the Third Party Claim) to (i) the Stockholder Representative, in the event the
Indemnifying Party is a member of the Stockholder Group, or (ii) Buyer, in the event the
Indemnifying Party is a member of the Buyer Group; provided, however, that no delay on the part of
the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is actually
prejudiced as a result thereof (except that the Indemnifying Party shall not be liable for any
expenses incurred during the period in which the Indemnified Party failed to give such notice); it
being understood and agreed that the failure of the Indemnified Party to so notify the Indemnifying
Party prior to settling a Third Party Claim (whether by paying a claim or executing a binding
settlement agreement with respect thereto) or the entry of a judgment or issuance of an award with
respect to a Third Party Claim shall constitute actual prejudice to the Indemnifying Party’s
ability to defend against such Third Party Claim. Thereafter, the Indemnified Party will deliver
to the Indemnifying Party, promptly after the Indemnified Party’s receipt thereof, copies of all
notices and documents (including court papers) received or transmitted by the Indemnified Party
relating to the Third Party Claim.

          (b) The Indemnifying Party will have the right to participate in or to assume the defense of
the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party
(at the expense of the Indemnifying Party). The Indemnifying Party will be liable for the
reasonable fees and expenses of counsel employed by the Indemnified Party for any
period during which the Indemnifying Party has failed to assume the defense thereof (other
than during any period in which the Indemnified Party shall have failed to give notice of the Third
Party Claim as provided above). Should the Indemnifying Party so elect to assume the defense of a
Third Party Claim, the Indemnifying Party will not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection with the

55

 

defense
thereof; provided, however, that, if an Indemnified Party reasonably determines that a conflict of
interest exists in respect of such claim, such Indemnified Party will have the right to employ
separate counsel reasonably satisfactory to the Indemnifying Party to represent such Indemnified
Party and in that event the reasonable fees and expenses of such separate counsel (but not more
than one separate counsel and local counsel for all Indemnified Parties) shall be paid by such
Indemnifying Party. If the Indemnifying Party is conducting the defense of the Third Party Claim,
the Indemnified Party, at its sole cost and expense, may retain separate counsel, and participate
in the defense of the Third Party Claim, it being understood that the Indemnifying Party will
control such defense.

          (c) No Indemnifying Party will consent to any settlement, compromise or discharge (including
the consent to entry of any judgment) of any Third Party Claim without the Indemnified Party’s
prior written consent (which consent will not be unreasonably withheld or delayed); provided, that,
if the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party will
agree to any settlement, compromise or discharge of such Third Party Claim which the Indemnifying
Party may recommend and which by its terms obligates the Indemnifying Party to pay the full amount
of Damages in connection with such Third Party Claim and unconditionally releases the Indemnified
Party completely from all Liability in connection with such Third Party Claim (other than with
respect to the payment of any amount of Damages that the Indemnifying Party is not obligated to pay
pursuant to Section 11.3(b)). Whether or not the Indemnifying Party shall have assumed the
defense of a Third Party Claim, the Indemnified Party will not admit any Liability, consent to the
entry of any judgment or enter into any settlement or compromise with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (which consent will not be
unreasonably withheld or delayed) unless, in connection with any such action, the Indemnified Party
releases the Indemnifying Party from any indemnification obligations under this Section
11.1 with respect to such Third Party Claim.

          (d) If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying
Party will keep the Indemnified Party informed of all material developments relating to or in
connection with such Third Party Claim. If the Indemnifying Party chooses to defend a Third Party
Claim, the Parties will cooperate fully and in good faith in the defense thereof (with the
Indemnifying Party being responsible for all reasonable out-of-pocket expenses of the Indemnified
Party (other than for the fees and expenses of its counsel) in connection with such cooperation),
which cooperation will include (except where a conflict exists) the provision to the Indemnifying
Party of records and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.

          (e) Any claim on account of Damages for which indemnification is provided under this Agreement
which does not involve a Third Party Claim shall be asserted by
reasonably prompt written notice (but in any event within the relevant period specified in
Section 11.3(e)) given by the Indemnified Party to the Indemnifying Party.

          (f) In the event of payment in full by an Indemnifying Party to any Indemnified Party in
connection with any claim (an “Indemnified Claim”), such Indemnifying Party will be
subrogated to and will stand in the place of such Indemnified Party as to any events

56

 

or
circumstances in respect of which such Indemnified Party may have any right or claim relating to
such Indemnified Claim against any claimant or plaintiff asserting such Indemnified Claim or
against any other Person. Such Indemnified Party will cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right or claim.

          (g) Notwithstanding the foregoing, the Buyer Group will not be entitled to indemnification
with respect to Taxes if any member of the Buyer Group initiates the review or contest of such
Taxes by any Governmental Authority without the Stockholder Representative’s consent (which will
not be unreasonably withheld or delayed), other than with respect to Taxes that are the subject of
the Voluntary Disclosure Agreement proceedings, whether or not concluded, described in Section
7.1(c) of this Agreement and for which the requirements of Section 8.1(a) are met.

                    Section 11.5. Exclusive Remedy. The remedies set forth in this Article XI and
Section 7.8 shall be the sole and exclusive post-Closing monetary remedy with respect to
any and all claims relating, directly or indirectly, to the subject matter of this Agreement or any
other Transaction Document (except as may otherwise expressly be set forth in such other
Transaction Document) other than claims for fraud.

                    Section 11.6. Mitigation. The Parties shall cooperate with one another with respect
to resolving any claim or Liability with respect to which one Party is obligated to provide
indemnification hereunder, including by using commercially reasonable efforts to mitigate and
resolve any such claim or Liability.

ARTICLE XII.

TERMINATION

                    Section 12.1. Termination Events. Subject to the terms hereof, without prejudice to
other remedies which may be available to the Parties by Law or this Agreement, this Agreement may
be terminated and the transactions contemplated hereby may be abandoned at any time prior to the
Closing:

     (a) by mutual written consent of the Company and Buyer;

     (b) by either the Company or Buyer by giving written notice to the other Party if the
Closing shall not have occurred by December 31, 2007, unless extended by written agreement
of the Company and Buyer; provided that the Party seeking termination pursuant to this
subsection (b) is not in default or breach of any Transaction Document to which it is party
and provided, further, that the right to terminate this Agreement under this subsection (b)
shall not be available to any Party (i) whose failure or inability to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date or (ii) seeking termination in the event that the Closing shall
not have occurred as a result of a failure of any representation or warranty of another
Party to be true and correct, if such Party seeking termination had Knowledge of such
failure prior to the date of this Agreement; or

57

 

     (c) by either the Company or Buyer by giving written notice to the other Party if any
Governmental Authority shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the consummation of any
of the transactions contemplated by this Agreement, and such order, decree, ruling or other
Action shall not be subject to appeal or shall have become final and unappealable.

                    Section 12.2. Effect of Termination. In the event of any termination of this
Agreement pursuant to Section 12.1, all rights and obligations of the Parties hereunder
shall terminate without any Liability on the part of any Party or its Subsidiaries and Affiliates
in respect thereof, except that (i) the obligations of Buyer, Merger Sub and the Company under
Section 7.2 (Access to Information and Confidentiality), Section 7.5 (Public
Announcements), Section 10.1 (Waiver of Damages) and Article XIV of this Agreement
shall remain in full force and effect and (ii) such termination shall not relieve any Party of any
Liability for any fraud, breach of an obligation or covenant or willful and intentional breach of
representation or warranty contained in this Agreement arising prior to termination.

ARTICLE XIII.

STOCKHOLDER REPRESENTATIVE

                    Section 13.1. Stockholder Representative. The Company and its stockholders have agreed
that it is desirable to designate One Equity Partners LLC to act on behalf of holders of the Shares
and Options for certain limited purposes, as specified herein (“Stockholder
Representative”). Stockholder Representative shall have the right to resign and appoint a
successor Stockholder Representative upon notice to the Company and Buyer.

                    Section 13.2. Authority and Rights. By the stockholders’ approval of the Merger Agreement
and each seller’s submission of a letter of transmittal pursuant hereto, each of the stockholders
of the Company immediately prior to the
Effective Time irrevocably ratifies the designation of One Equity Partners LLC (and any successor
representative) as Stockholder Representative as provided in this Merger Agreement and the Escrow
Agreement, including, without limitation, the power to take any and all actions specified in or
contemplated by this Merger Agreement or the Escrow Agreement and take all actions necessary in the
judgment of Stockholder Representative for the accomplishment of the foregoing. Stockholder
Representative shall take any and all actions that it believes are necessary or appropriate under
this Merger Agreement and the Escrow Agreement for and on behalf of the holders of Shares and the
Options, as fully as such holders were acting on their own behalf. All actions taken by
Stockholder Representative under this Merger Agreement and the Escrow Agreement shall be binding
upon all holders of Shares and the Options and their successors as if expressly confirmed and
ratified in writing by each of them.

                    Section 13.3. Limitations on Liability. Except in cases of willful misconduct or
fraud, the Stockholder Representative will have no liability to the holders of Shares or Options or
their successors or assigns with respect to actions taken or omitted to be taken in good faith in
its capacity as Stockholder Representative and shall be entitled to

58

 

indemnification from the
holders of Shares and Options entitled to receive the Merger Consideration against any loss,
liability or expenses arising out of actions taken or omitted to be taken in good faith in its
capacity as Stockholder Representative.

ARTICLE XIV.

MISCELLANEOUS

                    Section 14.1. Parties in Interest. Except as provided in Article XI with
respect to the rights of the members of Buyer Group or the Stockholder Group to receive
indemnification hereunder and Section 7.8 of this Agreement which is for the benefit of the
officers and directors of the Company nothing in this Agreement, whether express or implied, shall
be construed to give any Person, other than the Parties or their respective successors and
permitted assigns, any legal or equitable right, remedy, claim or benefit under or in respect of
this Agreement.

                    Section 14.2. Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns. No Party may assign
(by contract, stock sale, operation of Law or otherwise) either this Agreement or any of its
rights, interests or obligations hereunder without the express prior written consent of the other
Parties, and any attempted assignment, without such consent, shall be null and void; provided, that
Buyer shall be permitted to assign this Agreement in whole or in part to one or more Subsidiaries
and no such assignment shall relieve Buyer of its obligations hereunder, including those assigned.

                    Section 14.3. Notices. All notices and other communications required or permitted to
be given by any provision of this Agreement shall be in writing and mailed (certified or registered
mail, postage
prepaid, return receipt requested) or sent by hand or overnight courier, or by facsimile
transmission (with acknowledgment received), charges prepaid and addressed to the intended
recipient as follows, or to such other addresses or numbers as may be specified by a Party from
time to time by like notice to the other Parties:

	 	 	 
	If to the Company:

	 	Westcom Holding Corp.
	 

	 	162 Fifth Avenue
	 

	 	New York, New York 10010
	 

	 	Attn.: Adam Ableman
	 

	 	Facsimile: (212) 807-0316
	 
	 	 
	with copy to:

	 	Latham & Watkins LLP
	 

	 	885 Third Avenue
	 

	 	New York, New York 10022
	 

	 	Attn.: David S. Allinson
	 

	 	Facsimile: (212) 751-4864
	 
	 	 
	If to Buyer:

	 	IPC Systems, Inc.
	 

	 	Wall Street Plaza
	 

	 	88 Pine Street
	 

	 	Attn.: John M. McSherry, General Counsel
	 

	 	Facsimile: (212) 509-7888

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	with a copy to:

	 	Simpson Thacher & Bartlett LLP
	 

	 	425 Lexington Avenue
	 

	 	New York, New York 10017
	 

	 	Attn.: William E. Curbow
	 

	 	Facsimile: (212) 455-2502
	 
	 	 
	If to the Stockholder Representative:
	 
	 	 
	 

	 	One Equity Partners LLC
	 

	 	320 Park Avenue, 18th Floor
	 

	 	New York, New York 10022
	 

	 	Attn.: David Walsh
	 

	 	Facsimile: (212) 277-1533
	 
	 	 
	with copy to:

	 	Latham & Watkins LLP
	 

	 	885 Third Avenue
	 

	 	New York, New York 10022
	 

	 	Attn.: David S. Allinson
	 

	 	Facsimile: (212) 751-4864

All notices and other communications given in accordance with the provisions of this Agreement
shall be deemed to have been given and received when delivered by hand or transmitted by facsimile
(with acknowledgment received), three (3) Business Days after the same are sent by
certified or registered mail, postage prepaid, return receipt requested or one (1) Business Day
after the same are sent by a reliable overnight courier service, with acknowledgment of receipt.

                    Section 14.4. Amendments and Waivers. This Agreement may not be amended, supplemented
or otherwise modified (including by waiver) except in a written instrument executed by each of the
Parties. No waiver by any of the Parties of any default, misrepresentation or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence. No waiver by any of
the Parties of any of the provisions hereof shall be effective unless explicitly set forth in
writing and executed by the Party sought to be charged with such waiver.

                    Section 14.5. Exhibits and Disclosure Schedule.

          (a) All Exhibits, Schedules and the Disclosure Schedule attached hereto are hereby
incorporated herein by reference and made a part hereof. Any matter disclosed pursuant to any
Section of or Schedule or Exhibit to this Agreement or the Disclosure Schedule (or any section of
any Schedule or Exhibit to this Agreement or the Disclosure Schedule) or in the Company Financial
Statements whose relevance or applicability to any representation or warranty made elsewhere in
this Agreement or to the information called for by any other

60

 

Section of or Schedule or Exhibit to
this Agreement or the Disclosure Schedule (or any other section of any Schedule or Exhibit to this
Agreement or the Disclosure Schedule) is reasonably apparent shall to the extent of such disclosure
be deemed to be an exception to such representations and warranties and to be disclosed with
respect to all Sections of and Schedules and Exhibits to this Agreement and the Disclosure Schedule
(and all sections of all Schedules and Exhibits to this Agreement and the Disclosure Schedule),
notwithstanding the omission of a reference or cross-reference thereto.

          (b) Neither the specification of any dollar amount in any representation or warranty nor the
mere inclusion of any item in a Schedule or in the Disclosure Schedule as an exception to a
representation or warranty shall be deemed an admission by a Party that such item represents an
exception or material fact, event or circumstance or that such item would be reasonably likely to,
individually or in the aggregate, result in a Material Adverse Effect on the Company Group, Buyer
or Merger Sub.

          (c) The Company will have the right to deliver to Buyer on or before the Closing a supplement
to the Disclosure Schedule with respect to the matters set forth in Article V (the
“Closing Date Schedule Supplement”) containing any matters occurring after the date hereof
which, if occurring prior to the date hereof, are required or permitted to be set forth or
described in the Disclosure Schedule relating to Article V in order to make such Disclosure
Schedule true and complete. The Closing Date Schedule Supplement will have no effect for the
purposes of determining the satisfaction of any condition to Closing set forth in Article
IX. The Closing Date Schedule Supplement will, however, for purposes of Article XI in
determining whether the
Company has breached any of its representations and warranties hereunder be deemed to amend
the applicable sections of the Disclosure Schedule referenced in the Closing Date Schedule
Supplement to reflect the matters set forth therein but only to the extent that (i) Buyer, as a
result of the matters set forth in such Closing Date Schedule Supplement was permitted to elect not
to consummate the transactions pursuant hereto in accordance with Section 9.3(a) and chose
notwithstanding such permission to so consummate the Closing or (ii) Buyer consented in writing to
the actions requiring such matters to be set forth in the Closing Date Schedule Supplement.

                    Section 14.6. Headings. The table of contents and section headings contained in this
Agreement are for reference purposes only and shall not be deemed a part of this Agreement or
affect in any way the meaning or interpretation of this Agreement.

                    Section 14.7. Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement.

                    Section 14.8. No Other Representations or Warranties. Except for the representations
and warranties expressly set forth in this Agreement and the certificates delivered pursuant to
Sections 4.8(a)(ii) and 4.8(a)(iii), Buyer and Merger Sub acknowledge that none of
the Company, any of its Affiliates nor any other Person makes any representation or warranty,
express or implied, at law or in equity, with respect to the Company Group and its Affiliates, the

61

 

Shares or any of the assets or Liabilities of the Company Group and its Affiliates, or with respect
to any other information provided to Buyer or Merger Sub, whether on behalf of the Company Group or
such other Persons, including as to the probable success or profitability of the Company Group
after the Closing. Neither the Stockholder Group nor any other Person will have or be subject to
any Liability or indemnification obligation to Buyer or any other Person resulting from the
distribution to Buyer or Merger Sub, or Buyer or Merger Sub’s use of, any such information,
including any information, document or material made available to Buyer or Merger Sub in certain
“data rooms,” management presentations or in any other form in expectation or contemplation of the
transactions contemplated by this Agreement.

                    Section 14.9. Entire Agreement. This Agreement (including the Disclosure Schedule and
the Exhibits hereto), the Transaction Documents and the Confidentiality Agreement constitute the
entire agreement among the Parties with respect to the subject matter hereof and thereof and
supersede any prior understandings, negotiations, agreements, discussions or representations among
the Parties of any nature, whether written or oral, to the extent they relate in any way to the
subject matter hereof or thereof.

                    Section 14.10. Severability; Specific Performance.

          (a) If any provision of this Agreement or the application of any such provision to any Person
or circumstance shall be declared by any court of competent jurisdiction to be invalid, illegal,
void or unenforceable in any respect, all other provisions of this Agreement, or the application of
such provision to Persons or circumstances other than those as to which it has been held invalid,
illegal, void or unenforceable, shall nevertheless remain in full force and effect and will in no
way be affected, impaired or invalidated thereby. Upon such determination that any provision, or
the application of any such provision, is invalid, illegal, void or unenforceable, the Parties
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the greatest extent
possible.

          (b) The Parties agree that irreparable damage would occur in the event any provision of this
Agreement were not performed by any Party in accordance with the terms of this Agreement and that
each Party shall be entitled to specific performance of the terms of this Agreement, in addition to
any other remedy at law or equity.

                    Section 14.11. Expenses. Unless otherwise provided herein, including Section
4.4, each of Buyer and the Company agrees to pay, without right of reimbursement from the
other, all costs and expenses incurred by it incident to the performance of its obligations
hereunder, including, without limitation, the fees and disbursements of counsel, accountants,
financial advisors, experts and consultants employed by the respective Parties in connection with
the transactions contemplated hereby, whether or not the transactions contemplated by this
Agreement are consummated.

                    Section 14.12. Governing Law. This Agreement and all claims arising out of or
relating to this Agreement and the transactions contemplated hereby shall be governed

62

 

by the Laws
of the State of New York, without regard to the conflicts of law principles that would result in
the application of any Law other than the Law of the State of New York.

                    Section 14.13. Consent to Jurisdiction; Waiver of Jury Trial.

          (a) Each of the Parties irrevocably submits to the exclusive jurisdiction of (i) state courts
of the State of New York located in New York County, New York and (ii) the United States District
Court for the State of New York sitting in the Southern District for the purposes of any suit,
Action or other proceeding arising out of or relating to this Agreement or any transaction
contemplated hereby (and agrees not to commence any Action, suit or proceeding relating hereto
except in such courts). Each of the Parties further agrees that service of any process, summons,
notice or document hand delivered or sent by U.S. registered mail to
such Party’s respective address set forth in Section 14.3 will be effective service of
process for any Action, suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction as set forth in the immediately preceding sentence. Each of the Parties
irrevocably and unconditionally waives any objection to the laying of venue of any Action, suit or
proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in
(i) state courts of the State of New York located in New York County, New York or (ii) the United
States District Court for the State of New York sitting in the Southern District, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim in any such court
that any such Action, suit or proceeding brought in any such court has been brought in an
inconvenient forum. Notwithstanding the foregoing, each Party agrees that a final judgment in any
Action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment in
any jurisdiction or in any other manner provided in law or in equity.

          (b) EACH OF THE PARTIES IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ACTIONS OF THE
PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

                    Section 14.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which together will constitute
one and the same instrument.

* * * * *

63

 

          IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the
date first above written.

	 	 	 	 	 
	 	IPC SYSTEMS, INC.

 	 
	 	By:  	                         /s/ Lance Boxer
 	 
	 	 	Name:  	Lance Boxer 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	WHITEHALL MERGER CORPORATION

 	 
	 	By:  	/s/ Lance Boxer
 	 
	 	 	Name:  	Lance Boxer 	 
	 	 	Title:  	President 	 
	 
	 	WESTCOM HOLDING CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PRINCIPAL STOCKHOLDERS:

ONE EQUITY PARTNERS LLC

 	 
	 	By:  	/s/ David Walsh
 	 
	 	 	Name:  	David Walsh 	 
	 	 	Title:  	Partner 	 
	 
	 	BANC OF AMERICA CAPITAL INVESTORS L.P.

 	 
	 	By:  	/s/ Georg E. Morgan, III
 	 
	 	 	Name:  	George E. Morgan, III 	 
	 	 	Title:  	Member 	 
	 

(Signature Page to Merger Agreement)

 

 

	 	 	 	 	 
	 	MICHAEL HIRTENSTEIN

 	 
	 	/s/ Michael Hirtenstein
 	 
	 	 	 
	 	 	 
	 

(Signature Page to Merger Agreement)EX-10.5

 

EXHIBIT
10.5

Execution Copy

PURCHASE AGREEMENT

by and among

POSITRON INC.,

POSITRON PUBLIC SAFETY SYSTEMS INC.,

IPC INFORMATION SYSTEMS HOLDINGS INC.,

TSW COMMAND SYSTEMS, INC.,

and

IPC SYSTEMS, INC.

Dated as of February 9, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	ARTICLE I PURCHASE AND SALE 	 	 	2	 
	1.1
	 	Agreement to Purchase and Sell	 	 	2	 
	1.2

	 	Purchase Price; Escrow Amount
	 	 	2	 
	1.3

	 	Options;
	 	 	3	 
	1.4

	 	Ordering of Transactions
	 	 	3	 
	1.5

	 	PPSS Shares Purchase Price Adjustment
	 	 	3	 
	 
	 	 	 	 	 	 
	ARTICLE II REPRESENTATIONS AND WARRANTIES	 	 	5	 
	2.1

	 	Representations and Warranties Relating to Sellers
	 	 	5	 
	2.2

	 	Representations and Warranties Relating to the Company
	 	 	6	 
	2.3

	 	Representations and Warranties of the IPC Parties
	 	 	21	 
	 
	 	 	 	 	 	 
	ARTICLE III CERTAIN COVENANTS	 	 	22	 
	3.1

	 	Conduct of the Company Pending the Closing
	 	 	22	 
	3.2

	 	No Solicitation
	 	 	23	 
	3.3

	 	Reasonable Efforts; Assurances
	 	 	23	 
	3.4

	 	Access and Information
	 	 	23	 
	3.5

	 	Notification of Certain Matters
	 	 	24	 
	3.6

	 	Purchasers’ Notification Obligations
	 	 	24	 
	3 7

	 	Performance Bonds
	 	 	24	 
	3.8

	 	Satisfaction of Indebtedness
	 	 	25	 
	3.9

	 	Positron Technologies, Inc. Manufacturing Agreement
	 	 	25	 
	3.10

	 	Cancellation of Intercompany Account Balances
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE IV CONDITIONS TO CLOSING	 	 	25	 
	4.1

	 	Conditions to Obligation of Sellers
	 	 	25	 
	4.2

	 	Conditions to Obligation of Purchasers
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE V CLOSING	 	 	26	 
	5.1

	 	Closing	 	 	26	 
	5.2

	 	Deliveries by Sellers
	 	 	27	 
	5.3

	 	Deliveries by Purchasers
	 	 	28	 
	5.4

	 	Other Documents
	 	 	28	 
	 
	 	 	 	 	 	 
	ARTICLE VI TERMINATION	 	 	28	 
	6.1

	 	Termination
	 	 	28	 
	6.2

	 	Effect of Termination
	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE VII INDEMNIFICATION	 	 	29	 
	7.1

	 	Survival
	 	 	29	 
	7.2

	 	Indemnification by PI
	 	 	30	 

-i-

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	7.3

	 	Indemnification by Purchasers
	 	 	30	 
	7.4

	 	Claims
	 	 	31	 
	7.5

	 	Limitation on Liability
	 	 	31	 
	7.6

	 	Mitigation
	 	 	32	 
	7.7

	 	Escrow
	 	 	33	 
	7.8

	 	Exclusivity
	 	 	33	 
	7.9

	 	Treatment of Indemnity Payments
	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE VIII ADDITIONAL COVENANTS	 	 	34	 
	8.1

	 	Confidentiality	 	 	34	 
	8.2

	 	Restrictive Covenants
	 	 	34	 
	8.3

	 	Tax Returns
	 	 	36	 
	8.4

	 	Public Announcements
	 	 	37	 
	8.5

	 	PI Releases
	 	 	37	 
	8.6

	 	Company Releases
	 	 	38	 
	8.7

	 	COBRA
	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE IX DEFINITIONS	 	 	39	 
	9.1

	 	Certain Definitions
	 	 	39	 
	9 2

	 	Other Defined Terms
	 	 	43	 
	 
	 	 	 	 	 	 
	ARTICLE X MISCELLANEOUS	 	 	45	 
	10.1

	 	Notices	 	 	45	 
	10.2

	 	Amendments and Waivers
	 	 	46	 
	10.3

	 	No Presumption Against Drafter
	 	 	46	 
	10.4

	 	Interpretation
	 	 	47	 
	10.5

	 	Nonassignability
	 	 	47	 
	10.6

	 	Parties in Interest
	 	 	47	 
	10.7

	 	Governing Law
	 	 	47	 
	10.8

	 	Jurisdiction; Venue; Services of Process
	 	 	47	 
	10.9

	 	WAIVER OF JURY TRIAL
	 	 	48	 
	10.10

	 	Severability
	 	 	48	 
	10.11

	 	Entire Agreement
	 	 	48	 
	10.12

	 	Counterparts
	 	 	48	 
	10.13

	 	Expenses
	 	 	48	 
	10.14

	 	Obligations of Purchasers
	 	 	48	 
	10.15

	 	IPC Guaranty
	 	 	49	 

-ii-

 

PURCHASE AGREEMENT

     THIS PURCHASE AGREEMENT (this “Agreement”) is made as of February 9, 2007, by and among
POSITRON INC., a company incorporated under the laws of Quebec (“PI”), POSITRON PUBLIC SAFETY
SYSTEMS INC., a corporation incorporated under the laws of Canada (“PPSS” and collectively with PI,
“Sellers”), IPC INFORMATION SYSTEMS HOLDINGS INC., a Delaware corporation (“IPC-US”), TSW COMMAND
SYSTEMS, INC., a corporation incorporated under the laws of Canada (“IPC-Canada” and collectively
with IPC-US, “Purchasers”), and IPC SYSTEMS, INC., a Delaware corporation (“IPC” and collectively
with Purchasers, the “IPC Parties”). Capitalized terms used in this Agreement without definition
shall have the meanings set forth or referenced in Article IX.

WITNESSETH:

     WHEREAS, PPSS, together with Positron Public Safety Systems Corp., a Georgia corporation and
wholly owned subsidiary of PPSS (“PPSS Georgia”) and Masys Corporation, a Minnesota corporation
and wholly owned subsidiary of PPSS Georgia (“Masys” and, together with PPSS Georgia, the
“Subsidiaries” and, together with PPSS and PPSS Georgia, the “Company”) is engaged in the business
of providing public safety systems, including enhanced 9-1-1, command and control, dispatch,
mapping and records solutions, for police departments, fire departments, emergency medical service
providers and homeland security authorities (the “Business”);

     WHEREAS, PPSS is the owner of all of the issued and outstanding shares (the “PPSS Georgia
Shares”) of the share capital of PPSS Georgia as of the date hereof;

     WHEREAS, PI is owner of all of the issued and outstanding shares (the “Existing PPSS Shares”)
of the share capital of PPSS as of the date hereof;

     WHEREAS, PI is also owner of a promissory note of PPSS dated October 7, 2005, in the principal
amount of Cdn $6,264,000 (the “PPSS Note”) and an account receivable owed by PPSS, the outstanding
balance of which, net of accounts payable owed by PI to PPSS, was approximately Cdn $6,021,141 as
of December 31, 2006 (the “PPSS Receivable”);

     WHEREAS, on or prior to the Closing (as hereinafter defined) PI will convert (the “Debt
Conversion”) the PPSS Note and PPSS Receivable into newly issued shares (the “Additional PPSS
Shares” and, together with the Existing PPSS Shares, the “PPSS Shares”) of PPSS;

     WHEREAS, upon the terms and conditions set forth in this Agreement, the parties hereto
desire, among other things, that (i) IPC-US purchase the PPSS Georgia Shares from PPSS; and (ii)
IPC-Canada purchase the PPSS Shares from PI; and

     WHEREAS, PC desires to be a party to this Agreement to guarantee certain obligations of
Purchasers as set forth herein.

     NOW, THEREFORE, in consideration of the covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

 

ARTICLE I

PURCHASE AND SALE

     1.1 Agreement to Purchase and Sell.

          (a) Subject to the terms and conditions set forth herein, PPSS agrees to sell to IPC-US, and
IPC-US agrees to purchase from PPSS, at the Closing, free and clear of all Liens, other than
Permitted Liens, all of the PPSS Georgia Shares.

          (b) Subject to the terms and conditions set forth herein, PI agrees to sell to IPC-Canada, and
IPC-Canada agrees to purchase from PL, at the Closing, free and clear of all Liens, other than
Permitted Liens, all of the PPSS Shares.

     1.2 Purchase Price; Escrow Amount.

          (a) The aggregate purchase price for the PPSS Georgia Shares shall be US $17,360,000 (the
“PPSS Georgia Shares Purchase Price”).

          (b) Subject to adjustment set forth in Section 1.5, the aggregate purchase price for the PPSS
Shares shall be US $44,640,000 (the “PPSS Shares Purchase Price” and collectively with the PPSS
Georgia Shares Purchase Price, the “Purchase Price”).

          (c) The PPSS Georgia Shares Purchase Price shall be payable to PPSS in cash after the close of
business on the day immediately preceding the Closing Date by wire transfer of immediately
available funds to an account designated by PI.

          (d) The PPSS Shares Purchase Price shall be payable in cash on the Closing Date as follows:

          (i) US $6,200,000 of the PPSS Shares Purchase Price (the “Indemnity Escrow Amount”)
shall be deposited with a mutually agreed-upon escrow agent (the “Escrow Agent”) in
accordance with the terms and conditions of this Agreement and in accordance with the terms
of an escrow agreement substantially in the form of attached Exhibit A (the “Escrow
Agreement”);

          (ii) US $1,500,000 of the PPSS Shares Purchase Price (the “Tax Indemnity Escrow
Amount”) shall be deposited with the Escrow Agent in accordance with the terms and
conditions of this Agreement and in accordance with the terms of the Escrow Agreement; and

          (iii) US $5,000,000 of the PPSS Shares Purchase Price (the “Umbrella Indemnity Escrow
Amount”) shall be deposited with the Escrow Agent in accordance with the terms and
conditions of this Agreement and in accordance with the terms of the Escrow Agreement; and

          (iv) US $31,940,000 of the PPSS Shares Purchase Price shall be payable by IPC-Canada
to PI by wire transfer of immediately available funds to an account designated by PI.

2

 

     1.3 Options. On or before the Closing, Sellers shall cause each outstanding option to
purchase shares of the share capital of PPSS (each, an “Option”) and each equity incentive plan of
PPSS to be cancelled or otherwise terminated, whether upon the mutual agreement of PPSS and the
holder, or pursuant to the terms of such option or the PPSS Stock Option Plan, dated March 28, 2000.
The cancellation or termination and exchange of Options under this Section 1.3 shall in any event
be subject to and conditioned upon the consummation of the Closing.

     1.4 Ordering of Transactions. Notwithstanding anything to the contrary, the parties
agree that on the day immediately prior to the Closing Date and on the Closing Date the
transactions contemplated by this Agreement shall be effected in the following order:

          (a) First, on the day immediately prior to the Closing Date, the application of the
amount of cash and cash equivalents then held by the Subsidiaries to repay any Indebtedness owed by
the Subsidiaries to PI or PPSS;

          (b) Second, on the day immediately prior to the Closing Date, the distribution by the
Subsidiaries, directly or indirectly, to PPSS of any cash and cash equivalents not applied pursuant
to the Section 1.4(a);

          (c) Third, on the day immediately prior to the Closing Date, the purchase and sale of
the PPSS Georgia Shares and the payment of the PPSS Georgia Shares Purchase Price;

          (d) Fourth, on the day immediately prior to the Closing Date, the consummation of the
Debt Conversion; and

          (e) Fifth, on the day immediately prior to the Closing Date, the application of the
amount of cash and cash equivalents (including the PPSS Georgia Shares Purchase Price) then held by
PPSS to repay any Indebtedness owed by PPSS to PI (it being understood that PPSS Note and the PPSS
Receivable will be converted into the Additional Shares pursuant to the Debt Conversion);

          (f) Sixth, on the day immediately prior to the Closing Date, the distribution by PPSS to PI of
any cash and cash equivalents not applied pursuant to Section 1.4(e); and

          (g) Seventh, on the Closing Date, the purchase and sale of the PPSS Shares and the
payment of the PPSS Shares Purchase Price.

     1.5 PPSS Shares Purchase Price Adjustment.

          (a) Closing Date Balance Sheet. Within ninety (90) calendar days after the Closing
Date, PI shall prepare and deliver to IPC-Canada an unaudited consolidated balance sheet of the
Company as of the close of business on the Closing Date and immediately prior to the Closing (the
“Closing Date Balance Sheet”). The Closing Date Balance Sheet shall (x) be expressed in Canadian
Dollars (Cdn $); (y) be prepared in accordance with GAAP and incorporate all accounting methods
which are in accordance with GAAP and were utilized by the Company in connection with the
preparation of the balance sheet of the Company as at March 31, 2006, included as part of the
Financial Statements; and (z) for avoidance of doubt and without duplication, reflect all accruals
required by GAAP in respect of compensation, including,

3

 

as applicable, amounts in respect of salary, bonuses, sick pay, vacation pay, commissions, pension
plan contributions and employee benefits. The Closing Date Balance Sheet shall also include a
calculation of the Closing Date Working Capital.

          (b) Notice of Dispute. In the event that IPC-Canada wishes to dispute PI’s preparation
of the Closing Date Balance Sheet or its calculation of the Closing Date Working Capital,
IPC-Canada shall, within ninety (90) calendar days after receipt of the Closing Date Balance Sheet,
give written notice to PI of such dispute and the reasons therefor. PI and IPC-Canada shall attempt
in good faith to resolve such dispute within fifteen (15) calendar days after receipt by PI of such
notice of dispute, and in the event that the parties are unable to resolve such dispute within such
period, the parties agree that the Toronto or other Canadian office of the accounting firm of Grant
Thornton (or any other reputable independent certified public accounting firm that shall be
mutually agreed upon by PI and IPC-Canada, in the exercise of their reasonable discretion) (the
“Accounting Firm”) shall be employed to resolve such dispute as soon as reasonably practicable.
Prior to engaging an accounting firm as the Accounting Firm, the parties shall request the proposed
accounting firm to identify any matter for which such accounting firm (including its Affiliates)
has been engaged by any of the parties and their respective Affiliates since December 31, 2003, as
well as the general nature of such matter and the amount of fees received by such accounting firm
in such matter, and each of the parties agrees to promptly provide the accounting firm with a list
of their Affiliates for this purpose. If, pursuant to the preceding sentence, the proposed
accounting firm identifies that a party or its Affiliates engaged the proposed accounting firm,
then the party that did not so engage such accounting firm shall be entitled to reject the
engagement of such accounting firm as the Accounting Firm to resolve a dispute pursuant to this
Section 1.5, and, in such case, the parties shall select another accounting firm to be engaged as
the Accounting Firm. This process shall be repeated until an accounting firm is engaged by the
parties as the Accounting Firm.

          (c) Determination of Accounting Firm. The parties shall direct the Accounting
Firm to review the books and records of the Company as necessary in order to verify the accuracy of
the Closing Date Balance Sheet and to calculate the Closing Date Working Capital. The determination
of such Accounting Firm shall be final and binding upon the parties. In the event that the
Accounting Firm is so employed, the fees and costs charged by the Accounting Firm shall be borne by
PI and IPC-Canada equally.

          (d) Adjustment.

          (i) If the Closing Date Working Capital is less than Target Working Capital by an
amount exceeding Cdn $150,000 (the amount of such excess being herein referred to as the
“Working Capital Shortfall”, the PPSS Shares Purchase Price shall be decreased by the
amount equal to the Working Capital Shortfall, and PI shall pay to IPC-Canada an amount,
payable in Canadian Dollars (Cdn $), equal to the Working Capital Shortfall. At the option
of IPC-Canada the Working Capital Shortfall shall be payable in US Dollars (US $) and, in
such case, the Working Capital Shortfall shall be converted from Canadian Dollars (Cdn $)
to US Dollars (US $) at the noon exchange rate announced by the New York Federal Reserve
Bank on the date that the Closing Date Working Capital is finally determined, whether by
the mutual agreement of PI and IPC-Canada or by determination of the Accounting Firm;
provided, however, that in order to

4

 

exercise this option, IPC-Canada shall deliver appropriate written notice to PI within two
business days after the dates that the Closing Date Working Capital is finally determined.

          (ii) If the Closing Date Working Capital is greater than the Target Working Capital by
an amount exceeding Cdn $150,000 (the amount of such excess being herein referred to as the
“Working Capital Surplus”), the PPSS Shares Purchase Price shall be increased by the amount
of the Working Capital Surplus, and IPC-Canada shall pay to PI an amount, payable in
Canadian Dollars (Cdn $), equal to the Working Capital Surplus.

          (iii) Payment of the Working Capital Surplus or the Working Capital Shortfall, as
applicable, shall be made within 5 calendar days after the final determination of the
Closing Date Working Capital, whether by the mutual agreement of PI and IPC-Canada or by
determination of the Accounting Firm.

ARTICLE II
 REPRESENTATIONS AND WARRANTIES

     2.1 Representations and Warranties Relating to Sellers. PI hereby represents and
warrants to Purchasers as set forth below.

          (a) Authority. Each Seller has full corporate power and authority to enter into and
deliver this Agreement and each of the other agreements, certificates, instruments and documents
contemplated hereby (collectively, the “Ancillary Documents”), to carry out its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. Each
Seller has properly taken all corporate action required to be taken by such Seller with respect to
the execution and delivery of this Agreement and each of the Ancillary Documents, and the
consummation of the transactions contemplated hereby and thereby.

          (b) Execution and Delivery. This Agreement has been duly authorized, executed and
delivered by each Seller and constitutes a legal, valid and binding obligation of each Seller,
enforceable against each Seller in accordance with its terms and conditions, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors’ rights generally and by equitable
limitations on the availability of specific remedies. Each Ancillary Document to which a Seller is
a party will have been duly authorized, executed and delivered by such Seller upon the Closing and,
upon the execution and delivery thereof, will constitute a legal, valid and binding obligation of
such Seller, enforceable against such Seller in accordance with its terms and conditions, except as
such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors’ rights generally and by
equitable limitations on the availability of specific remedies.

          (c) No Conflicts. The execution, delivery and performance by each Seller of this
Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby do not and will not violate, conflict with or result in a breach of any
terms condition or provision of, or require the consent of any Governmental Authority or
any other Person under, or result in the creation of or right to create any Lien, other than a
Permitted

5

 

Lien, upon the PPSS Georgia Shares or the PPSS Shares under, (i) the articles of incorporation or
by-laws of either Seller or either Subsidiary, each as currently in effect, (ii) any judgment,
order, writ, injunction or decree of any Governmental Authority to which either Seller or either
Subsidiary is subject, or (iii) except as set forth on Schedule 2.1(c), any material
license, agreement, commitment or other instrument or document to which a Seller or a Subsidiary is
a party or by which a Seller or a Subsidiary is otherwise bound. No authorization, approval or
consent of, and no registration or filing with, any Governmental Authority or any other Person is
required in connection with the execution, delivery or performance by either Seller or either
Subsidiary of this Agreement or any Ancillary Document to which either Seller is a party.

          (d) Ownership of PPSS Shares. As of the date hereof, PI owns, beneficially and of
record, free and clear of any Liens, other than Permitted Liens, 50 million Class “A” common shares
of PPSS, which comprise all of the Existing PPSS Shares as of the date hereof. Upon completion of
the Debt Conversion, PI will own, beneficially and of record, free and clear of any Liens, other
than Permitted Liens, the Additional PPSS Shares which, together with the Existing PPSS Shares,
will comprise all of the PPSS Shares as of the Closing Date. Except for the issuance of the
Additional Shares pursuant to the Debt Conversion and the obligations set forth in this Agreement,
there are no commitments, options, contracts or other arrangements under which PI is or may become
obligated to sell or otherwise dispose of the PPSS Shares. At the Closing, upon delivery of and
payment for the PPSS Shares as provided in this Agreement, all of the PPSS Shares shall be
transferred to IPC-Canada, and IPC-Canada shall have good and valid title to the PPSS Shares free
and clear of any Liens, other than Permitted Liens. PI has not granted any power of attorney or
proxy with respect to any of the PPSS Shares.

          (e) Non-Residency Status. Neither PI nor PPSS is a “non-resident” of Canada within the
meaning of the Income Tax Act (Canada).

          (f) Solvency. PI is solvent and is able to pay its debts in the ordinary course of its
business as they become due. PI has sufficient capital to carry on its business as it is now being
conducted. PI owns assets and property having a value both at fair valuation and at present fair
saleable value on a going concern basis greater than the amount required to pay all of its debts
and liabilities as they come due.

     2.2 Representations and Warranties Relating to the Company. PI hereby represents
and warrants to Purchasers as set forth below.

          (a) Organization. Standing and Qualification. PPSS is a corporation duly
incorporated, validly existing and in good standing under the Canada Business Corporations Act.
PPSS is duly qualified, licensed or authorized to do business and, if applicable, in good standing
in each jurisdiction where the nature of the activities conducted by it or the character of the
properties owned, leased or operated by it require such qualification, licensing or authorization,
except where the failure to so qualify would not have a Material Adverse Effect. The Company has
full right, power and authority to carry on its business as now being conducted and to own or
lease and operate its properties as such properties are now being operated. PPSS has previously
delivered or made available to Purchasers true, correct and complete copies of the articles of
incorporation and by-laws of PPSS, each as currently in effect.

6

 

          (b) Competition Act Matters. For purposes of determining whether the
threshold has been met for a pre-merger notification as set forth in Section 109 of the
Competition Act, and calculated in accordance with the regulations under the Competition Act,
 as amended, the Company and its affiliates (as defined in the Competition Act) together have
(i) less than Cdn $200 million of assets in Canada, and (ii) less than Cdn $200 million in
gross revenue from sales in, from or into Canada.

          (c) Capitalization. The authorized capital stock of PPSS consists of (i) an unlimited
number of Class “A” common shares, of which 50 million shares are outstanding, (ii) an unlimited
number of Class “B” common shares, of which no shares are issued and outstanding, (iii) an
unlimited number of Class “A” preferred shares, of which no shares are issued and outstanding,
(iv) an unlimited number of Class “B” preferred shares, of which no shares are issued and
outstanding, (v) an unlimited number of Class “C” preferred shares, of which no shares are issued
and outstanding, and (vi) an unlimited number of Class “D” preferred shares, of which no shares are
issued and outstanding. All of the issued and outstanding shares of capital stock of PPSS are duly
authorized, validly issued, fully-paid and nonassessable. Except for the issuance of the Additional
Shares pursuant to the Debt Conversion, as set forth in the articles of incorporation of PPSS or on
Schedule 2.2(c), there are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible or exchangeable securities, profits interests,
preemptive rights, rights of first refusal or other rights, agreements, arrangements or commitments
of any nature whatsoever under which PPSS is or may become obligated to issue, redeem, assign or
transfer any shares of capital stock of PPSS or purchase or make payment in respect of any shares
of capital stock of PPSS now or previously outstanding. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to PPSS or any shares of its
capital stock. The Existing PPSS Shares represent 100% of the outstanding equity securities of
PPSS as of the date hereof, and the PPSS Shares will represent 100% of the outstanding equity
securities of PPSS as of the Closing Date.

          (d) Subsidiaries. Except for the Subsidiaries and as set forth on Schedule
2.2(d), PPSS does not own of record, beneficially or equitably, any direct or indirect equity,
investment or other interest in any other Person. PPSS Georgia is a corporation duly
incorporated, validly existing and in good standing under the laws of the state of Georgia, and
Masys is a corporation duly incorporated, validly existing and in good standing under the laws of
the state of Minnesota. Each Subsidiary is duly qualified, licensed or authorized to do business
and, if applicable, in good standing in each jurisdiction where the nature of the activities
conducted by it or the character of the properties owned, leased or operated by it require such
qualification, licensing or authorization, except where the failure to so qualify would not have a
Material Adverse Effect. PPSS owns all of the issued and outstanding capital stock of PPSS Georgia,
and PPSS Georgia owns all of the issued and outstanding capital stock of Masys. At the Closing,
upon delivery of and payment for the PPSS Georgia Shares as provided in this Agreement, all of the
PPSS Georgia Shares shall be transferred to IPC-US, and IPC-US shall have good and valid title to
the PPSS Georgia Shares free and clear of any Liens, other than Permitted Liens.

          (e) Financial Statements. The Company has previously delivered or made available to
Purchasers the following financial statements (collectively, the “Financial Statements”) (i) the
audited consolidated balance sheet, consolidated statement of income,

7

 

consolidated statement of retained earnings and consolidated statement of cash flows of the Company
as at and for the years ended March 31, 2006 (the “Most Recent Fiscal Year End”), 2005 and 2004; and
(ii) the unaudited consolidated balance sheet, consolidated statement of income and consolidated
statement of retained earnings of the Company as at and for the eight months ended November
30, 2006. The Financial Statements have been prepared from and are consistent with the books,
records and accounts of the Company, and have been prepared in accordance with GAAP, consistently
applied throughout the periods indicated subject, in the case of the interim financial statements,
to normal year-end adjustments and the matters set forth on Schedule 2.2(e). The Financial
Statements present fairly, in all material respects, as of the dates and for the periods referred
to therein, the Company’s consolidated financial position and consolidated results of operations.

          (f) Absence of Undisclosed Liabilities. Except as set forth on Schedule
2.2(f), there are no liabilities of the Company which would be required under GAAP to be
reported or otherwise disclosed on a consolidated balance sheet of the Company, or any note
thereto, other than (i) liabilities set forth in the most recent balance sheet included in the
Financial Statements or in any note thereto; (ii) liabilities that have arisen thereafter in the
ordinary course of business in accordance with past practice; and (iii) liabilities that,
individually or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.

          (g) Ordinary Course. Except for the Separation Transactions or as disclosed on
Schedule 2.2(g), since the Most Recent Fiscal Year End, the Company has operated the
Business in the ordinary course consistent with past practice, and the Company has not made or
instituted, or agreed to make or institute, any material change in its methods of production,
assembly, purchase, sale, lease, management, marketing, distribution, accounting, investment of
funds or operations and, in particular, has not:

          (i) amended its articles of incorporation or by-laws;

          (ii) issued or sold any shares of or interests in, or rights of any kind to acquire
any shares of or interests in, or received any payment based on the value of, its capital
stock or any securities convertible or exchangeable into shares of its capital stock
(including any stock options, phantom stock or stock appreciation rights) or adjusted,
split, combined or reclassified its capital stock, or declared, paid or made any dividend
or made any other distribution on, or directly or indirectly redeemed, purchased, retired
or otherwise acquired, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock;

          (iii) made any investment of a capital nature in excess of $50,000, individually, or
$150,000 in the aggregate; provided, however, that the Company has made
capital expenditures and research and development expenditures consistent with the
Company’s budget for fiscal year 2007 presented to Purchasers;

          (iv) created, incurred or assumed any liability for borrowed money except liabilities
incurred under existing credit facilities to fund normal operations in the ordinary course
of business;

8

 

          (v) merged or consolidated with any other Person, acquired any capital stock or other
securities of any other Person, or acquired all or a significant portion of the assets of any
other Person;

          (vi) assumed or guaranteed any liability or responsibility (whether primarily, secondarily,
contingently or otherwise) for the obligations of any other Person, except for the endorsement for
collection by the Company of instruments in the ordinary course of business;

          (vii) sold, transferred, leased to others, granted Liens, other than Permitted Liens,
against, or otherwise disposed of any of its material assets, whether tangible or intangible,
except for inventory sold in the ordinary course of business;

          (viii) permitted any lapse to occur, failed to take any actions to protect, or suffered any
adverse change in respect of any of its Proprietary Rights;

          (ix) materially increased the compensation of any director or officer or, other than in the
ordinary course of business consistent with past practice, any other employee, consultant or
commission agent, or entered into, established, amended or terminated any benefit plan other than
as required pursuant to the terms of agreements in effect on the date of this Agreement or as may
be required by applicable Law;

          (x) made or rescinded any material election relating to Taxes, unless required to do so by
applicable Law;

          (xi) settled or compromised any material Tax liability of the Company;

          (xii) prepared or filed any Tax Return of the Company materially inconsistent with past
practice in preparing or filing similar Tax Returns in prior periods or, on any such Tax Return,
took any position, made any election, or adopted any method that was materially inconsistent with
positions taken, elections made or methods used in preparing or filing similar Tax Returns in
prior periods, in each case except to the extent required by Law;

          (xiii) made any material change to its accounting methods, principles or practices, except as
may be required by Law or by GAAP;

          (xiv) paid, discharged, canceled, redeemed, repaid, compromised or satisfied any material
claim, liabilities, debts or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business consistent with past practice, or failed
to pay or otherwise satisfy (except if being contested in good faith) any material accounts
payable, liabilities, debts or obligations when due and payable;

          (xv) (A) entered into any Material Agreement, or (B) amended or modified any Material
Agreement;

9

 

          (xvi) entered into any long term maintenance, support or services agreement other
than in the ordinary course of business;

          (xvii) disclosed any confidential information relating to Company Proprietary Rights,
other than to Persons with which the Company has entered into a confidentiality agreement;

          (xviii) adopted a plan of complete or partial liquidation or dissolution;

          (xix) initiated, compromised or settled (A) any material judicial, administrative or
arbitral actions, suits or proceedings (public or private) by or before a Governmental
Entity (other than in connection with the enforcement of the Company’s rights tinder this
Agreement), or (B) any material claim under any insurance policy for the benefit of the
Company or any of its Subsidiaries;

          (xx) agreed or committed, in writing or otherwise, to take any of the actions
described in the foregoing subclauses (i) through (xix); or

          (xxi) created any accounts receivable or executed any purchase order or contract
other than in the ordinary course of business consistent with, past practice.

          (h)
Title to Assets; Conduct of Business. Except as disclosed on Schedule
2.2(h) and except for (i) Real Property, which is covered by Section 2.2(j) and (ii) Proprietary
Rights, which are covered by Section 2.2(k), the Company has good and marketable title, or in the
case of leased or subleased assets, valid and subsisting leasehold interests in, all of its assets,
free and clear of any Liens, other than Permitted Liens. From and after the Closing, the Company
will own, lease or otherwise have the contractual right (through the Transition Services Agreement
or otherwise) to use all of the assets used in or necessary for the conduct of the Business as
currently conducted. Except as set forth on Schedule 2.2(1), the Company is not a party to
or subject to any agreement with any third party which restricts the ability of the Company to
conduct its business as currently conducted in any geographic area or to solicit customers,
employees or other service providers of any third party.

          (i) Tangible Assets. The tangible property owned, leased or used by the Company
(including buildings, structures, facilities and equipment) (i) is in good operating condition and
repair, reasonable wear and tear excepted and consistent with age; and (ii) except as disclosed on
Schedule 2.2(i), is located at the Real Property.

          (j) Real Property. The Company does not own and has never owned any real property.
Schedule 2.2(i) sets forth a true and complete list of all real property leased or
otherwise used by the Company, identifying the lessor thereof (the
“Real Property”). There is not
existing or proposed as a matter of public record or, to the best of
PI’s knowledge, presently
contemplated, any condemnation or similar action, or zoning action or proceeding, with respect to
any portion of the Real Property. There is not existing or proposed as a matter of public record
or, to the best of PI’s knowledge, presently contemplated, any moratorium or similar impediment to
land development, building construction, or hook-up to usage of water or sewer or other utility
services that could materially adversely affect, either individually or in the aggregate, the use
of any Real Property as it is currently being used or proposed to be used. The

10

 

Company has not granted any other Person any light to use or occupy any portion of the Real
Property, and no other Person is using or occupying the same.

          (k) Proprietary Rights.

          (i)
Schedule 2.2(k) identifies (A) each federal, state or foreign patent or
trademark, tradename, servicemark or copyright registration which has been issued to the
Company and has not expired with respect to any Proprietary Rights (with any relevant
registration numbers identified), (B) each pending federal, state or foreign patent
application or application for registration of a trademark, tradename, servicemark or
copyright which the Company has made with respect to any Proprietary Right, (C) each
license, sublicense, agreement or other permission pursuant to which the Company has
granted to any third party me right to use any Proprietary Rights, and (D) each license,
sublicense, agreement or other permission granted by a third party to the Company pursuant
to use any Proprietary Rights.

          (ii)
Except as disclosed on Schedule 2.2(k)(ii),each of the Proprietary Rights
disclosed pursuant to Section 2.2(k)(i) as owned by the Company, and all software developed
internally by the Company for use in its products, (A) is owned by the Company, free and
clear of any Liens, other than Permitted Liens, and (B) is not currently the subject of any
challenge, opposition, litigation or any other proceeding before any court, Governmental
Authority or other regulatory body, except for proceedings in order to prosecute pending
applications for registration of Proprietary Rights.

          (iii) Except with respect to licenses disclosed pursuant to Section 2.2(k)(i)(D), and
except as disclosed on Schedule 2.2(k)(iii),the Company is not required to pay any
royalty, license fee or similar compensation with respect to Proprietary Rights in
connection the conduct of the Business as currently conducted. The Company currently owns
or possesses licenses or other rights to use all Proprietary Rights necessary to the
conduct of the Business as currently conducted and consistent with past practice.

          (iv) The Company has not interfered with, infringed upon, misappropriated or otherwise
come into conflict with the Proprietary Rights of any other Person or committed any acts of
unfair competition. No claims have been asserted by any Person alleging such interference,
infringement, misappropriation, conflict or act of unfair competition.

          (v)
To the best of PI’s knowledge, no Person is infringing upon the Proprietary Rights
owned or used by the Company, and the Company has not notified any Person that it believes
that such Person is interfering with, infringing, misappropriating or otherwise acting in
conflict with the Proprietary Rights owned or used by the Company or engaging in any act of
unfair competition or has done any of the foregoing.

11

 

          (vi) There are no Proprietary Rights developed by any shareholder, director, officer,
consultant or employee of the Company that are used by the Business and that have not been
transferred to the Company, or are not owned by the Company free and clear of any Liens,
other than Permitted Liens.

          (vii) The Company has taken all necessary action, including the payment of maintenance
and renewal fees due and owing prior to the date of this Agreement, in all appropriate
jurisdictions to register and maintain the registration of all of the Proprietary Rights
that are owned by the Company and which may be registered.

          (1)
Material Agreements. Schedule 2.2(I) sets forth a true and complete list
of each of the following, whether written or oral, to which the Company is a party or is otherwise
bound (each, a “Material Agreement” ):

          (i) all loan agreements, indentures, mortgages, notes, installment obligations,
factoring arrangements, capital leases or other agreements or instruments relating to the
borrowing of money (or guarantees thereof);

          (ii) all contracts, open purchase orders or commitments for the purchase or sale of
assets or services, excluding contracts, orders or commitments, or any series of related
contracts, orders or commitments, involving payments, cost of performance or receipts by
the Company following the date hereof of greater than $250,000;

          (iii) all contracts with any Governmental Authority, in which the Governmental
Authority is contracting in a capacity other than as a customer of the Company;

          (iv) all leases, subleases or other agreements or arrangements under which the Company
has the right to use me Real Property;

          (v) all leases, subleases or any other agreements or arrangements under which the
Company has the right or license to use any personal property, whether tangible or
intangible, owned or licensed by another Person;

          (vi) all agreements or arrangements under which any other Person has the right or
license to use any real property or personal property, whether tangible or intangible,
owned or licensed by the Company;

          (vii) all joint venture, “partnering” or similar agreements or understandings;

          (viii) all sales representative, distributor or dealer agreements, practices or
understandings;

          (ix) all collective bargaining, employment, consulting or retainer agreements not
listed on Schedule 2.2(t); and

12

 

          (x) all other contracts, without regard to monetary amount, which are material to the
Company or the Business and not listed above.

          Neither the Company nor, to the best of PI’s knowledge, any other party is in default under
any Material Agreement and, to the best of PI’s knowledge, no event has occurred which (after
notice or lapse of time or both) would become a breach or default under any Material Agreement.
Each Material Agreement is in full force and effect and is valid and legally binding against the
Company, and, to the best of PI’s knowledge, the other parties thereto.

          (m) Litigation. Except as disclosed on Schedule 2.2(m), there is no claim,
legal action, suit, arbitration, investigation by any Governmental Authority or other proceeding
pending or, to the best of PI’s knowledge, threatened against or relating to the Company which, if
adversely determined, could result in a Material Adverse Effect or would otherwise prevent, hinder
or delay consummation of the transactions contemplated herein. Neither the Company nor any of its
assets is subject to any outstanding judgment, order, writ, injunction or decree of any
Governmental Authority.

          (n) Permits; Compliance with Laws.

          (i) Except as set forth on Schedule 2.2(n), (A) the Company has obtained all
licenses, permits and other authorizations from all applicable Governmental Authorities
necessary for the conduct of its business as currently conducted and (B) the Company is in
compliance with all Laws applicable to it and has not received any written notice of any
violation thereof.

          (ii) None of the Company or any of the directors, officers or managers of the Company
nor, to the best of PI’s knowledge, any of the Company’s employees or agents, or the
employees or agents or any other Person acting for or on behalf of any of them, has
directly or indirectly (A) made any contribution or gift, which contribution or gift is in
violation of any applicable Law, (B) made any bribe, rebate, payoff, influence payment,
kickback or other payment to any Person, private or public, regardless of form, whether in
money, property or services (I) to obtain favorable treatment in securing business, (II) to
pay for favorable treatment for business secured, or (III) to obtain special concessions or
for special concessions already obtained for or in respect of the Company or any
Subsidiary, or any Affiliate thereof or (C) established or maintained any fund or asset for
the purpose of effecting any action described in this clause (ii) that has not been
properly recorded in the books and records of the Company.

          (o) Related Party Transactions. Except as disclosed on Schedule 2.2(o), the
Company is not directly or indirectly a party to any contract or other arrangement (whether
written or oral) providing for services (other than as an employee of a Company), products, goods
or supplies, rental of real or personal property, or otherwise requiring payments to or from any
of the following: Seller, an Affiliate of Seller (other than the PPSS and the Subsidiaries), any
director or officer of PPSS, PPSS Georgia or Masys, or any corporation, partnership, other
business entity or trust in which such director or officer has greater than a ten percent (10%)
interest.

13

 

          (p) Insurance. Schedule 2.2(p) sets forth, as of the date hereof (and to be
updated as of the Closing Date to reflect any changes), a list of the Company’s currently
effective insurance policies (including property, casualty, liability (general, products and
directors and officers) and workers’ compensation), excluding any insurance policies relating to
the Company U.S. Benefit Plans or the Canadian Benefit Plans, listing for each policy the identity
of the insurance carrier, the policy period, the limits and retentions and any special exclusions.
Such policies are currently in full force and effect and the Company has not received any notice of
termination or disallowance of claim on the part of the insurance carriers. The Company has not
been denied insurance coverage by any provider at any time since December 31, 2001.

          (q) Taxes. Except as set forth on Schedule 2.2(q):

          (i) The Company has filed, or has applied for an extension to file (or has had filed
or applied for on its behalf) on a timely basis all Tax Returns required by applicable Law
to be filed by it on or before the Closing Date;

          (ii) All Tax Returns required by applicable Law to be filed by it on or before the
Closing Date were true, correct and complete when filed;

          (iii) The Company has paid all Taxes due as a result of its activities or has made
adequate provision for such Taxes such that the reserves for current Taxes (excluding
reserves for deferred Taxes) in respect of the period ended on or including the Closing
Date or to any periods ending prior thereto (the “Pre-Closing Tax Period”) will not be less
than the reasonably estimated Tax liability accruing or payable by the Company in respect
of the Pre-Closing Tax Period;

          (iv) There are no ongoing audits or examinations of any of the Tax Returns of the
Company;

          (v) There are no claims, investigations, actions or proceedings pending or, to the
best of PI’s knowledge, threatened against the Company by any taxing authority for any past
due Taxes with respect to which the Company would be liable;

          (vi) There has been no waiver of any applicable statute of limitations or reassessment
period nor any consent for the extension of the time for the assessment of any Tax against
the Company;

          (vii) The Company is not a party to any tax sharing agreement which is binding and in
effect on the date hereof;

          (viii) The Company has withheld and paid over all Taxes required to have been withheld
and paid over and complied with all material information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in connection
with material amounts paid or owing to any employee, independent contractor, creditor,
stockholder, non-resident or other third party;

14

 

          (ix) Neither PPSS nor any of its Subsidiaries has ever been a member of an affiliated,
combined, consolidated or unitary Tax group (other than a group of which the Seller or one of its
Subsidiaries was the common parent) and the Company is not liable for the Taxes of any other Person
under Treasury Regulations §1.1502-6 (or any similar provision of state, local or foreign law), as
transferee or successor, by contract, or otherwise;

          (x) The Company is not, nor has it ever been, a United States real property holding company
within the meaning of Section 897(c)(2) of the Code;

          (xi) The Company will not be required as a result of any adjustment under Section 481 of the
Code, or any “closing agreement” as described in Section 7121 of the Code (or any similar
provision of state, local or foreign Law) to include any material item of income or exclude any
material item of deduction from any Tax period ending on or after the Closing Date;

          (xii) No closing agreements, private letter rulings or similar agreements have been entered
into or issued by any taxing authority with respect to the Company that will affect the Company’s
liability for taxes in periods ending after the Closing Date. The Company has made available to
Purchasers copies of all Tax Returns filed by the Company in the past three years;

          (xiii) The Company will not at any time be deemed to have a capital gain pursuant to
subsection 80.03(2) of the Income Tax Act (Canada) or any equivalent provincial provision as a
result of any transaction or event taking place in any taxation year ending on or before the
Closing Date;

          (xiv) There are no circumstances existing which could result in the application of section 78
or 160 of the Income Tax Act (Canada) or any equivalent provincial provision to the Company; and

          (xv) The Company has charged, collected and remitted on a timely basis all Taxes as required
under applicable legislation on any sale, supply or delivery whatsoever made by the Company.

          (r) U.S. Employee Benefit Plans.

          (i) Schedule 2.2(r) lists all U.S. Pension Plans and U.S. Welfare Plans which are
maintained or contributed to by the Company. Each U.S. Pension Plan which is intended to be
“qualified” within the meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service (the “IRS”) to be so qualified and each trust created thereunder has been
determined by the IRS to be tax exempt under Section 501 (a) of the Code. No “prohibited
transaction,” as such term is defined in Section 406 of ERISA, has occurred with respect to any
U.S. Pension Plan or U.S. Welfare Plan. No breach of fiduciary responsibility under Part 4 of
Title I of ERISA has occurred which has resulted or may result in liability to the Company, any
trustee, administrator or fiduciary of any U.S. Pension Plan or U.S. Welfare Plan. The Company
does not

15

 

maintain or contribute to a “Multiemployer Plan,” as such term is defined in Section 4001(a)(3)
of ERISA.

          (ii) The Company has made available to Purchasers true and complete copies of the following
documents, as they have been amended to the date hereof, relating to each U.S. Pension Plan and
U.S. Welfare Plan: (A) all plan documents; (B) the current summary plan description for each U.S.
Pension Plan and U.S. Welfare Plan; (C) the Form 5500, if applicable, for the most recent plan
year; and (D) all insurance contracts.

          (iii) With respect to each U.S. Pension Plan and U.S. Welfare Plan, as applicable, except as
would not, individually or in the aggregate, have a Material Adverse Effect: (A) the Company has
performed all obligations required to be performed by such entity thereunder and the Company is
not in default under or in violation thereof; and (B) each U.S. Pension Plan and U.S. Welfare
Plan has been established, operated, maintained and performed in compliance with its terms,
ERISA, the Code and all other applicable Laws, statutes, orders, rules and regulations. There are
no actions, proceedings, arbitrations, investigations, suits or claims pending, or to best of
PI’s knowledge threatened or anticipated (other than routine, non-material claims for benefits)
with respect to any U.S. Pension Plan or U.S. Welfare Plan. No U.S. Pension Plan or U.S. Welfare
Plan is under audit or investigation by the IRS, the Department of Labor or the Pension Benefit
Guarantee Corporation, and to the best of PI’s knowledge, no such audit or investigation is
pending or threatened.

          (iv) The Company does not maintain or contribute to any U.S. Pension Plan or U.S. Welfare
Plan which provides, or has any liability or obligation to provide, material life insurance,
medical or other employee welfare benefits to any employee upon his retirement or termination of
employment, except as may be required by Section 4980B of the Code.

          (v) The execution of, and performance of the transactions contemplated in, this Agreement
will not, whether alone or in connection with any other event, result in any material payment
(whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect to any employee or
under any U.S. Pension Plan or U.S. Welfare Plan or Canadian Employee Benefit Plan.

          (vi) The Company has not made any payments or provided any benefits, and is not obligated to
make any payments or provide any benefits, and is not a party to any arrangement that under any
circumstances could obligate it to make any payments or provide any benefits, that would not be
deductible under Section 280G of the Code.

          (s) Canadian Employee Benefit Plans.

          (i) Schedule 2.2(s) lists all retirement, pension, supplemental pension, post
retirement savings, retirement savings, deferred compensation, incentive, life

16

 

insurance, medical, hospital, dental care, vision care, drag, sick leave, short term or long term
disability, salary continuation, or other employee benefit plan, program, arrangement or policy
that is maintained or otherwise contributed to by PPSS, or offered to PPSS’ employees or former
employees, and their respective spouse or beneficiaries, other than government sponsored pension,
employment insurance, workers compensation and health insurance plans (the “Canadian Employee
Benefit Plans”).

          (ii) Complete and updated copies of all documents pertaining to each Canadian Employee Benefit
Plan have been provided or otherwise been made available to Purchasers, including each plan’s text,
the three (3) last financial or actuarial reports (if any), and documents remitted to members or
participants in any Canadian Employee Benefit Plan and their respective spouse or beneficiaries,
and all material correspondence with the competent authorities in relation to such plans.

          (iii) Except as disclosed on Schedule 2.2(s), each Canadian Employee Benefit Plan is
and has been established, maintained, administered and funded at all times incompliance with its
terms and with the requirements of all applicable Laws; and is in good standing in respect of such
requirements and Laws.

          (iv) Except as disclosed on Schedule 2.2(s) all contributions, premium or other
payment of any nature whatsoever, including any interest or penalty, that is or was at any time
required to be paid or remitted to in relation to any Canadian Employee Benefit Plan have been
paid and remitted in due time.

          (v) Except as disclosed on Schedule 2.2(s), PPSS does not contribute and is not and
was never required to contribute to any pension plan, including “registered retirement savings
plans” (as defined in the Income Tax Act (Canada) (the “ITA”), “registered pension plans” (as
defined in the ITA), “retirement compensation arrangements” (as defined in the ITA) and
supplemental pension plans and arrangements, but excluding statutory plans (the “Pension Plans”).
Except as disclosed on Schedule 2.2(s), PPSS does not contribute and is not and was never
required to contribute to any multi-employer pension or benefit plan.

          (vi) No Pension Plan is or was at any time a defined benefit pension plan or contained any
undertaking to provide any specific amount to any employee or former employee or their spouses
after their retirement.

          (vii) There was no partial wind up, cash withdrawal, merger or division, or transfer of
assets involving any Pension Plan.

          (viii) No facts or circumstances exist that could adversely affect the tax exempt status of
any Canadian Employee Benefit Plans (including any Pension Plan).

          (t) Labor & Employment Matters.

          (i) Schedule 2.2(t) lists all of the employees of the Company (the “Employees”) as of
the date of this Agreement and the position, status, length of service, compensation and benefits
(other than benefits that are the subject to Section 2.2(r) or

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Section 2.2(s)) of each of them, respectively. Except as disclosed in Schedule
2.2(t), the Company has not entered into any written employment contracts with any of
its non-unionized Employees. Except as disclosed in Schedule 2.2(t). no Employee is
on long-term disability leave, extended absence or receiving benefits pursuant to
applicable provincial workers compensation legislation.

          (ii) The Company is not a party to any collective bargaining agreement, contract or
legally binding commitment to any trade union or similar employee organization or group in
respect of or affecting any of its Employees and, to the best of PI’s knowledge, the
Company is not subject to any union organization effort.

          (iii) Except as set forth on Schedule 2.2(t), the Company has not paid nor
will it be required to pay any bonus, fee, distribution, remuneration or other
compensation to any person (other than salaries, wages or bonuses paid or payable to
employees in the ordinary course of business in accordance with current compensation
levels and practices as set out in Schedule 2.2(t)) as a result of the transaction
contemplated by this Agreement.

          (iv) The Company is in compliance in all material respects with all currently
applicable laws respecting, as applicable, employment and employment practices and
standards, terms and conditions of employment and wages and hours, occupational health and
safety, human rights, labor relations and workers compensation and is not engaged in any
unfair labor practice. Since December 31, 2005, there have been no claims nor, to the best
of PI’s knowledge, are there any threatened complaints under such laws against the Company
in respect of its business. There is no unfair labor practice complaint pending or, to the
best of PI’s knowledge, threatened against the Company before, as applicable, any
provincial or federal labor relations board or any similar authority. The Company is not
subject to assessments under any applicable provincial workers compensation legislation.
There are no pending or, to the best of PI’s knowledge, threatened charges against the
Company under applicable provincial occupational health and safety legislation relating to
its business.

          (v) All accruals for unpaid vacation pay, premiums for employment insurance, health
premiums, Canada Pension Plan premiums, accrued wages, salaries, bonuses and commissions
up to the Closing Date have been reflected in the books and records of the Company.

          (u) Brokerage Fees. Except as set forth on Schedule 2.2(u), neither the
Company nor Seller has engaged or authorized any broker, investment banker or other Person to act
on its or their behalf, directly or indirectly, as a broker or finder who might be entitled to a
fee, commission or other remuneration in connection with the transactions contemplated by this
Agreement. All fees detailed on Schedule 2.2(u) shall be paid by Seller.

          (v) Product Warranty. Each product manufactured, assembled, sold, leased or
delivered by the Company, has to the best of PI’s knowledge, been in conformity, in all material
respects, with all applicable contractual commitments and all express warranties made by the
Company, and the Company has no known liability for replacement or repair thereof or other

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damages in connection therewith, other than as provided in contracts between the Company and its
customers.

          (w) Closing Date. All of the representations and warranties of Seller contained in
this Section 2.2 are true and correct on the date of this Agreement and will be true on the Closing
Date, except to the extent that Seller has otherwise advised Purchasers in writing before the
Closing (each a “Schedule Update”). Each Schedule Update delivered to Purchase shall be deemed to
modify the representations and warranties herein for the purposes of any claims for indemnification
pursuant to Section 7.2(a) after the Closing Date to the extent that such Schedule Update discloses
facts, events or circumstances which occurred after March 7, 2007. No Schedule Update shall be
deemed to modify the representations and warranties herein for purposes of determining whether or
not the condition to Closing set forth in Section 4.2(b) has been satisfied.

          (x) No Other Representation or Warranty. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 2.1
OR THIS SECTION 2.2, SELLER MAKES NO OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SHARES, THE COMPANY, THE BUSINESS OR ANY OF THE COMPANY’S ASSETS, INCLUDING ANY
WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, EACH OF WHICH REPRESENTATIONS
AND WARRANTIES IS HEREBY EXPRESSLY DISCLAIMED.

          (y) Environmental Matters. Except as disclosed in Schedule
2.2(y):

          (i) The Company is in compliance with and for the past three (3) years has been in
compliance in all material respects with, all applicable Environmental Laws and all
permits, approvals, identification numbers, licenses or other authorizations required to
operate the Business or the Real Property, whether leased or owned, under any applicable
Environmental Law (“Environmental Permits”). All past noncompliance with Environmental Laws
or Environmental Permits has been resolved without any pending, ongoing or future
obligation, cost or liability.

          (ii) To the best of PI’s knowledge, there are no underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which (a)
petroleum and petroleum products, by-products, or breakdown products, radioactive
materials, asbestos-containing materials and polychlorinated biphenyls, or (b) any other
chemicals, materials or substances regulated as toxic or hazardous or as a pollutant,
contaminant or waste under any applicable Environmental Law (collectively, “Hazardous
Materials”) are being or, since December 31, 2005, have been treated, stored or disposed on
any of the Real Property, or on any property formerly leased or occupied by the Company
during the Company’s occupation thereof since December 31, 2005.

          (iii) The Company has not, and to the best of PI’s knowledge, no other Person has,
disposed of, discharged, injected, spilled, leaked, leached, dumped, emitted, permitted to
escape, emptied, seeped, placed or the like (“Release” or “Released”) into or upon any land
or water or air or otherwise entering into surface waters, groundwaters,

19

 

surface water sediment, soil, subsurface strata or ambient air (the “Environment”)
Hazardous Materials on any of the Real Property, or on any property formerly leased or
occupied by the Company during the Company’s occupation thereof any of the Real Property,
or on any property formerly leased or occupied by the Company during the Company’s
occupation thereof since December 31, 2005.

          (iv) The Company is not conducting, and has not undertaken or completed, any
investigation, assessment, monitoring, treatment, excavation, removal, remediation or
cleanup of Hazardous Material in the Environment (“Remedial Action”) relating to any
Release or threatened Release at the Leased Real Property or at any other site, location or
operation, either voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law or Environmental Permit.

          (v) To the best of PI’s knowledge, there is no friable and damaged asbestos or
asbestos-containing material on any of the Real Property.

          (vi) None of the Real Property is listed or, to the best of PI’s knowledge, proposed
for listing on the National Priorities List under the federal Comprehensive Environmental
Response, Compensation, and Liability Act.

          (vii) There are no actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability, investigations,
proceedings, consent orders or consent agreements relating in any way to any Environmental
Law, any Environmental Permit or any Hazardous Material or arising from any alleged injury
or threat of injury to health, safety or the Environment (“Environmental Claims”) pending
or, to the best of PI’s knowledge, threatened against the Company, the Business or the
Leased Real Property, and to the best of PI’s knowledge, there are no circumstances that
can reasonably be expected to form the basis of any such Environmental Claim, including
with respect to any off-site disposal location currently or formerly used by the Company or
any of its predecessors or with respect to any previously operated facilities.

          (viii) The Company has no Environmental Permits.

          (ix) The Company has provided or made available to the Purchasers copies of (i) all
environmental assessment or audit reports and other similar studies or analyses obtained by
the Company since December 31, 2005, relating to the Real Property or the operations of the
Company in its possession, and (ii) all insurance policies issued at any time that may
provide coverage to the Company for environmental matters.

          (z) Accounts Receivable. Except to the extent, if any, reserved for on the Closing
Date Balance Sheet, all trade accounts receivable reflected on the Closing Date Balance Sheet
arose from, and the trade accounts receivable existing on the Closing Date will have arisen from,
the sale of products or services to Persons not affiliated with the Sellers or the Company and in
the ordinary course of the Business consistent with past practice. Except as reserved against on
the Closing Date Balance Sheet, those trade accounts receivable constitute or will

20

 

constitute, as the case may be, only valid claims of the Company which are, to the best of PI’s
Knowledge, not subject to any valid claims of setoff or other defenses or counterclaims other than
normal cash discounts accrued in the ordinary course of business consistent with past practice.

          (aa) Product liability. There are no pending or, to the best of PI’s knowledge,
threatened claims (and to the best of PI’s knowledge, there is no reasonable basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand
against the Company giving rise to any liability) arising out of any injury to individuals or
property as a result of the ownership, possession or any use of any product manufactured,
assembled, sold, leased or delivered by the Company, which liability is reasonably expected to
have a Material Adverse Effect.

          (bb) Customers, Distributors and Suppliers. Schedule 22(bb) sets forth a list
of the names of the ten (10) largest suppliers, the five (5) largest distributors and the ten (10)
largest customers (measured by dollar volume of purchases or sales, as applicable, in each case) of
the Company during each of the Company’s last two fiscal years. Except as set forth on Schedule
2.2(bb), no such customer, distributor or supplier has given the Company written notice, or to
the best of PI’s knowledge, any other notice, that it is terminating, canceling, limiting or
otherwise changing its business relationship with the Company, and, to the best of PI’s knowledge,
no such customer, distributor or supplier has threatened to do so. Except as set forth on
Schedule 2.2(bb), to the best of PI’s knowledge, no such customers, distributors or
suppliers has (y) given the Company notice that it plans to terminate, cancel, limit or otherwise
change its relationship with the Company as a result of the consummation of the transactions
contemplated by this Agreement or the Ancillary Documents, or (z) has threatened to take any such
action.

          (cc) Bank Accounts. Schedule 2.2(cc) lists all of the Company’s bank
accounts, including the account number, address and the names of all individuals authorized to
draw thereon or have access thereto.

          (dd) Powers of Attorney. Other than listed in Schedule 2.2(dd), the Company
has not granted any power of attorney or similar authority, which remains in force as of the
Closing Date.

          (ee) Corporate Books and Records. Complete and accurate copies of the Company’s
charter documents, bylaws, minutes books and stock registers have been provided by, or otherwise
made available to, Purchasers.

     2.3 Representations and Warranties of the IPC Parties. The IPC Parties hereby
represent and warrant to PI as set forth below.

          (a) Organization. Each of IPC-US and IPC is a corporation duly organized, validly
existing and in good standing under the Laws of Delaware. IPC-Canada is a corporation duly
organized, validly existing and in good standing under the Laws of the Canada.

          (b) Authority. Each IPC Party has full corporate power and authority to enter into
this Agreement and each of the Ancillary Documents to which such IPC Party is a party, to carry out
the transactions contemplated hereby and thereby, and to consummate the transactions

21

 

contemplated hereby and thereby. Each IPC Party has properly taken all corporate action required to
be taken by such IPC Party with respect to the execution and delivery of this Agreement and each of
the Ancillary Documents to which such IPC Party is a party, and the consummation of the
transactions contemplated hereby and thereby.

          (c) Execution and Delivery. This Agreement has been duly authorized, executed and
delivered by each IPC Party and constitutes a legal, valid and binding obligation of such IPC
Party, enforceable against such IPC Party in accordance with its terms and conditions. Each
Ancillary Document to which an IPC Party is a party will have been duly authorized, executed and
delivered by such IPC Party upon the Closing and, upon the execution and delivery thereof, will
constitute a legal, valid and binding obligation of such IPC Party, enforceable against such IPC
Party in accordance with its terms and conditions.

          (d) Competition Act Matters. For purposes of determining whether the threshold has
been met for a pre-merger notification as set forth in Section 109 of the Competition Act, and
calculated in accordance with the regulations under the Competition Act, as amended, the Purchasers
and their affiliates (as defined in the Competition Act) together have (i) less than Cdn $200
million of assets in Canada, and (ii) less than Cdn $200 million in gross revenue from sales in,
from or into Canada.

          (e) No Conflicts. The execution, delivery and performance by each IPC Party of this
Agreement and each of the Ancillary Documents to which such IPC Party is a party, and the
consummation of the transactions contemplated hereby and thereby do not and will not violate,
conflict with or result in a breach of any term, condition or provision of, or require the consent
of Governmental Authority or any other Person under, (i) the articles of incorporation or by-laws
of any IPC Party, (ii) any judgment, order, writ, injunction or decree of any Governmental
Authority to which any IPC Party is subject, or (iii) any material license, agreement, commitment or
other instrument or document to which any IPC Party is a party or by any IPC Party is otherwise
bound. No authorization, approval or consent of, and no registration or filing with, any
Governmental Authority is required in connection with the execution, delivery or performance by
each IPC Party of this Agreement and each of the Ancillary Documents to which such IPC Party is a
party.

          (f) Financial Capacity. On the Closing Date, the IPC Parties will have sufficient
funds on hand to purchase the PPSS Georgia Shares and the PPSS Shares on the terms and conditions
contemplated by this Agreement and to consummate the transactions contemplated hereby.

          (g) Litigation. There is no claim, legal action, suit, arbitration, investigation by
any Governmental Authority or other proceeding pending, or to the best of the IPC Parties’
knowledge, threatened against or relating to any IPC Party which, if adversely determined, could
prevent, hinder or delay consummation of the transactions contemplated herein.

          (h) Brokerage Fees. The IPC Parties have not engaged or authorized any broker,
investment banker or other Person to act on its behalf, directly or indirectly, as a broker or
finder who might be entitled to a fee, commission or other remuneration in connection with the
transactions contemplated by this Agreement.

22

 

ARTICLE III
 CERTAIN COVENANTS

     3.1 Conduct of the Company Pending the Closing. PI covenants and agrees that, prior
to the earlier to occur of the termination of this Agreement or the Closing, except for the
consummation of the Separation Transactions, the consummation of the Debt Conversion (including the
issuance of the Additional PPSS Shares), the settlement of the TIBCO Obligations (and actions
related thereto), conduct and transactions contemplated by this Agreement (including any Schedule
hereto) and as set forth in Schedule 3.1, it shall ensure that the Company conducts its
business in the usual, regular and ordinary course of business consistent with its past practice
and use its commercially reasonable efforts consistent with past practices to (A) preserve the
existing relationships of the Company with customers and suppliers, (B) preserve intact its
business organization, goodwill and ongoing operations, (C) retain the services of its key
employees, (D) perform in all material respects its obligations under the Material Contracts, (E)
maintain and keep in good repair (ordinary wear and tear excepted) its material properties, rights
and assets (including Proprietary Rights), (F) maintain insurance coverage on such terms and in
such amounts substantially as maintained on the date of this Agreement; and (G) make capital
expenditures and research and development expenditures consistent with the Company’s fiscal 2007
budget previously presented to Purchasers. PI shall not permit the Company to take any of the
actions described in any of clauses (i) through (xix) of Section 2.2(g) without the prior written
consent of Purchasers.

     3.2 No Solicitation. From and after the date hereof and prior to the earlier to occur
of the termination of this Agreement or the Closing, PI shall not, and shall not permit the Company
or its directors, officers, employees, representatives and agents to, directly or indirectly,
solicit, initiate or encourage any offers, inquiries or proposals from, or provide any confidential
information to, or participate in any discussions or negotiations with, any Person other than
Purchasers and their directors, officers, employees, representatives and agents concerning any
merger, sale of assets, sale of equity securities of the Company or other similar transaction
involving the Business, other than inquiries specifically relating to the transactions contemplated
by this Agreement.

     3.3 Reasonable Efforts; Assurances. Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto shall use all reasonable efforts to take or cause to be
taken all action, and to do or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including using reasonable efforts to
(a) obtain all consents or approvals referred to in Section 4.2(d), (b) effect promptly all
necessary or appropriate registrations or filings with any Governmental Authorities and (c) fulfill
or cause the fulfillment of the conditions to Closing set forth in Article IV. In case at any time
after the Closing Date any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or any transactions contemplated hereby, PI and Purchasers shall take
such further action without additional consideration.

23

 

     3.4 Access and Information.

          (a) From and after the date hereof and prior to the earlier to occur of the termination of
this Agreement or the Closing, PI shall afford, and shall cause the Company to afford, to
Purchasers and its accountants, counsel and other representatives full access, upon reasonable
prior notice and during normal business hours, to the Company’s properties, books, accounts,
records, contracts, and personnel, as well as all information concerning the Company’s business,
properties and personnel as Purchasers or its representatives may reasonably request. Without PI’s
prior approval, Purchasers shall cause its representatives to refrain from (i) contacting any of
the Company’s employees, customers or vendors in connection with Purchasers’ due diligence, and
(ii) disclosing the transactions contemplated by this Agreement to any Person. The rights of
Purchasers under this Section are subject to the obligations of Purchasers (as successor to or
assignee of IPC Information Systems, LLC) under the Non-Disclosure Agreement, dated August 3, 2005
(as extended on September 14, 2006, the “Nondisclosure Agreement”), between PPSS and IPC
Information Systems, LLC.

          (b) After the Closing, Purchasers shall afford, and shall cause the Company to afford, to PI
and its accountants, counsel and other representatives reasonable access to the books, records and
personnel of the Company to the extent PI has a legitimate interest therefor, including the
preparation of the Closing Date Balance Sheet, preparation of Tax Returns pursuant to Section 8.3,
reviewing Tax Returns prepared by the Company pursuant to Section 8.3, the implementation of any
Separation Transactions that are not completed prior to or on the Closing Date, the defense of any
claims, and other matters relating to the operations of the Company prior to the Closing Date, to
the extent that such Persons have a reasonable need for the same and provided that such access does
not unreasonably interfere with the operations of the Company.

     3.5 Notification of Certain Matters. From and after the date hereof and prior to the
earlier to occur of the termination of this Agreement or the Closing, PI shall notify
Purchasers:

          (a) if, subsequent to the date of this Agreement and prior to the Closing Date, PI becomes
aware of the occurrence of any event or the existence of any fact that renders any of the
representations and warranties made in Article II inaccurate or untrue in any material respect;

          (b) of any notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions contemplated by this
Agreement; or

          (c) of any notice or other communication from any Governmental Authority in connection with
the transactions contemplated hereby.

     3.6 Purchasers’ Notification Obligations. From and after the date hereof and prior to
the earlier to occur of the termination of this Agreement or the Closing, Purchasers shall
promptly notify PI in writing if either Purchaser becomes aware of the occurrence of any event
or the existence of any fact that renders any of the representations and warranties made in
Article II inaccurate or untrue in any material respect.

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     3.7 Performance Bonds. From and after the date hereof and prior to the earlier to occur of the termination of this Agreement or the Closing,

          (a) PPSS shall use its commercially reasonable efforts to cancel or retire any Performance
Bonds that are no longer contractually required to be outstanding in respect of the Business; and

          (b) With respect to Performance Bonds or any Company contract or agreement for which PI or any
Affiliate thereof (excluding the Company and the Subsidiaries) has a reimbursement, guaranty or
similar obligation, Sellers shall use their reasonable efforts to cause the issuer of such
Performance Bond, or counterparty to such contract or agreement, to replace, substitute, retire or
otherwise deal with such Performance Bond, or contract or agreement, in such a manner that neither
PI nor any such Affiliate thereof (excluding the Company and the Subsidiaries) has or will have any
liability or obligation with respect thereto. Purchasers shall cooperate with all activities of
Sellers pursuant to this Section 3.8(b) and, at Sellers’ request, shall use their commercially
reasonable efforts to cause the transactions set forth in this Section 3.8(b) to be effected.

     3.8 Satisfaction of Indebtedness. Prior to or concurrent with Closing, Sellers shall
cause the Company to repay all of its Indebtedness in the manner described in Section 1.4 or
otherwise, it being agreed that the PPSS Note and the PPSS Receivable will be settled and cancelled
pursuant to the Debt Conversion.

     3.9 Position Technologies, Inc. Manufacturing Agreement. Prior to Closing, PPSS shall
use its commercially reasonable efforts to enter into a binding manufacturing agreement with
Positron Technologies, Inc. (the “PTI Manufacturing Agreement”), on terms and conditions reasonably
acceptable to Purchasers, for the manufacture of property used in the Business that has been
manufactured by Positron Technologies, Inc. PPSS shall permit Purchasers to participate in the
process of negotiating the PTI Manufacturing Agreement on behalf of
PPSS to the extent that
Purchasers reasonable request.

     3.10 Cancellation of Intercompany Account Balances. Prior to Closing, PI and PPSS
shall cause all accounts payable and accounts receivable between the PI and the Company to be
settled in full and cancelled, it being agreed that the PPSS Note and the PPSS Receivable will be
settled and cancelled pursuant to the Debt Conversion.

     3.11 Transition Services Agreement. On or prior to Closing, PI and Purchasers shall
use their commercially reasonable efforts to negotiate a transition services agreement to be
entered into between PI and PPSS at Closing, in form and substance reasonably acceptable to PI and
Purchasers, whereby PI would provide PPSS with certain transition services in accordance with the
principles set forth on Exhibit B hereto (the
“Transition Services Agreement”).

     3.12 Subordination Agreement. On or prior to Closing, Purchasers shall and PI shall
cause its parent, Positron Canada Holding Corp (“Parent”) to negotiate a subordination agreement to
be entered into among Parent and Purchasers at Closing, in form and substance reasonably acceptable
to Parent and Purchasers, whereby Parent will agree to subordinate any

25

 

obligation owed to Parent by PI to any obligations of PI to the Purchaser Indemnified Parties
pursuant to Section 7.2 hereunder (the “Subordination
Agreement”).

     3.13 Tail Insurance. Prior to the Closing, PI and the Purchasers will mutually and in
good faith seek to ascertain whether the Company requires an insurance policy providing continuing
or “tail” coverage under the Company’s professional liability insurance policy, either because (i)
such insurance policies will terminate at Closing, or (ii) Purchasers’ existing insurance policies
will not cover such claims with respect to pre-Closing occurrences. In the event that PI and the
Purchasers mutually determine that such continuing or “tail” coverage is required, the Company
will purchase such coverage as is mutually agreed to, and the cost of such coverage shall be borne
equally by PI, on the one hand, and Purchaser, on the other hand.

ARTICLE IV

CONDITIONS TO CLOSING

     4.1 Conditions to Obligation of Sellers. The obligation of Sellers to consummate the
transactions contemplated hereby shall be subject to the satisfaction on or prior to the
Closing of
the following conditions (any of which may be waived in writing by Sellers):

          (a) Purchasers shall have performed and complied in all material respects with all obligations
and agreements hereunder required to be performed by Purchasers or complied with by Purchasers on
or prior to the Closing;

          (b) the representations and warranties of Purchasers contained in this Agreement shall be true
and correct in all material respects as of the Closing Date as if made as of such date;

          (c) no action, suit, claim or proceeding by or before any Governmental Authority shall be
pending which seeks to restrain, prevent or materially delay or restructure the transactions
contemplated hereby or which otherwise questions the validity or legality of any such transactions;
and

          (d) Sellers shall have received all deliveries set forth in Section 5.3.

     4.2 Conditions to Obligation of Purchasers. The obligation of Purchasers to
consummate the transactions contemplated hereby shall be subject to the satisfaction on or
prior
to the Closing of the following conditions (any of which may be waived in writing by
Purchasers):

          (a) Sellers shall have performed and complied in all material respects with all obligations
and agreements hereunder required to be performed by Sellers or complied with by Sellers on or
prior to the Closing;

          (b) the representations and warranties of PI contained in this Agreement shall be true and
correct in all material respects as of the Closing Date, regardless of any Schedule Update, as if
made as of such date (other than those representations and warranties that address matters only as
of a particular date or only with respect to a specific period of time, which need only be true and
correct in all material respects as of such date or with respect to such period, and

26

 

except for inaccuracies in the representations and warranties in Section 2.2(c) due to compliance
with any provision of this Agreement);

          (c) no action, suit, claim or proceeding by or before any Governmental Authority shall be
pending which seeks to restrain, prevent or materially delay or restructure the transactions
contemplated hereby or which otherwise questions the validity or legality of any such transactions;

          (d) the consents set forth on Schedule 2.l(c) shall have been obtained;

          (e) there shall not have occurred any Material Adverse Effect; provided, however, that the
condition set forth in this Section 4.2(f) may not be invoked by Purchasers after March 7, 2007; and

          (f) Purchasers shall have received all deliveries set forth in Section 5.2.

ARTICLE V

CLOSING

     5.1 Closing.

          (a) The closing of the transactions contemplated hereby, other than the purchase and sale of
the PPSS Georgia Shares (the “Closing”), shall take place at the offices of Neal, Gerber &
Eisenberg, LLP, 2 North LaSalle Street, Chicago, Illinois, or if required by Purchasers’ lender, at
the offices of Purchaser’s counsel, at 10:00 a.m., local time, on the later to occur of (i) the
second business day after satisfaction or waiver of the conditions of the parties to consummate the
transactions contemplated by this Agreement (other than the conditions with respect to actions the
respective parties will take at the Closing itself), (ii) the date which is twenty-two (22) days
after the date of this Agreement or (iii) at such other place, at such other time or on such other
date as the parties may mutually agree. The date on which the Closing actually occurs is referred
to herein as the “Closing Date”. The Closing shall be effective immediately after the close of
business on the Closing Date.

          (b) The Closing of the PPSS Georgia Shares shall take place at the offices of Neal, Gerber &
Eisenberg, LLP, 2 North LaSalle Street, Chicago, Illinois, or if required by Purchasers’ lender, at
the offices of Purchaser’s counsel, at 11:59 p.m., local time on the day immediately preceding the
Closing Date or at such other place, at such other time or on such other date as the parties may
mutually agree.

     5.2
Deliveries by Sellers. Subject to the terms and conditions hereof, Sellers shall
deliver, or cause to be delivered, the following to Purchasers, or the appropriate Purchaser,
at or
before the Closing:

          (a) certificates, duly endorsed for transfer, representing the PPSS Georgia Shares and the
PPSS Shares, in each case together with stock powers or other appropriate instruments of transfer
endorsed in blank by PPSS or PI, as applicable;

27

 

          (b) resignations or evidence of removal, effective as of the Closing Date, of all of the
directors and officers of PPSS and each Subsidiary;

          (c) a copy of a sublease in the form attached hereto as Exhibit C (the “Sublease”)
with respect to the real property located at 5101 Buchan Street, Montreal, Quebec, Canada (the
“Montreal Facility”), duly executed by PI, pursuant to which PI will sublease a portion of the
Montreal Facility to PPSS from and after the Closing, accompanied by evidence of the consent of the
landlord thereto;

          (d) a copy of the Escrow Agreement, duly executed by PI;

          (e) a copy of a Transition Services Agreement, duly executed by PI;

          (f) a copy of the Subordination Agreement, duly executed by Parent;

          (g) a certificate of the chief executive officer of PI, dated the Closing Date, certifying
compliance with the conditions set forth in Sections 4.2(a) and 4.2(b);

          (h) a copy of the articles of incorporation of PPSS and each Subsidiary, which has been filed
with the appropriate Governmental Authority, certified as of a recent date by the secretary of
PPSS;

          (i) a certificate of compliance issued by the Director, Industry Canada with respect to PPSS;

          (j) certificates of good standing or existence with respect to each Subsidiary, issued not
earlier than 10 days prior to the Closing Date, certified by the Secretary of State of the State
of such company’s organization and each jurisdiction in which such company is authorized to do
business;

          (k) a legal opinion from Neal, Gerber & Eisenberg LLP, PI’s U.S. legal counsel, addressed to
the Purchasers and dated the Closing Date, substantially in the form of Exhibit D-l;

          (l) a legal opinion from Ogilvy Renault S.E.N.C.R.L., s.r.l./LLP, PI’s Canadian legal
counsel, addressed to the Purchasers and dated the Closing Date, substantially in the form of
Exhibit D-2;

          (m) employment or consulting agreements on terms reasonable satisfactory to Purchasers
executed by each of the key Company employees listed on Schedule 5.2(I) hereof;

          (n) a copy of a License Agreement substantially in the form of attached Exhibit E
(the “License Agreement”), duly executed by PI;

          (o) a copy of the PTI Manufacturing Agreement, duly executed by PPSS and PTI; and

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          (p) evidence reasonably satisfactory to Purchasers that all Indebtedness of the Company has
been repaid.

     5.3 Deliveries by Purchasers. Subject to the terms and conditions hereof, Purchasers
shall deliver the following to Sellers, or the appropriate Seller, at or before the Closing:

          (a) the PPSS Georgia Shares Purchase Price and the PPSS Shares Purchase Price, in accordance
with the appropriate provisions of Article I;

          (b) a copy of the Sublease, duly executed by PPSS;

          (c) a copy of the Escrow Agreement, duly executed by IPC-Canada;

          (d) a copy of the Transition Services Agreement, duly executed by PPSS;

          (e) a copy of the Subordination Agreement, duly executed by Purchasers;

          (i) a copy of the License Agreement, duly executed by PPSS; and

          (g) a certificate of IPC-Canada, dated the Closing Date and signed by the chief executive
officer of IPC-Canada evidencing compliance with the conditions set forth in Sections 4.1(a) and
4.1(b).

     5.4 Other Documents. The parties agree to execute and deliver on or before the
Closing all other documents that are necessary or advisable in order to consummate the
transactions contemplated hereby or in connection herewith.

ARTICLE VI

TERMINATION

     6.1 Termination. This Agreement may be terminated at any time prior to the
Closing:

          (a) by mutual consent of Purchasers and Sellers;

          (b) by either Purchasers or Sellers if there shall have been a breach or inaccuracy on the
part of the other party (treating each of PI and PPSS, on the one hand, and IPC-US and IPC-Canada,
on the other hand, as a party for this purpose) in any material respect of any representation or
warranty set forth in this Agreement, or if any such representation or warranty shall have become
untrue, in either case if such breach has not been cured by such other party within 30 days after
receipt of written notice of such breach from the terminating party;

          (c) by Purchasers or Sellers if there shall have been a breach in any material respect of any
covenant or agreement in this Agreement to be performed by the other party treating each of PI and
PPSS, on the one hand, and IPC-US and IPC-Canada, on the other hand, as a party for this purpose),
if such breach has not been cured by such other party within 30 days after receipt of written
notice of such breach from the terminating party, provided that the terminating party shall not
then be in breach of any of its covenants or agreements under this Agreement;

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          (d) by either party if the Closing shall not have been consummated on or before March 31,
2007, (provided that the terminating party is not otherwise in material breach of its obligations
under this Agreement), which date may be extended by written agreement of Purchasers and Sellers.

     6.2 Effect of Termination. In the event of the termination of this Agreement in
accordance with Section 6.1, all further obligations of the parties hereunder shall terminate;
provided, however, that the obligations of the parties set forth in
Sections 8.1 and 10.13 shall survive such termination. Each party’s right of termination under
Section 6.1 is in addition to any other rights it may have under this Agreement or otherwise, and
the exercise of a right of termination will not be an election of remedies. Upon termination of
this Agreement under Section 6.1(a), there shall be no liability on the part of any party hereto or
their respective directors, officers, shareholders or agents. A termination under Sections 6.1(b),
6.1(c) or 6.1(d) shall be without prejudice to the rights of any party hereto arising out of the
breach by any other party of any representation, warranty, covenant or other provision of this
Agreement.

ARTICLE VII

INDEMNIFICATION

     7.1 Survival. Subject to the next sentence, the representations, warranties, covenants
and agreements set forth in this Agreement, or in any Ancillary Document or in any certificate or
other writing delivered in connection with this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby. With respect to claims for breaches of
representations and warranties referred to in Section 7.2(a) or 7.3(a), PI or Purchasers (as
applicable) shall not be liable for any Losses arising therefrom unless written notice of such
breach is given by the Purchaser Indemnified Parties or PI Indemnified Parties (as applicable)
within one year after the Closing Date, except for Losses arising from a breach of the
representations contained in Sections 2.1(a)(Authority), 2.1(b)(Execution and Delivery),
2.1(d)(Title), 2.2(a)Organization, Standing and Qualification), 2.2(c)(Capitalization),
2.2(q)(Taxes), 2.2(r)(U.S. Employee Benefit Plans), 2.2(s)(Canadian Employee Benefit Plans) and
2.2(y)(Environmental Matters) (collectively, the “Fundamental Representations”) for which PI shall
be not be liable for any Losses arising therefrom unless written notice of such breach is given by
a Purchaser Indemnified Party prior to 30 days after the expiration of the applicable statute of
limitations with respect to the matter giving rise to the breach (including any extensions
thereof).

     7.2 Indemnification by PI. Subject to the limitations set forth in this Article VII,
PI agrees to indemnify Purchasers and their Affiliates (including the Company) and their respective
officers, directors, employees, agents and representatives (the “Purchaser Indemnified Parties”)
against, and agrees to hold each of them harmless from, any and all Losses incurred or suffered by
them incident to, resulting from or in any way arising out of or in connection with any of the
following (in each case so long as notice of a claim for indemnification is made in good faith
within any applicable survival period):

          (a) any breach of or any inaccuracy in any representation or warranty made by PI in this
Agreement or any Ancillary Document; or

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          (b) any breach of or failure by PI to perform any covenant or obligation of PI contained in
this Agreement or in any Ancillary Document; or

          (c) all Taxes of the Company with respect to any Pre-Closing Tax Period, including the
pre-Closing portion of any Straddle Period without regard to my disclosure set forth on
Schedule 2.2(q); or

          (d) any claims made against the Company by TIBCO Software Inc. or its Affiliates with respect
to the Company’s failure to pay any royalties, license fees or other fees attributable to TIBCO
software incorporated into the Company’s products or provided to the Company’s customers prior to
the Closing Date (the“TIBCO Obligations ”); or

          (e) any claims made against the Company in connection with the Pension Plan for Employees of
Positron Industries Inc. (the  “Pension Plan Liabilities ”).

For purposes of this Agreement, the term “Loss” or “Losses” shall mean any and all liabilities,
losses, costs, claims, damages, penalties, interest charges and documented out-of-pocket expenses
(including attorneys’ fees); provided, however, that Losses incurred by any Purchaser Indemnified
Party (other than pursuant to a Third Party Claim) shall be determined without regard to any
special, exemplary, punitive, consequential and incidental damages. In the event that any of the
foregoing are indemnifiable hereunder, the terms “Loss” and “Losses” shall include any and all
attorneys’ fees and expenses and costs of investigation and litigation incurred by the Indemnified
Person in enforcing such indemnity.

For purposes of determining whether PI shall be required to indemnify any Purchaser Indemnified
Party under this Article VII, any materiality (including Material Adverse Effect) standard or
qualification contained in any representation, warranty, covenant or agreement shall be taken into
account.

     7.3 Indemnification by Purchasers. Purchasers agree to indemnify PI and its
Affiliates, officers, directors, employees, agents and representatives (the  “PI Indemnified
Parties ”) against, and agrees to hold each of them harmless from, any and all Losses incurred or
suffered by them incident to, resulting from or in any way arising out of or in connection with
any of the following (in each case so long as notice of a claim for indemnification is made in
good faith within any applicable survival period):

          (a) any breach of or any inaccuracy in any representation or warranty made by Purchasers in
this Agreement or any Ancillary Document; or

          (b) any breach of or failure by Purchasers to perform any covenant or obligation of Purchasers
contained in this Agreement or any Ancillary Document; or

          (c) any claim for payment or reimbursement with respect to a Performance Bond that is required
by a Company contract to be in effect on the Closing Date to the extent relating to a post-Closing
event or circumstance or post-Closing breach by the Company of such Company contract;
provided, however, no PI Indemnified Party shall be entitled to indemnification pursuant to
this Section 7.3(c) to the extent that the Purchaser Indemnified

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Parties are entitled to indemnification pursuant to Section 7.2(a) with respect to such
post-Closing event, circumstance or post-Closing breach.

     7.4 Claims. No party hereto will be liable for any claim for indemnification under
this Article VII unless written notice of a Claim for indemnification is promptly delivered by the
party seeking indemnification (the “Indemnified Person”) to the party from whom indemnification is
sought (the “Indemnifying Person”) prior to the expiration of the applicable survival period, if
any, set forth in Section 7.1 (and in any event, within 10 days after receiving notification of any
claim by a third party which may give rise to a claim for indemnification (a “Third Party Claim”));
provided that no delay on the part of the Indemnified Party in notifying the Indemnifying Party
will relieve the indemnifying Party from any obligation hereunder except to the extent that the
Indemnifying Party is prejudiced thereby. All notices given pursuant to this Section 7.4 will
describe with reasonable specificity the basis of the Indemnified Party’s claim for
indemnification. Upon receipt of notice of a Third Party Claim, the Indemnifying Party will be
entitled to participate therein and, to the extent desired, to assume the defense thereof with
counsel of its choice. However, the Indemnified Party may continue to participate in (but not
control) such defense at its own cost and expense, which costs and expenses shall not be subject to
the indemnification provisions in this Article VII. unless the Indemnifying Party does not actually
assume the defense thereof following notice of such election. If the Indemnifying Party does not
assume the defense of such Third Party Claim, the Indemnified Party will have the right to
undertake the defense of such Third Party Claim, by counsel or other representatives of its own
choosing (subject to the right of the Indemnifying Party to assume the defense of or opposition to
such Third Party Claim at any time prior to settlement, compromise or final determination thereof).
Whether or not the Indemnifying Person chooses to defend or prosecute any such claim, suit, action
or proceeding, all of the parties hereto shall cooperate in the defense or prosecution thereof.

     7.5 Limitation on Liability.

          (a) Notwithstanding Section 7.2, PI shall have no liability under Section 7.2 to indemnify
the Purchaser Indemnified Parties for any Losses incurred by the Purchaser Indemnified Parties
with respect to Section 7.2 unless and until the aggregate amount of all such Losses exceeds
$620,000 (the “Deductible”), in which event PI shall only be required to indemnify the Purchaser
Indemnified Parties to the extent that such Losses exceed the Basket. Notwithstanding anything
contained in this Article VII other than the remainder of this Section 7.5(a), the aggregate
liability of PI under this Agreement shall not exceed $6,200,000 (the “Cap”). However, the
limitations contained in the preceding portion of this Section 7.5 will not apply to any claim
with respect to (i) the breach by either Seller of a covenant contained herein or in an Ancillary
Document, (ii) fraud, willful concealment or intentional breach or misrepresentation, (iii) the
breach of any Fundamental Representation, (iv) the TIBCO Obligations, or (v) the Pension Plan
Liabilities; provided, however, that, the aggregate liability of PI for all
indemnification claims under Section 7.2, taken together with any other amounts paid by PI to the
Purchaser Indemnified Parties pursuant to Section 7.2, shall not exceed the Purchase Price.
Nothing contained in this Section 7.5(a) shall limit Purchasers’ rights under Section 6.2.
Furthermore, the Deductible shall not apply to Losses arising out of any breach of the
representations and warranties contained in Section 2.2(k)(iv); and instead, PI shall have no
liability under Section 7.2 to indemnify the Purchaser Indemnified Parties for any Losses

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incurred by the Purchaser Indemnified Parties arising out of any breach of the representations and
warranties contained in Section 2.2(k)(iv) unless and until the aggregate amount of all such Losses
exceeds $300,000, in which event PI shall only be required to indemnify the Purchaser Indemnified
Parties to the extent that such Losses exceed $300,000.

          (b) Notwithstanding Section 7.3, Purchasers shall have no liability under Section 7.3 to
indemnify the PI Indemnified Parties for any Losses incurred by the PI Indemnified Parties with
respect to Section 7.3 unless and until the aggregate amount of all such Losses exceeds $620,000,
in which event Purchasers shall only be required to indemnify the PI Indemnified Parties to the
extent that such Losses exceed $620,000. Notwithstanding anything contained in this Article “VII
other than the remainder of this Section 7.5(b), the aggregate liability of Purchasers under this
Agreement shall not exceed $6,200,000. However, the limitations contained in the preceding portion
of this Section 7.5(b) will not apply to any indemnification claims under Section 7.3 with respect
to (i) the breach by Purchasers of a covenant contained herein or in any Ancillary Document or
(ii) any indemnification pursuant to Section 7.3(c), provided, however, that, the
aggregate liability of Purchasers for all claims under Section 7.3 (a) shall be limited to the
Purchase Price. Nothing contained in this Section 7.5(b) shall limit Sellers’ rights under Section
6.2.

     7.6 Mitigation. Each party hereto agrees to use commercially reasonable efforts to
mitigate any Loss which forms the basis of a claim for indemnification hereunder. All Losses
recoverable by an Indemnified Person shall be net of insurance proceeds actually recovered by or on
behalf of such Indemnified Person. All Losses recoverable by an Indemnified Person shall be net of
the amount of any tax reduction realized by the Indemnified Person as a result of tax benefits
resulting directly from the matter giving rise to such Losses. If an Indemnifying Person makes a
payment in respect of Losses of an Indemnified Person, and if at any time subsequent to such
payment the amount of such Losses is reduced by recovery, settlement, or otherwise under or
pursuant to any insurance coverage or pursuant to any claim, recovery, settlement, or payment by or
against any other person or entity (excluding any taxing authority), the amount of such reduction,
less any costs, expenses, premiums, or taxes incurred in connection therewith will promptly be
repaid by the Indemnified Person to the Indemnifying Person. In the event that any claim for
indemnification asserted hereunder is, or maybe, the subject of any insurance coverage or other
right to indemnification or contribution from any third Person, the Indemnified Person expressly
agrees to promptly notify the applicable insurance carrier of any such claim or loss for which it
would be commercially reasonable to do so in the absence of any escrow funds to cover such claim or
loss and tender defense thereof to such carrier, and shall also promptly notify any potential third
party indemnitor or contributor which may be liable for any portion of such losses or claims. The
Indemnified Person agrees to pursue such claims diligently and to reasonably cooperate with each
applicable insurance carrier and third party indemnitor or contributor. PI shall have the right to
examine the books and records of Purchasers and the Company and its subsidiaries to the extent
necessary to investigate and defend against any claim for indemnification made by a Purchaser
Indemnified Party.

     7.7 Escrow.

          (a) The Indemnity Escrow Amount shall be used solely in connection with claims for
indemnification made by the Purchaser Indemnified Parties pursuant to Section 7.2,

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other than
Tax Indemnity Claims. On the 12-month anniversary of the Closing Date
(the “Indemnity Escrow Release Date”), the parties shall direct the Escrow Agent to release to PI a portion of the
Indemnity Escrow Amount equal to the excess, if any, of (x) the aggregate remaining amount of the
Indemnity Escrow Amount, less (y) the aggregate amount of Losses specified in any then unresolved
good faith indemnification claims, other than Tax Indemnity Claims, made by Purchasers pursuant to
Section 7.2. To the extent that, on the Indemnity Escrow Release Date, any amount has been
reserved and withheld from distribution from the Indemnity Escrow Amount on such date on account of
such an unresolved claim for indemnification and, subsequent to the Indemnity Escrow Release Date,
such claim is resolved, the parties shall immediately direct the Escrow Agent to release (i) to
Purchasers the amount of Losses, if any, due in respect of such claim as finally determined and
(ii) to PI an amount equal to the excess, if any, of the amount theretofore reserved and withheld
from distribution in respect of such claim over the payment, if any, made pursuant to the foregoing
clause (i) of this sentence.

          (b) The Tax Indemnity Escrow Amount shall be used solely in connection with claims for
indemnification made by the Purchaser Indemnified Parties pursuant to Section pursuant to Section
7.2(a) with respect to a breach of the representations and warranties in Section 2.2(q) or pursuant
to Section 7.2(c) (collectively,“Tax Indemnity Claims”). On that date (the “Tax Escrow Release Date”) that is 30 days after the later to occur of (i) the expiration of the statute of limitations
or normal reassessment period under applicable Canadian federal income tax law, as the case may be,
with respect to the Canadian federal income Tax Return filed by PPSS with respect to its taxable
year ending on the Closing Date or (ii) the expiration of the statute of limitations with respect
to the United States federal income Tax Return filed by PPSS Georgia with respect to its taxable
year ended March 31, 2007, the parties shall direct the Escrow Agent to release to PI a portion of
the Tax Indemnity Escrow Amount equal to the excess, if any, of (x) the aggregate remaining amount
of the Tax Indemnity Escrow Amount, less (y) the aggregate amount of Losses specified in any then
unresolved good faith Tax Indemnity Claims. To the extent that, on the Tax Escrow Release Date, any
amount has been reserved and withheld from distribution from the Tax Indemnity Escrow Amount on
such date on account of such an unresolved claim for indemnification and, subsequent to the Tax
Escrow Release Date, such claim is resolved, the parties shall immediately direct the Escrow Agent
to release (i) to Purchasers the amount of Losses, if any, due in respect of such claim as finally
determined and (ii) to PI an amount equal to the excess, if any, of the amount theretofore reserved
and withheld from distribution in respect of such claim over the payment, if any, made pursuant to
the foregoing clause (i) of this sentence.

          (c) The Umbrella Indemnity Escrow Amount shall be used solely in connection with (A) Tax
Indemnity Claims to the extent that the then remaining Tax Indemnity Escrow Amount is not
sufficient to satisfy any Tax Indemnity Claims and (B) claims for indemnification made by the
Purchaser Indemnified Parties pursuant to Section 7.2 (other than with respect to breaches of
representations and warranties which are not Fundamental Representations) to the extent that the
then remaining Indemnity Escrow Amount is not sufficient to satisfy any such claim (collectively,
“Umbrella Indemnity Claims”). On the 36-month anniversary of the Closing Date
(the“Umbrella Escrow Release Date”), the parties shall direct the Escrow Agent to release to PI a portion of the
Umbrella Indemnity Escrow Amount equal to the excess, if any, of (x) the aggregate remaining amount
of the Umbrella Indemnity

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Escrow Amount, less (y) the aggregate amount of Losses specified in any then unresolved good faith
Umbrella Indemnity Claims. To the extent that, on the Umbrella Escrow Release Date, any amount has
been reserved and withheld from distribution from the Umbrella Indemnity Escrow Amount on such date
on account of such an unresolved claim for indemnification and, subsequent to the Umbrella Escrow
Release Date, such claim is resolved, the parties shall immediately direct the Escrow Agent to
release (i) to Purchasers the amount of Losses, if any, due in respect of such claim as finally
determined and (ii) to PI an amount equal to the excess, if any, of the amount theretofore reserved
and withheld from distribution in respect of such claim over the payment, if any, made pursuant to
the foregoing clause (i) of this sentence.

          (d) The Parties hereto agree that, for U.S and Canadian federal, provincial and state income
tax purposes, any income earned on or derived from the Indemnity Escrow Amount or the Tax
Indemnity Escrow Amount shall be allocated to PI and all such accrued income will be released to
PI on a quarterly basis.

     7.8 Exclusivity. The parties hereto agree that, from and after the Closing Date, with
respect to any breach or violation of any representation or warranty or any covenant, obligation or
other term set forth in this Agreement, the only relief available to the party indemnified for such
breach in respect of such breach shall be (a) damages, but only to the extent properly claimable
hereunder as may be limited pursuant to this Article VII; (b) specific performance if a court of
competent jurisdiction in its discretion grants the same; or (c) injunctive relief or declaratory
relief if a court of competent jurisdiction in its discretion grants the same.

     7.9 Treatment of Indemnity Payments. PI and Purchasers agree to treat all payments
made by either of them to or for the benefit of the other under this Article VII as increases or
decreases, as applicable, to the PPSS Shares Purchase Price.

ARTICLE VIII

ADDITIONAL COVENANTS

     8.1 Confidentiality. Whether or not the transactions contemplated hereby are
consummated, Purchasers, PPSS and PI shall keep confidential all (a) confidential information
relating to the marketing strategies, pricing policies or characteristics, customers, suppliers
and customer and supplier information, customer and supplier lists, product or product
specifications, Proprietary Rights, designs, manufacturing, testing or assembly processes or
costs, costs of materials, business or business prospects, plans, proposals, codes, marketing
studies, research, reports, investigations, or other information of similar character which relate
to the Business or the Company, and (b) information and materials regarding another party
reasonably designated by such party as confidential at the time of disclosure thereof
(collectively referred to as“Confidential Information”). If the transactions contemplated hereby
are consummated, PI shall maintain confidential and shall not use or disclose, directly or
indirectly (except as required by law or as authorized in writing by Purchasers prior to such
disclosure), any Confidential Information including all Confidential Information relating to the
Company or the Business. If the transactions contemplated hereby are not consummated, Purchasers
will return to Sellers all Confidential Information (in whatever medium or embodiment) which has
been provided to Purchasers pursuant to this Agreement or otherwise in connection with this
transaction, and Purchasers will destroy all copies of any analyses, compilations, studies or
other documents

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prepared by Purchasers or for Purchasers’ use containing or reflecting any such Confidential
Information. For the avoidance of doubt, the Nondisclosure Agreement shall survive termination of
this Agreement.

     8.2 Restrictive Covenants.

          (a) Non-interference with Customer and Supplier Relationships. Except for such actions
as are necessary to ensure the compliance by PI of its obligations under this Agreement and the
Ancillary Documents, PI covenants and agrees that neither PI nor any Subsidiary or Affiliate of PI,
including Reginald Weiser, shall, for a period of five years following the date hereof, directly or
indirectly, on its own behalf or on behalf of any other Person, contact or do business with any
customer or supplier of the Business with respect to any product or service which is competitive
with any product or service which constitutes, or is part of, the Business as of the date hereof.
This covenant applies to those customers and suppliers, and their respective Affiliates to which
the Company or any of its Affiliates have sold their products or services as part of the Business
prior to the date hereof, and those prospective customers and suppliers with which the Company or
any of its Affiliates have actively pursued sales or supply opportunities prior to the date hereof.

          (b) Non-Competition. Except for such actions as are necessary to ensure the compliance
by PI of its obligations hereunder and under the Ancillary Documents, PI covenants and agrees that
neither PI, nor any Subsidiary or Affiliate of PI, including Reginald Weiser shall, for a period of
five years following the date hereof, directly or indirectly own an interest in, operate, join,
control, advise, work for, consult to, have a financial interest which provides any control of, or
participate in any Person producing, designing, providing, soliciting orders for, selling,
distributing, consulting to, or marketing or re-marketing products or services competitive with or
in substantially the same line of business as the Business, or any part thereof, as of the date
hereof. This prohibition applies in Canada and the United States. This covenant does not prohibit
the mere ownership of less than 5% of the outstanding stock of any publicly-traded corporation as
long as PI is not otherwise in violation of this Agreement. Nothing contained in this Section 8.2
shall limit PI or any of its Subsidiaries or Affiliates from continuing to conduct the Existing PI
Businesses.

          (c) Non-Recruitment. PI agrees that Purchasers have invested and will invest
substantial time and effort in acquiring and maintaining its workforce. Accordingly, PI agrees that
for a period of five years following the date hereof, neither PI nor any Subsidiary or Affiliate of
PI, including Reginald Weiser shall hire away, or cause any other Person to hire away, (i) any
employee of the Company as of the date hereof or (ii) any employee of either Purchaser, nor, in
either case, directly or indirectly entice or solicit or seek to induce or influence any of such
employees to leave their employment.

          (d) Remedies. PI acknowledges and agrees that the Restrictive Covenants are an
essential and material term of this Agreement and without such provisions, Purchasers would not
have agreed to purchase the PPSS Georgia Shares or the PPSS Shares or entered into this Agreement.
PI acknowledges that should it violate any of the covenants contained in this Section 8.2
(collectively, the“Restrictive Covenants”), it will be difficult to determine the resulting
damages to Purchasers and their Affiliates and, in addition to any other remedies

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Purchasers and their Affiliates may have, Purchasers and their Affiliates shall be entitled to
temporary injunctive relief without being required to post a bond and permanent injunctive relief
without the necessity of proving actual damage. The Purchasers may elect to seek such remedy at
their sole discretion on a case by case basis. Failure to seek any or all remedies in one case
shall not restrict Purchasers from seeking any remedies in another situation. Such action by
Purchasers shall not constitute a waiver of any of their rights.

          (e) Severability and Modification of Any Unenforceable Covenant. It is the parties’
intent that each of the Restrictive Covenants be read and interpreted with every reasonable
inference given to its enforceability. However, it is also the parties’ intent that if any term,
provision or condition of the Restrictive Covenants is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the provisions thereof shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. Finally, it is also the
parties’ intent that if a court should determine any of the Restrictive Covenants are
unenforceable because of over-breadth, then the court shall modify said covenant so as to make it
reasonable and enforceable under the prevailing circumstances.

     8.3 Tax Returns.

          (a) Any Taxes for a tax period beginning before the Closing Date and ending after the Closing
Date (a “Straddle Period”) shall be apportioned between PI and the Purchasers, in the case of real
and personal property Taxes and franchise Taxes not based on gross or net income, on a per diem
basis and, in the case of other Taxes (including sales or transfer Taxes), shall be determined
based on an interim closing of the books as of the dose of business on the Closing Date.
Notwithstanding the foregoing, in the case of any Tax based upon or measured by capital (including
net worth or long-term debt) or intangibles, the amount of such Tax allocated to the portion of the
tax period ending on the Closing Date shall be computed by reference to the level of such items on
the Closing Date.

          (b) PI, at its own expense, shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Company for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. Without limiting the foregoing, with respect to such Tax Returns,
PI shall have the right to utilize any available tax attributes of PPSS existing as of the end of
the taxable period including the Closing Date in order to offset any taxable income to PPSS for the
applicable period. PI shall permit Purchasers to review and approve each such Tax Return described
in the preceding sentence prior to filing (which approval shall not be unreasonably withheld).
Purchasers, at their own expense, shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company for any Straddle Period. Purchasers shall permit PI to
review and approve each such Tax Return described in the preceding sentence prior to filing (which
approval shall not be unreasonably withheld). Purchasers shall not allow the Company to file any
amended Tax Return with respect to any Pre-Closing Tax Period without the prior approval of PI
(which approval shall not be unreasonably withheld). All Tax Returns described in this Section
8.3(b) shall be prepared in a manner consistent with the past practice of the Company unless such
past practice has been determined to be incorrect by the applicable Governmental Authority or a
contrary treatment is required by applicable Tax Laws (or the judicial or administrative
interpretations thereof).

37

 

Nothing in this Section 8.3(b) shall be interpreted to prevent the Company from timely filing any
Tax Return when due.

          (c) The provisions of Section 7.4 to the contrary notwithstanding, PI shall control all
proceedings (including selection of counsel and accountants) taken in connection with any Tax Audit
with respect to tax periods beginning on or prior to the Closing Date; provided, however,
that PI shall provide Purchasers the opportunity to participate, as may reasonably be requested by
Purchasers, with PI in contesting any Tax Audit to the extent such Tax Audit may adversely affect
the Company in any Tax period (or portion thereof) beginning on or after the Closing Date.
Notwithstanding the foregoing, neither PI nor the Purchasers shall settle or compromise, or shall
permit the Company to settle or compromise, any Tax Audit without the other party’s prior consent
(which consent shall not be unreasonably withheld or delayed). Each party’s participation in any
Tax Audit shall be at its own expense. Each of the parties agrees to provide the other parties with
a copy of any written communication received from any Governmental Authority relating to the
taxation the Company within ten (10) calendar days of its receipt of such communication,

          (d) After the Closing Date, as reasonably requested, PI and Purchasers shall cooperate with
one another and shall furnish or cause to be furnished to one another, as promptly as practicable,
such information and assistance (to the extent within the control of such party) relating to the
filing of any Tax Returns, the making of any election related to Taxes, the preparation for any
audit by any Taxing Authority, and the prosecution or defense of any claim, suit or proceeding
related to any Tax Return.

          (e) Eighty percent (80%) of any refunds or credits of Taxes, plus the after-tax amount of any
interest received or credited with respect thereto, of the Company arising in or with respect to
any Pre-Closing Tax Period (including refunds or credits arising by reason of amended Tax Returns
filed after the Closing Date) shall be for the account of PI and shall be paid by Purchasers to PI
as an increase in the purchase price of the relevant shares within ten business days after (i)
Purchasers or any Affiliate receives such refund, or (ii) the relevant Tax Return is filed in which
the credit is applied against any liability of the Company (or any successor) for Taxes for a
period other than a Pre-Closing Tax Period. Notwithstanding the foregoing, (a) PI shall be
entitled to the full amount of any refunds applied for prior to the Closing Date and received after
the Closing Date, and (b) it is understood that Tax credits arising in or with respect to
Pre-Closing Tax Periods may be credited and applied in full against the Tax liability of the
Company for any Pre-Closing Tax Period and shall not be subject to the eighty percent (80%)
limitation of the preceding sentence except to the extent the application of such credits results
in a refund payable by Purchasers to PI pursuant to clause (i) of the preceding sentence.
Purchasers agree that they shall not, and shall not allow their Affiliates to, take any action
(including, for the avoidance of doubt, preparation of a Tax Return in a manner that fails to
utilize available Tax credits on an earliest to expire basis) a principal purpose of which is to
prevent the Company (or any successor) from utilizing any Tax credit for which PI is entitled to
payment upon use by the Company (or successor) pursuant to this Section 8.3(e). In the event that
Purchaser makes a payment to PI pursuant to this Section 8.3(e) and, subsequently, the refund or
credit which gave rise to such payment is disallowed by the applicable Governmental Authority, PI
shall promptly repay to Purchaser the amount of the payment previously received

38

 

by it in respect of such disallowed refund or credit plus any interest charged to the Company by
the Governmental Authority with respect to such disallowance.

          (f) IPC-Canada and PI shall each pay 50% of all transfer, stamp or similar Taxes, if any,
payable in connection with the consummation of the transactions contemplated by this Agreement.

     8.4 Public Announcements. No party will issue or cause the publication of, nor will PI
permit the Company to issue, any press release or other public announcement with respect to this
Agreement or the transactions contemplated hereby without the prior consent of the other parties
hereto; provided, however, that nothing herein will prohibit a party from issuing
or causing the publication of any such press release or public announcement to the extent that such
party is advised by its legal counsel that such action is required by law, in which case the party
making such determination will use reasonable efforts to allow the other parties reasonable time to
comment on such release or announcement in advance of its issuance.

     8.5 PI Releases. Effective on the Closing Date, PI, for itself and for its
Affiliates, agents, servants and legal representatives, and their successors and assigns, fully
and unconditionally waives, releases and forever discharges all claims, demands, causes of action,
obligations, damages and liabilities of any nature whatsoever (any of the foregoing, individually,
a “Claim ”), which it or its Affiliates, agents and their successors or assigns ever had, now have,
or hereafter may have against the Company and its officers, directors, controlling persons (if
any), Affiliates, employees, attorneys, agents and stockholders, (each, a “Company Releasee”)
whether known or unknown, whether now existing or which may hereafter arise, which PI had, has or
claims to have against them with respect to all matters that existed between PI, on the one hand,
and any Company Releasee, on the other, prior to the Closing. Notwithstanding the foregoing, for
the purpose of this Section 8.5, the term “Claim” shall exclude (i) claims and causes of action
arising under this Agreement, each Ancillary Document and/or any other agreement, document or
instrument executed and delivered at or in connection with the transactions contemplated hereby,
including, without limitation, claims for indemnification under Article VII and claims to enforce
the covenants contained herein, and (ii) monetary obligations owed by Purchasers or the Company to
PI (or an Affiliate of PI other than the Company).

     PI intends in granting each Company Releasee this release that it shall be effective as a bar
to each and every Claim, and expressly consents that this release shall be given full force and
effect according to its terms and provisions, including those relating to unknown and unsuspected
Claims, if any, (notwithstanding any federal, state or local law that expressly limits the
effectiveness of a general release of unknown, unsuspected and unanticipated Claims), as well as
those relating to any other Claims described or implied above. PI acknowledges and agrees that this
waiver is an essential and material term of this Agreement and without such waiver, Purchasers
would not have agreed to acquire the PPSS Georgia Shares or the PPSS Shares or entered into this
Agreement. PI further agrees that in the event that PI brings any Claim in which PI seeks damages
against any Company Releasee, or in the event PI seeks to recover against any Company Releasee in
any Claim brought by a governmental agency on such PI’s behalf, this release shall serve as a
complete defense to such Claims. PI understands and agrees that this Agreement and the
transactions contemplated hereby are not in any way to be

39

 

interpreted as admissions by any Company Releasee that PI has any viable Claims against any
Company Releasee.

     8.6 Company Releases. Effective on the Closing Date, Purchasers, on behalf of the
Company, the Company’s agents, servants and legal representatives, and their successors and
assigns, fully and unconditionally waives, releases and forever discharges all Claims which it
and its agents and their successors or assigns ever had, now have, or hereafter may have
against
PI and its officers, directors, controlling persons (if any), Affiliates, employees,
attorneys, agents
and stockholders, (each, a “PI Releasee”) whether known or unknown, whether now existing or
which may hereafter arise, which the Company had, has or claims to have against them with
respect to all matters that existed between PI, on the one hand, and any PI Releasee, on the
other,
including the fiduciary duty any PI Releasee may have owed the Company by virtue of its
capacity as a shareholder, director, officer or employee of the Company, prior to the Closing.
Notwithstanding the foregoing, for the purpose of this Section 8.4, the term “Claim” shall
exclude (i) claims and causes of action arising under this Agreement, each Ancillary Document
and/or any other agreement, document or instrument executed and delivered at or in connection
with the transactions contemplated hereby, including, without limitation, claims for
indemnification under Article VII and claims to enforce the covenants contained herein, and
(ii)
monetary obligations owed by PI (or an Affiliate of PI other than the Company) to the Company or Purchasers.

     Purchasers intend in granting each PI Releasee this release that it shall be effective as a
bar to each and every Claim of the Company, and expressly consent that this release shall be given
full force and effect according to its terms and provisions, including those relating to unknown
and unsuspected Claims, if any, (notwithstanding any federal, state or local law that expressly
limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims),
as well as those relating to any other Claims described or implied above. Purchasers acknowledge
and agree that this waiver is an essential and material term of this Agreement and without such
waiver, PI would not have agreed to sell the PPSS Shares or permitted PPSS to sell the PPSS
Georgia Shares or entered into this Agreement. Purchasers further agree that in the event that any
Purchaser or the Company brings any Claim in which it seeks damages against any PI Releasee or in
the event Purchasers or the Company seeks to recover against any PI Releasee in any Claim brought
by a governmental agency on Purchasers’ or the Company’s behalf, this release shall serve as a
complete defense to such Claims. Purchasers understand and agree that this Agreement and the
transactions contemplated hereby are not in any way to be interpreted as admissions by any PI
Releasee that the Company has any viable Claims against any PI Releasee.

     8.7 COBRA. Notwithstanding any provision of this Agreement to the contrary,
following the Closing, the Company shall provide those “qualifying beneficiaries” who
terminate
their employment with the Subsidiaries or otherwise have a “qualifying event” with respect to
a
U.S. Welfare Plan on or prior to the Closing Date with any continuation of health benefits
coverage which is required to be provided under Part 6 of Subtitle B of Title I of ERISA, or
if
applicable, Section 4980B of the Code (“COBRA”). “Qualifying beneficiaries” and “qualifying
event ” shall have the meanings ascribed to those terms in COBRA.

40

 

     8.8 Pension Plans. From and after the Closing, Sellers shall take any necessary
measures to ensure, to the Purchaser’s reasonable satisfaction, that PPSS is not a participating
employer to any Pension Plan, including the Pension Plan for Employees of Positron Industries Inc.

ARTICLE IX

DEFINITIONS

     9.1 Certain Definitions. For purposes of this Agreement, the following terms and
phrases shall have the following meanings:

          “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, is controlled by or is under common control with
such Person. The term “control” means, without limitation, the possession, directly or indirectly,
of the power to direct the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise. For greater certainty, the Persons set forth on
Schedule 9.1 shall be deemed to be Affiliates of PI.

          “Closing Date Working Capital” means an amount, determined in accordance with GAAP applied on
a basis consistent with the calculation of the Target Working Capital and the preparation of the
Company’s March 31, 2006 audited financial statements (except as expressly set forth herein),
equal to the difference (which may be a positive or negative number) between

               (i) the dollar value of the consolidated current assets of the Company as of the
Closing Date but immediately before the Closing, provided, however, that
for purposes of the Closing Date Balance Sheet (and notwithstanding GAAP) there shall be
excluded from the amount of current assets (v) any amount in respect of cash and cash
equivalents (all of which will be applied pursuant to Section 1.4), (w) any amount in
respect of short term investments, (x) any amount in respect of any accounts receivable
from PI or its Affiliates, (y) an amount equal to the long term deferred revenue of the
Company which has been accrued but not collected as of the Closing Date (consistent with
the calculation of the Target Working Capital and the preparation of the Company’s March
31, 2006 audited financial statements), and (z) any amounts which may become payable to PI
pursuant to Section 8.3(e); and

               (ii) the dollar value of the consolidated current liabilities of the Company as of the
Closing Date but immediately before the Closing, provided, however. that
for purposes of the Closing Date Balance Sheet (and notwithstanding GAAP), there shall be
added to the amount of current liabilities (A) Cdn $422,000 and (B) an amount equal to 25%
of the positive difference, if any, between (y) the amount of consolidated long-term
deferred revenue reflected on the Closing Date Balance Sheet minus (z) the amount of
consolidated long-term deferred revenue reflected on the Company’s consolidated balance
sheet as at November 30, 2006 (i.e., Cdn $5,564,000) and; further  provided
however, that for purposes of the Closing Date Balance Sheet (and notwithstanding
GAAP), there shall be excluded from the amount of current liabilities (x)

41

 

any amounts in respect of accounts payable to PI or its Affiliates and (z) any amounts in
respect of liabilities for Taxes.

               In computing current assets and current liabilities for purposes of determining the
Closing Date Working Capital, without duplication, amounts with respect to which a party
has released its claim pursuant to Section 8.5 or 8.6 of this Agreement shall not be
taken into account.

          “Code” means the Internal Revenue Code of 1986, as amended (including the Treasury
Department regulations promulgated thereunder).

          “Competition Act” the Competition Act (Canada).

          “Environmental Law” means any and all Laws and other requirements relating to the
environment, or activities that might threaten or result in damage to the environment, or any Law
that is concerned in whole or in part with the environment and with protecting or improving the
quality of the environment.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

          “Existing PI Businesses” means (i) the provisions of fiber optic multiplexers as network
elements for fiber optic communications (presently conducted by Aethera Networks Inc.); (ii) the
provision of contract manufacturing services with respect to electronic assemblies which are
designed by other companies who own the intellectual property (presently conducted by Positron
Technologies, Inc.); and (iii) the design, manufacture and distribution of products that serve to
protect communication facilities, personnel and equipment from high voltages and high voltage or
current surges (presently conducted by PI’s “Power” division).

          “GAAP” means Canadian generally accepted accounting principles.

          “Governmental Authority” means any court, arbitrator, administrative agency or commission,
or governmental or regulatory official, department, agency, body, authority or instrumentality,
whether U.S., Canadian, federal, state, provincial or local.

          “Indebtedness” means (i) indebtedness for borrowed money or the deferred purchase price of
property or services purchased (other than amounts constituting accrued expenses and trade
payables arising in the ordinary course of the Company’s business), (ii) obligations arising in
respect of letters of credit or similar instruments, and (iii) indebtedness of the type described
in clauses (i) and (ii) which have been directly or indirectly assumed or guaranteed;
provided, however, that notwithstanding anything to the contrary, “Indebtedness” shall
exclude obligations under or with respect to (y) Performance Bonds and letters of credit or
similar instruments issued in lieu of or substitution for Performance Bonds and (z) leases
pursuant to which the Company is a lessee.

          “Laws” means any U.S. or Canadian federal, state, provincial, local or municipal statute,
law, ordinance, regulation, rule, code, order, other requirement or rule of law, including
common law and civil law.

42

 

          “Lien” means any lien, claim, hypothecation, option, pledge, charge, security interest,
equitable interest, or other encumbrance of any nature or kind whatsoever, except for, with
respect to the PPSS Georgia Shares or the PPSS Shares, any restrictions imposed by federal, state
or provincial securities Laws.

          “Material Adverse Effect” means a material and adverse effect on the business, assets,
condition (financial or otherwise), or operations of PPSS and its subsidiaries taken as a whole;
provided,  however, that in no event shall any of the following be taken into account in
determining whether there has been, or shall be, a Material Adverse Effect: (i) any effect that
results from changes affecting any of the industries in which PPSS and its subsidiaries operate
generally or the United States or Canadian economies generally which do not have a
disproportionate effect on PPSS and the Subsidiaries taken as a whole; (ii) any effect resulting
from compliance with the provisions of this Agreement; (iii) any effect resulting from the
announcement or pendency of the transactions contemplated by this Agreement; or (iv) any effect
that results from changes affecting general worldwide economic or capital market conditions which
do not have a disproportionate effect on PPSS and the Subsidiaries taken as a whole.

          “Performance Bonds” means any and all performance bonds, bid bonds, bank drafts, letters of
credit, guarantees and similar instruments issued by financial institutions, sureties and the
similar parties to Company customers and other third parties pursuant to which the Company has a
reimbursement obligation (existing, contingent or otherwise).

          “Permitted
Liens” means (i) Liens for Taxes, assessments and other governmental charges that
are not yet due and payable, (ii) inchoate statutory, mechanics’, laborers’ and materialmen’s Liens
arising in the ordinary course of business for sums not yet due, (iii) statutory and contractual
lessors’ Liens under leases pursuant to which the Company is a lessee, (iv) Liens that do not
attach to any PPSS Georgia Shares or any PPSS Shares or asset of the Company after the Closing; and
(v) Liens under Performance Bonds.

          “Person” means any individual, sole proprietorship, general partnership, limited partnership,
joint venture, trust, unincorporated organization, association, corporation, limited liability
company, Government Authority or other entity.

          “Proprietary Rights” means the collective reference to, whether or not registered, United
States, Canadian and foreign patents, including continuations, continuations-in-part, divisionals
and reissues, patent applications, trademarks, trademark applications, trade names, service marks,
service mark applications, software other than commercially available standard software, internet
domain names, copyrights, copyright applications, trade secrets and all embodiments of the
foregoing and rights thereto.

          “Separation Transactions” means (i) the transfer and assignment by PI to PPSS of all assets
and properties located in the Subleased Premises (as defined in the Sublease) that relate to the
Business, except for any and all office furniture and personal effects contained in the office of
Reginald Weiser, any and all paintings, sculptures and other works of art and any and all computer
hardware and similar assets that are contemplated to be owned by PI and used in part by PPSS
pursuant to the Transition Services Agreement; (ii) the transfer and assignment by

43

 

PI to PPSS of all contracts and agreements relating to the Business to which PPSS is not a party,
except for any and all contracts relating to computer software, computer support, computer hosting,
computer maintenance and the like that relate to computer hardware and computer software
contemplated to be owned by PI and used in part by PPSS pursuant to the Transition Services
Agreement; (iii) the transfer of employees between PI and PPSS as necessary to provide that PI does
not employ any individual whose scope of employment primarily relates to the Business, other than
individuals who will be employed by PI after the Closing Date and will provide, on behalf of PI,
services to PPSS pursuant to the Transition Services Agreement in respect of information systems
and information technology; (iv) any and all actions reasonably required to implement separate
employee benefits plans for PI and PPSS; (v) any and all actions reasonably required to implement
separate insurance policies for PI and PPSS; (vi) the transfer and assignment (and recordation with
a Governmental Authority if appropriate) by PI to PPSS of all Proprietary Rights that relate to the
Business, except as otherwise contemplated by the License Agreement or the Transition Services
Agreement; and (vii) except as otherwise contemplated by this Agreement or any Ancillary Document,
any other actions reasonably required to cause the operation of the Business to be conducted solely
by PPSS and the Subsidiaries.

          “Target Working Capital” means Cdn $5,985,000. The parties calculation of Target Working
Capital is set forth on Schedule 9.2.

          “Tax” or “Taxes” means all taxes, charges, fees, duties, levies, withholdings or other
assessments (including any applicable interest and penalties), however denominated, imposed by any
federal, territorial, state, provincial or local Governmental Authority.

          “Tax Audit” means any audit, assessment, claim, suit or proceeding by any Governmental
Authority with respect to Taxes which, if successful, could result in a claim for indemnification
under Section 7.2(c), or under Section 7.2(a) pursuant to a representation or
warranty in Section 2.2(q).

          “Tax Return” means any return, report, information return or other document (including any
related or supporting information) filed or required to be filed with any Governmental Authority
in connection with the determination, assessment or collection of any Tax or the administration of
any Laws to any Tax.

          “to the best of PI’s knowledge” or words of similar import mean the actual knowledge or
awareness of (i) Reginald Weiser, Dimitra Diplarakos and Bruno Des Rosiers, after making a
reasonable, but not exhaustive, inquiry, consistent with such individual’s positions) with PPSS
and its subsidiaries, and exercising reasonable diligence with respect to the particular matter in
question; and (ii) Albert Israel, Bert Dana, Dominic DeVeau, Paul Guest and Sidney Bouzalgo, in
each case solely with respect to matters within the scope of such individual’s employment by the
PPSS and without requiring any of the foregoing individuals listed in clause (ii) to make any
inquiry or investigation whatsoever.

          “U.S. Pension Plan” means any qualified or non-qualified Employee Pension Benefit Plan
(including any Multiemployer Plan), as such term is defined in Section 3(2) of ERISA.

44

 

          “U.S. Welfare Plan” means any Employee Welfare Benefit Plan, as such term is defined in
Section 3(1) of ERISA.

     9.2 Other Defined Terms. Each of the following terms has the meaning assigned to
it in the Section indicated:

	 	 	 
	Term	 	Section
	Accounting Firm
	 	1.5(b)
	Additional PPSS Shares
	 	Recitals
	Ancillary Documents
	 	2.1(a)
	Agreement
	 	Preamble
	Business
	 	Recitals
	Canadian Employee Benefit Plans
	 	2.2(s)
	Cap
	 	7.5(a)
	Claim
	 	8.5
	Closing
	 	5.1
	Closing Date
	 	5.1
	Closing Date Balance Sheet
	 	1.5(a)
	Closing Payment
	 	1.4
	COBRA
	 	8.9
	Company
	 	Recitals
	Company Releasee
	 	8.5
	Confidential Information
	 	8.1
	Debt Conversion
	 	Recitals
	Deductible
	 	7.5(a)
	Environment
	 	2.2(y)
	Environmental Claims
	 	2.2(y)
	Environmental Permits
	 	2.2(y)
	Employees
	 	2.2(t)
	Escrow Account
	 	1.2(d)
	Escrow Agent
	 	1.2(d)
	Escrow Agreement
	 	1.2(d)
	Existing PPSS Shares
	 	Recitals
	Financial Statements
	 	2.2(e)
	Fundamental Representations
	 	7.1
	Indemnified Person
	 	7.4
	Indemnifying Person
	 	7.4
	Indemnity Escrow Amount
	 	1.2(d)
	Indemnity Escrow Release Date
	 	7.7(a)

45

 

	 	 	 
	Term	 	Section
	IPC
	 	Preamble
	IPC Parties
	 	Preamble
	IPC-Canada
	 	Preamble
	IPC-US
	 	Preamble
	IRS
	 	2.2(r)
	ITA
	 	2.2(s)
	Landlord
	 	5.2(c)
	License Agreement
	 	5.2(m)
	Losses
	 	7.2
	Masys
	 	Recitals
	Material Agreement
	 	2.2(1)
	Montréal Facility
	 	5.2(c)
	Most Recent Fiscal Year End
	 	2.2(e)
	Nondisclosure Agreement
	 	3.4
	Option
	 	1.3
	Parent
	 	3.12
	Pension Plans
	 	2.2(s)
	Pension Plan Liabilities
	 	7.2(e)
	PTI Manufacturing Agreement
	 	3.10
	PI
	 	Preamble
	PI Indemnified Parties
	 	7.3
	PI Releasee
	 	8.6
	Pre-Closing Tax Period
	 	2.2(q)
	PPSS
	 	Preamble
	PPSS Georgia
	 	Recitals
	PPSS Georgia Purchase Price
	 	1.2(a)
	PPSS Georgia Shares
	 	Recitals
	PPSS Note
	 	Recitals
	PPSS Receivable
	 	Recitals
	PPSS Shares
	 	Recitals
	PPSS Shares Purchase Price
	 	1.2(b)
	Purchase Price
	 	1.2(b)
	Purchasers
	 	Preamble
	Purchaser Indemnified Parties
	 	7.2
	Real Property
	 	2.2(j)
	Release
	 	2.2(y)
	Released
	 	2.2(y)
	Remedial Action
	 	2.2(y)

46

 

	 	 	 
	Term	 	Section
	Restrictive Covenants
	 	8.2
	Schedule Update
	 	2.2(w)
	Sellers
	 	Preamble
	Sublease
	 	5.2(c)
	Subsidiaries
	 	Recitals
	Straddle Period
	 	8.3(a)
	Subordination Agreement
	 	3.12
	Tax Indemnity Claim
	 	7.7(b)
	Tax Indemnity Escrow Amount
	 	1.2(d)
	Tax Escrow Release Date
	 	7.7(b)
	TIBCO Obligations
	 	7.2(d)
	Third Party Claim
	 	7.4
	Transition Services Agreement
	 	3.11
	Umbrella Indemnity Claim
	 	7.7(c)
	Umbrella Indemnity Escrow Amount
	 	1.2(d)
	Umbrella Escrow Release Date
	 	7.7(c)
	Working Capital Shortfall
	 	1.5(d)
	Working Capital Surplus
	 	1.5(d)

ARTICLE X

MISCELLANEOUS

     10.1 Notices. All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally, delivered by reputable overnight
courier service, or transmitted by facsimile transmission, as follows:

	 	(a)	 	If to any IPC Party, to:
	 
	 	 	 	IPC Information Systems Holdings Inc.
 88
Pine Street 
Wall Street Plaza 
New York,
NY 10005 
Attention: John McSherry, Esq.

Facsimile: (212) 858-6960

	 
	 	 	 	with a copy sent contemporaneously to:
	 
	 	 	 	Wollmuth Maher & Deutsch LLP 
500 Fifth
Avenue, 12th Floor 
New York, NY
10110 
Attention: Rory M. Deutsch,
Esq.
 Facsimile: (212) 382-0050

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	 	(b)	 	If to either Seller, to:
	 
	 	 	 	5101 Buchan Street

Montréal, QC H4P 2R9

Attention: Reginald Weiser 

Facsimile: (514)345-2227

	 
	 	 	 	with copies sent contemporaneously to:
	 
	 	 	 	Neal, Gerber & Eisenberg LLP

Two North LaSalle Street, Suite 2200

Chicago, Illinois 60602

Attention: Ross D. Emmerman 

Facsimile: (312)269-1747

or to such other address as the Person to whom notice is to be given may have previously furnished
to the other parties in writing in accordance herewith. Notice shall be deemed given immediately
upon personal delivery, one business day after deposit with a reputable overnight courier, or upon
confirmation of successful facsimile transmission.

     10.2 Amendments and Waivers. This Agreement may not be amended, modified or
supplemented except by written agreement of the parties hereto. No waiver by any party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.

     10.3 No Presumption Against Drafter. Each of the parties hereto has jointly
participated in the negotiation and drafting of this Agreement. In the event there arises any
ambiguity or question of intent or interpretation with respect to this Agreement, this Agreement
shall be construed as if drafted jointly by all of the parties hereto and no presumptions or
burdens of proof shall arise favoring any party by virtue of the authorship of any of the
provisions of this Agreement.

     10.4 Interpretation. The headings preceding the text of Articles and Sections included
in this Agreement and the headings to Exhibits and Schedules attached to this Agreement are for
convenience only and shall not be deemed part of this Agreement or be given any effect in
interpreting this Agreement. The use of the masculine, feminine or neuter gender herein shall not
limit any provision of this Agreement. The use of the terms “including” or “include” shall in all
cases herein mean “including, without limitation” or “include, without limitation,” respectively.
References to any “Article”, “Section”, “Exhibit” or “Schedule” shall refer to an Article or
Section of, or an Exhibit or Schedule to, this Agreement. Except with respect to Section 1.5
hereof and the definition of Target Working Capital, the symbol “$” shall be deemed to mean United
States dollars.

     10.5 Nonassignability. This Agreement shall not be assigned, by operation of law or
otherwise, except that the rights and obligations of Purchasers hereunder may be assigned to any

48

 

Affiliate of Purchasers (except that no such assignment shall relieve Purchasers of their
obligations hereunder).

     10.6 Parties in Interest. This Agreement is solely for the benefit of the parties
hereto and, to the extent provided herein, their respective directors, officers, employees, agents
and representatives, and no provision of this Agreement shall be deemed to confer upon other third
parties any remedy, claim, liability, reimbursement, cause of action or other right.

     10.7 Governing Law. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT AND EACH OF THE ANCILLARY DOCUMENTS (OTHER THAN THE AGREEMENT OF
PURCHASE AND SALE) SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH
STATE.

     10.8 Jurisdiction; Venue; Services of Process. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of
the State of New York and of the United States of America, in each case located in the County of
New York, for any proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any proceeding relating thereto except in such
courts), and further agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in this Agreement shall be effective service of
process for any proceeding brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of any proceeding
arising out of this Agreement or the transactions contemplated hereby in the courts of the State of
New York or the United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such
court that any such Proceeding brought in any such court has been brought in an inconvenient forum.
Each of the parties agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

     10.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY HERETO WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.9.

49

 

     10.10 Severability. If any term or provision of this Agreement shall, to any extent,
be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement or the application of such term or provision to Persons or circumstances other than those
as to which it has been held invalid or unenforceable, shall not be affected thereby and this
Agreement shall be deemed severable and shall be enforced otherwise to the full extent permitted by
law; provided, however, that such enforcement does not deprive any party hereto of the benefit of
the bargain.

     10.11 Entire Agreement. This Agreement (including the Schedules and Exhibits
referred to herein and which form a part hereof) and the Nondisclosure Agreement constitute the
entire agreement among the parties hereto and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the subject matter
hereof.

     10.12 Counterparts. This Agreement may be executed by facsimile and in one or more
counterparts, each of which shall be deemed to constitute an original and shall become effective
when one or more counterparts have been signed by each party hereto and delivered to the other
parties.

     10.13 Expenses. Except as otherwise specifically provided herein, each of Purchasers
and Sellers shall pay their own expenses, including, but not limited to, attorneys’, accountants’,
financial advisors’ and brokers’ or finders’ fees, incurred in connection with the transactions
contemplated hereby.

     10.14 Obligations of Purchasers. All obligations of the Purchasers under this
Agreement shall be joint and several.

     10.15 IPC Guaranty. IPC hereby guarantees Purchasers’ obligations to pay the Purchase
Price in accordance with Section 1.2 of this Agreement. IPC agrees that this guaranty shall be
directly enforceable against IPC without first resorting to either Purchaser or exhausting
remedies against either Purchaser. This guaranty is an absolute and continuing guaranty and shall
remain in full force and effect from the date hereof until the Purchase Price shall have been paid
to each Seller and the Escrow Agent in accordance with the terms and conditions of this Agreement.
This guaranty is independent of and in addition to any and all other security that either Seller
may now or hereafter have for the payment of the Purchase Price. IPC hereby waives notice of
acceptance of this guaranty and notice of the creation, of any and all liabilities incurred under
this guaranty. IPC further waives presentment for payment and protest.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

50

 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each of the parties
hereto on the date first above written.

	 	 	 	 	 
	 	IPC INFORMATION SYSTEMS HOLDINGS INC.

 	 
	 	By:  	/s/ John McSherry
 	 
	 	 	Name:  	John McSherry	 
	 	 	Title:  	Secretary 	 
	 
	 	TSW COMMAND SYSTEMS, INC.

 	 
	 	By:  	/s/ John McSherry
 	 
	 	 	Name:  	John McSherry	 
	 	 	Title:  	Secretary 	 
	 
	 	IPC SYSTEMS, INC.

 	 
	 	By:  	/s/ Lance Boxer
 	 
	 	 	Name:  	Lance Boxer	 
	 	 	Title:  	CEO 	 
	 
	 	POSITRON, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Reginald Weiser 	 
	 	 	Title:  	President 	 
	 
	 	POSITRON PUBLIC SAFETY SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Reginald Weiser 	 
	 	 	Title:  	President and  Secretary 	 

51

 

	 	 	 	 	 

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each of the
parties hereto on the date first above written.

	 	 	 	 	 
	 	IPC INFORMATION SYSTEMS HOLDINGS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TSW COMMAND SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	IPC SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	POSITRON, INC. 

 	 
	 	By:  	/s/ Reginald Weiser
 	 
	 	 	Name:  	Reginald Weiser 	 
	 	 	Title:  	President 	 
	 
	 	POSITRON PUBLIC SAFETY SYSTEMS, INC.

 	 
	 	By:  	/s/ Reginald Weiser
 	 
	 	 	Name:  	Reginald Weiser 	 
	 	 	Title:  	President and Secretary 	 

51

 

Execution Copy

AMENDMENT TO PURCHASE AGREEMENT

     THIS AMENDMENT TO PURCHASE AGREEMENT (this “Amendment”) is made as of February 28, 2007, to
the PURCHASE AGREEMENT dated as of February 9, 2007, (the “Original Agreement”) by and among
POSITRON INC., a company incorporated under the laws of Quebec (“PI”), POSITRON PUBLIC SAFETY
SYSTEMS INC., a corporation incorporated under the laws of Canada (“PPSS” and collectively with PI,
“Sellers”), IPC INFORMATION SYSTEMS HOLDINGS INC., a Delaware corporation (“IPC-US”), TSW COMMAND
SYSTEMS, INC., a corporation incorporated under the laws of Canada (“IPC-Canada” and collectively
with IPC-US, “Purchasers”), and IPC SYSTEMS, INC., a Delaware corporation (“IPC” and collectively
with Purchasers, the “IPC Parties”). Capitalized terms used in this Agreement without definition
shall have the meanings set forth or referenced in the Original Agreement.

WITNESSETH:

     WHEREAS, Sellers and Purchasers desire to amend the Original Agreement, pursuant to Section
10.2 thereof, upon the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, hereby agree as follows:

     1. Amendment to Original Agreement. The Original Agreement is hereby amended as
follows:

               (a) Amendment of Section 1.4 of the Original Agreement. Section 1.4 of the
Original Agreement is hereby amended in its entirety as follows:

     “1.4 Ordering of Transactions. Notwithstanding anything to the
contrary, the parties agree that on the day immediately prior to the Closing Date
and on the Closing Date the transactions contemplated by this Agreement shall be
effected in the following order:

     (a) First, on the day immediately prior to the Closing Date,
the application of the amount of cash and cash equivalents then held by the
Subsidiaries to repay any Indebtedness owed by the Subsidiaries to PI or
PPSS;

     (b) Second, on the day immediately prior to the Closing Date,
the purchase and sale of the PPSS Georgia Shares and the payment of the
PPSS Georgia Shares Purchase Price;

 

 

     (c) Third, on the day immediately prior to the Closing Date,
the consummation of the Debt Conversion; and

     (d) Fourth, on the day immediately prior to the Closing Date,
the application of the amount of cash and cash equivalents (including the
PPSS Georgia Shares Purchase Price) then held by PPSS to repay any
Indebtedness owed by PPSS to PI (it being understood that PPSS Note and
the PPSS Receivable will be converted into the Additional Shares pursuant
to the Debt Conversion);

     (e) Fifth, on the day immediately prior to the Closing Date,
the distribution by PPSS to PI of any cash and cash equivalents not
applied pursuant to Section 1.4(d), such distribution to be in the form of
various dividends;

     (f) Sixth, on the day immediately prior to the Closing Date,
the contribution of cash by PI to PPSS as a capital contribution in an
amount to be determined by PI in its sole discretion;

     (g) Seventh, on the day immediately prior to the Closing
Date, the distribution by PPSS to PI in a series of dividends in an
aggregate amount equal to the contributions made to PPSS pursuant to
Section 1.4(f); and

     (h) Eight, on the Closing Date, the purchase and sale of
the PPSS Shares and the payment of the PPSS Shares Purchase Price.

It is the intention and understanding among the parties hereto that the Company
shall be transferred to Purchasers on a “cash-free” basis and that, for the purposes
of this Section 1.4, “cash and cash equivalents” shall be determined on a
“balance-sheet” basis as of the Closing, after giving effect to a reconciliation of
such cash and cash equivalents to bank records, such reconciliation to be performed
by Purchasers and PI jointly within 10 days after the Closing Date. The parties
hereto shall take such actions as are reasonably required to give effect to such
intention and understanding, and any discrepancy between the amount of cash and cash
equivalents distributed to PI under this Section 1.4, and the amount of cash and
cash equivalents of the Company as of the Closing shall be paid over by PI or the
Company, as applicable, promptly after the completion of such reconciliation.”

               (b) Amendment of Section 1.5(a) of the Original Agreement. The first sentence of
Section 1.5(a) of the Original Agreement is hereby amended in its entirety as follows:

     “(a) Closing Date Balance Sheet. Within ninety (90) calendar days
after the Closing Date, PI shall prepare and deliver to IPC-Canada an unaudited
consolidated balance sheet of the Company as of the opening of business on the

-2-

 

Closing Date and immediately prior to the Closing (the “Closing Date Balance
Sheet”).

               (c) Addition to Article I of the Original Agreement. Article I of the Original
Agreement is hereby amended by adding the following as a new Section 1.6 thereof:

     “1.6 Reimbursement of Amount Advanced for Bid Bond. At the Closing,
Purchasers will reimburse PI for an advance in the amount of US $162,814.23, which
was advanced by the Company to INCOG in the form of a bank draft in lieu of a bid
bond required in connection with such bid. Following the Closing, in the event that
such bank draft is returned to PI or in the event that INCOG reimburses PI for funds
drawn on such bank draft, PI will promptly deliver such bank draft or such funds to
the Company.”

               (d) Amendment of Section 2.2(q) of the Original Agreement. Paragraph (iii)
of Section 2.2(q) of the Original Agreement is hereby amended in its entirety as follows:

     “(iii) The Company has paid all Taxes due as a result of its activities or has
made adequate provision for such Taxes such that the reserves for current Taxes
(excluding reserves for deferred Taxes) in respect of the period up to but not
including the Closing Date or to any periods ending prior thereto (the “Pre-Closing
Tax Period”) will not be less than the reasonably estimated Tax liability accruing or
payable by the Company in respect of the Pre-Closing Tax Period.”

               (e) Amendment of Section 5.1(a) of the Original Agreement. Section 5.1(a)
of the Original Agreement is hereby amended in its entirety as follows:

     “(a) The closing of the transactions contemplated hereby, other than the
purchase and sale of the PPSS Georgia Shares (the “Closing”), shall take place at
the offices of Neal, Gerber & Eisenberg, LLP, 2 North LaSalle Street, Chicago,
Illinois, or if required by Purchasers’ lender, at the offices of Purchaser’s
counsel, at 10:00 a.m., local time, on March 1, 2007, or at such other place, at such
other time or on such other date as the parties may mutually agree. The date on
which the Closing actually occurs is referred to herein as the “Closing Date”. The
Closing shall be effective immediately prior to the opening of business on the
Closing Date.”

               (f) Amendment of Section 7.7 of the Original Agreement. Section 7.7 of the
Original Agreement is hereby amended by adding the following as new paragraphs (e) and (f)
thereof:

     “(e) In the event that the trust created pursuant to Section 1 of the Escrow
Agreement, as finally executed among the parties thereto, is not recognized by any
court of competent jurisdiction or held invalid for any reason whatsoever and if PI
is declared to have ownership in the Charged Property (as hereinafter defined), then
as security for the performance by PI of the indemnification obligations, if any, of
PI under Section 7.2 (the “Secured Obligations”), PI

-3-

 

hereby
grants a hypothec without delivery (the “Hypothec”) in favor of the
Purchasers in (i) the cash comprising the Escrow Amount (as defined in the Escrow
Agreement) and (ii) all titles, documents, records and receipts evidencing the
Escrow Amount (collectively, the “Charged Property”), for the sum of Cdn.
$19,050,000 in lawful currency of Canada with interest thereon from the date hereof
at the rate of 25% per annum (which sum and interest rate are solely for the
purposes of the compliance with the applicable laws of the Province of Quebec and
the laws of Canada). The full amount of the Hypothec shall be and remain continuing
collateral security in favor of the Purchasers notwithstanding the fact that all or
part of the Secured Obligations arise prior to, at the time of or subsequent to the
execution of this Amendment. The Hypothec is a continuous security which shall
subsist notwithstanding any fluctuation of the amounts hereby secured. PI and
Purchasers shall use their commercially reasonable efforts to cause the Escrow Agent
to take such actions as are reasonably requested by the Purchasers in order to give
effect to the Hypothec. This Section 7.7(e), as well as the enforcement of and the
recourses related to the Hypothec, shall be governed by and construed in accordance
with the laws of the Province of Quebec and the laws of Canada applicable therein.
The Hypothec will expire upon the distribution of the entire Escrow Amount by the
Escrow Agent in accordance with the terms of the Escrow Agreement. This Section
7.7(e) does not expand or contract the obligations of PI or the rights of the
Purchaser Indemnified Parties under Article VII or the Escrow Agreement.

     (f) As security for the Secured Obligations, PI hereby grants to Purchasers a
first priority security interest in and to the Charged Property and any investments
or reinvestments of Charged Property. PI authorizes the filing of any financing
statements that the Purchasers may deem appropriate covering the Charged Property,
any investments or reinvestments of Charged Property, or any part thereof. The
security interest granted hereby will expire upon the distribution of the entire
Escrow Amount by the Escrow Agent in accordance with the terms of the Escrow
Agreement. This Section 7.7(f) does not expand or contract the obligations of PI or
the rights of the Purchaser Indemnified Parties under Article VII or the Escrow
Agreement.”

               (g) Amendment of Section 8.3(c) of the Original Agreement. Section 8.3(c) of the
Original Agreement is hereby amended in its entirety as follows:

     “(c) The provisions of Section 7.4 to the contrary notwithstanding, PI shall
control all proceedings (including selection of counsel and accountants) taken in
connection with any Tax Audit or negotiations with U.S. state Tax authorities
regarding entering into a voluntary compliance or disclosure or similar agreement (a
“VDA”) with respect to tax periods of the Company ending on or prior to the Closing
Date, and shall have the right to initiate negotiations with respect to any such
VDA, but shall not without the prior consent of Purchasers (which consent shall not
be unreasonably withheld, conditioned or delayed) (i) in connection with such
negotiations take any action (including entering into any- VDA) that

-4-

 

obligates the Company with respect to any post-Closing Tax period or (ii) conclude
any agreement that relates to “trust fund” Taxes (i.e., Taxes for which applicable
law requires the Company to withhold amounts from third parties and remit the same
to a Tax authority); provided, however, that PI shall provide Purchasers
the opportunity to participate, as may reasonably be requested by Purchasers, with
PI in contesting any Tax Audit or in negotiating any VDA to the extent such Tax
Audit or VDA may adversely affect the Company in any Tax period (or portion
thereof) beginning on or after the Closing Date. Notwithstanding the foregoing,
neither PI nor the Purchasers shall settle or compromise, nor shall permit the
Company to settle or compromise, any Tax Audit without the other party’s prior
consent (which consent shall not be unreasonably withheld, conditioned or delayed).
Prior to holding any discussions with any Tax authority relating to a potential
VDA, PI shall notify Purchasers of PI’s intent to enter into a VDA and shall advise
Purchasers of the proposed terms of the VDA. Each party’s participation in any Tax
Audit or VDA negotiation shall be at its own expense. Each of the parties agrees to
provide the other parties with a copy of any written communication received from
any Governmental Authority relating to the taxation the Company within ten (10)
calendar days of its receipt of such communication.”

               (h) Amendment of Section 10.7 of the Original Agreement. Section 10.7 of the
Original Agreement is hereby amended in its entirety as follows:

     “10.1 Governing Law. SAVE AND EXCEPT FOR SECTION 7.7(e) OF THIS
AGREEMENT, ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION
OF THIS AGREEMENT AND EACH OF THE ANCILLARY DOCUMENTS (OTHER THAN THE AGREEMENT OF
PURCHASE AND SALE) SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW
PRINCIPLES OF SUCH STATE.”

     2. Miscellaneous.

               (a) Full Force and Effect. Except as expressly set forth herein, this Amendment
does not constitute a waiver or modification of any provision of the Original Agreement. Except as
expressly amended hereby, the Original Agreement shall continue in full force and effect in
accordance with the provisions thereof on the date hereof. As used in the Original Agreement, the
terms “this Agreement,” “herein,” “hereof,” “hereinafter,” “hereto” and words of similar import,
shall, unless the context otherwise requires, mean the Original Agreement as amended by the
Amendment. References to the terms “Agreement” appearing in the Exhibits or Schedules to the
Original Agreement, shall, unless the context otherwise requires, mean the Original Agreement as
amended by this Amendment.

               (b) Headings and Terms. The headings in this Amendment are for purposes of reference
only and shall not be considered in construing this Amendment. Terms defined in the singular shall
have a comparable meaning when used in the plural, and vice versa.

-5-

 

               (c) Counterparts. This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall constitute an original and all together shall
constitute one agreement.

               (d) Law Governing. This Amendment shall be construed and enforced in accordance with
and shall be governed by the laws of the State of New York, without giving effect to its conflict
of laws provisions.

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]

-6-

 

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by each of the parties hereto on the date first above written.

	 	 	 	 	 
	 	IPC INFORMATION SYSTEMS HOLDINGS

INC.

 	 
	 	By:  	/s/
Timothy Whelan
 	 
	 	 	Name:  	Timothy Whelan	 
	 	 	Title:  	Treasurer 	 
	 
	 	TSW COMMAND SYSTEMS, INC.

 	 
	 	By:  	/s/
John McSherry
 	 
	 	 	Name:  	John McSherry	 
	 	 	Title:  	Secretary 	 
	 
	 	IPC SYSTEMS, INC.

 	 
	 	By:  	/s/
Lance Boxer	 
	 	 	Name:  	Lance Boxer
	 
	 	 	Title:  	CEO 	 
	 
	 	POSITRON, INC.

 	 
	 	By:  	/s/ Reginald Weiser
 	 
	 	 	Name:  	Reginald Weiser 	 
	 	 	Title:  	President 	 
	 
	 	POSITRON PUBLIC SAFETY SYSTEMS, INC.

 	 
	 	By:  	/s/ Reginald Weiser
 	 
	 	 	Name:  	Reginald Weiser 	 
	 	 	Title:  	President and Secretary

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